Finance and the Good Society

Sudarshan Kadariya, New York

For comments: su.kadariya@gmail.com

“IF YOU HAVE DAUGHTER (S), YOU WOULD NEED MORE MONEY TO SAVE” a comment by a Lady living in American but originally from China which is similar with the study findings by Zhiwu Chen, Professor of Finance at The University of Hong Kong.  He has mentioned that the Chinese families with fewer children save more money, families with son (s) save less, and, families with only a daughter save much more money, among others. But he wonders why the American families save very less!

From the ancient time, the Chinese families live with joint family structure where they can share the financial risk among the members of their family. The Chinese families invest a huge sum of the household savings for the education and the career development of their children where the children are socially and morally liable for the retirements of their parents. On the other hand, most of the American parents have their own retirement accounts linked with the financial market and their Childs are not bound to retire their parents.

Most of the Nepali families are inclined towards the Chinese family structures described above but the globalization is spreading the western cultures in our society and new generations are adopting the changes including social and cultural changes. In such context, it should be a good idea to review our personal financial setup which we are adopting from our parents and grandparents. Is it a good idea to keep investing majority of our savings for new generations and expect them to retire us paying back out of their limited paychecks? or Should we balance the pros and cons of ancient system and the modern nuclear family structures? Can we see any advantages of building our own retirement funds through gradual investing and saving funds for the future? As stated, most of the retirements accounts in the western countries are linked one way or the other ways to the financial market and its instruments. It is the fact the financial market is not that developed the level we want in our context, even though, what happened if we would start investing portion of our comfortable savings to the shares of the companies listed in the Nepalese Stock Market and in the Initial Public Offerings available for us to invest?

Wikipedia shows Finance is a field that is concerned with the allocation of assets and liabilities over space and time, often under conditions of risk or uncertainty. Finance can also be defined as the art of money management. As per Cambridge Dictionary, Society is a large group of people who live together in an organized way, making decisions about how to do things and sharing the work that needs to be done. All the people in a country, or in several similar countries, can be referred to as a society. Is there necessarily any connection between these two areas – Finance and the Society? How would be the allocation of assets and liabilities impacting the groups of people in the society?

Yale University Professor Robert J. Shiller is one of the Nobel Prize laurates in 2013 for their empirical analysis on assets prices. Shiller is an economist and more specifically he is a behavioral economist. He has written a book called Finance and the Good Society in 2012 where he has discussed about how the finance sector works to improve society? what duties members of the financial industry have toward the community? and, how finance can contribute to democracy, progress and economic equality? Finance, as part of economics deals with the collection and use of resources to maximize the value of the assets, has impact for the good society. And also, Finance is the science of economics which has impacts on the family and the society in general and to the nation as a whole.

As per World Bank, in 2015, 736 million people lived on less than $1.90 a day which is down from 1.85 billion in 1990 (as per September 2018 update). Finance works is a circulatory system in the society. It has direct link in resources allocation between rich and poor. As per inequality.org, the world’s richest 1 percent, those with more than $1 million, own 45 percent of the world’s wealth. And, the world’s wealthiest individuals, those owning over $100,000 in assets, total less than 10 percent of the global population, own 84 percent of global wealth. Credit Suisse defines “wealth” as the value of a household’s financial assets plus real assets (principally housing), minus their debts. By looking at the statistics presented above from various sources tells us that there is something not going good! what would be the situation of the 90 percent of the world population holding only 16 percent of the global wealth? How can this distribution system justify the development of the good society which is the part of our life? In the Nepali context too, can we see the disparity on wealth distribution? If yes, how can we imagine the roles of finance and the good society?

Individuals and each family, no matter what whether they know the official meaning of Finance and the terms and phrases use in the academia, we, as a member of the society are dealing with our Finance i.e. the income, the expenses, savings and investing, borrowing and loads, tangible and intangible investing for the short term or for the long terms, etc. Each household has their own written or unwritten budgets and its boarder limits. They know how to deal with the family financial crisis and emergencies, they know to pay interest when borrowing money from others and they expect interest income if they lend money to others. Each family has their assets - it could be cash, gold and silver, land and building, livestock and crops, and belongings in any other forms. In such a way, family finance is knowingly or unknowingly having greater impact on the society.

Finally, we are living in the modern era and we are developing the modern society, the advancement of technologies has created the accessibility of the most valuable information in our figure tips instantly at the time when event happens. We do have ‘no excuses’ other than learning new things, it is very important to start learning new things specially that has direct impact in your pockets or wallets. How can we make more money and how to spend less to increase the savings? It should be the only objective of each of the individuals, families, and the countries as a whole. With this, we would like to emphasis to spread the idea of financial education for the development of the good society - a good society is what we strive for and we aim to build it around our core values: Equality, Democracy and Sustainability.