Financial Literacy: A Distraction from Economic Injustice?

Mark Winston Griffith

Financial Literacy: A Distraction from Economic Injustice?

This past Thursday the New York Sate Assembly held the second of two hearings to examine the high cost of financial services in poor neighborhoods. One of the interesting debates that emerged was the role of "financial literacy". While advocates, like my NEDAP co-director Sarah Ludwig, acknowledged that financial literacy is important - one of NEDAP's most effective and widely used resources is its "Community Financial Literacy and Justice" course - she and others also pointed out at the hearing that the responsibility for changing the financial service landscape sits with the industry itself. Or lawmakers, if necessary. The fundamentals of asset building, budgeting and credit for instance that are featured in NEDAP's financial literacy course are integrated with an analysis of the financial services system, one that helps people understand that predatory services are a function of regulatory breakdowns and industry exploitation. Perhaps most importantly, the course offers affordable, community-based financial service alternatives as well as ways in which communities can organize and fight abusive financial practices.

Financial literacy is perhaps one of the most over-used terms and programmatic devices in community development circles. When used responsibly it represents a process through which consumers and community groups can become savvy economic citizens. When used cynically it can be a way for the financial services industry to take the spotlight off of its own patterns of discrimination and put the onus on consumers to navigate financial service minefields. One unseamly example of this is when financial institutions purport to provide financial literacy by using community based organizations or not-for-profits to market their products in an underserved neighborhood.

Perhaps one day someone will sponsor hearings on financial literacy to help us expose and examine this betrayal of the community trust.

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Posted at 3:04 AM, Oct 07, 2006 in
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I see a lot of paralells between this debate and the topics you have discussed previously concerning food. As with financial literacy, we need to educate ourselves and our communities about good nutrition. But it's not enough just to say that individuals need to make healthier food choices in an environment that's set up to aggressively market only bad options. As you've noted, all the nutrition info in the world doesn't make much difference if there's a McDonalds on every corner but you have to take two buses to find a store that stocks fresh produce, and it's a similar story if there's a check casher on each block but banks and credit unions are nowhere to be seen in the neighborhood. Other than food and financial services, are there other industries like this? Can we draw some general lessons?

My apologies, Upper Manhattite, for not getting back to you sooner.

I think one of the general take-aways from this discussion is that everyone needs to step up. Legislators, corporate players, consumer advocates, regulatory agencies, community organizers and even consumers themselves. It's particularly the responsibility of our elected officials and public institutions to protect it's citizenry and hold corporate providers responsible and accountable. Unfortunately, other than the Community Reinvestment Act, there are few devices designed to hold providers accountable in the financial services industry.

There are no quick fixes, because each area of concern is so vast. Food delivery, for instances, takes in so many issues including zoning, food preparation and disclosure regulations, free market forces, education, dietary culture, mass marketing and assumptions about what poor people want to eat. As I've said before, just as the financial services industry has undergone a legislative and regulatory "modernization", fair lending laws, consumer protections and community reinvestment requirements need to undergo modernization and catch up with the exploitative dimensions of the market.