The Imperative for Innovation: International Perspectives on How Financial Education Can Change the World
Thank you for honoring me as your opening keynote speaker for the Citi-FT Global Financial Education Summit.
I am once again also honored to be here in Beijing, China. The Chinese people I have encountered here have been warm and welcoming.
I am also privileged to be here as a global partner with Citi, around financial literacy and silver rights. Citi has invested significantly in my global silver rights movement, providing resources and passionate HOPE Corps volunteers in our Banking on Our Future classrooms, in low-wealth communities throughout the US, and in South Africa too. It was Citi that partnered with HOPE as we launched our first program office with the William Jefferson Clinton Foundation in Harlem, New York, where former US President Bill Clinton joined me and Citi volunteers in teaching the very first financial literacy course.
It was because of a founding commitment from Citi that Operation HOPE first entered the South Africa market. With their support and global credibility we were able to then secure commitments from the World Bank and IFC, Standard Bank, Deutsche Bank, Old Mutual, the Nelson Mandela Children’s Fund, the South African provincial and national government, and a host of other credible partners there.
HOPE has now served more than one million low-wealth individuals in the US and South Africa. We are honored to be a partner with Citi around the world, and hopefully someday soon here in China, and Asia too.
I was in Tianjin, China in September of this year, for a meeting of the World Economic Forum and the Forum of Young Global Leaders, and in 2007, in Dalian, China for the same annual meeting. I was last in Beijing, in 1989. How China has changed.
If nothing else has made it clear that we are all connected, the now global impact of the subprime mortgage crisis should. In this fast growing and morphing subprime mortgage crisis, which has now become a general credit crisis, a liquidity crisis, and ultimately a crisis of confidence, an investment made to homeowners in Florida cripples the budget and causes a slash of government services for a small town in Norway that invested in mortgages, and is now causing factories in China to close, and the overall global economy to slow.
When you set aside predatory lending, fraud, speculation and simple greed, at the core of this now global financial crisis is a massive level of consumer financial illiteracy. Individuals, many middle class, who asked “what is the payment (on that loan),” but not “what is the interest rate.”
Not so long ago, the US Federal Reserve reported that 70% of all Americans were living from paycheck to paycheck, yet approximately 70% of America’s economic prosperity sits on the back of the US consumer.
While traveling here to China in September, 2008, some of my colleagues, from around the world, attending the global World Economic Forum meeting, seemed to almost rejoice in the economic challenges currently being faced by America. But my colleagues were missing a much bigger, and much more important, and more relevant point to them as well as countries around the world; America is a $14 trillion economy, or a third of the world economy, and the American consumer is 70% of our U.S. economy, which also means that the U.S. consumer is approximately 25% of the world economy.
In short, this means that when the consumer in the U.S. has a headache, the worker in say China, get pneumonia.
When consumers in the US stop buying things, factories in China and other parts of Asia will stop making things. According to figures from the Chinese government, since the beginning of 2008, more than 67,000 factories in China have shut down, tied to the slowing global economy and exports from China.
We are all in this together.
In this global, increasingly interconnected economy and world we live in today, when one succeeds, we all succeed. And conversely, when one fails, we all fail.
Civil rights icon, my personal hero and mentor, and HOPE global spokesman Ambassador Andrew Young and I recently sent a co-signed letter to President-Elect Barack Obama and his transition team.
In that letter we recommended that President-Elect Obama’s broader, macro-economic policies associated with repairing the US and global economy, be dual tracked with an equally important effort to educate American, and the American consumer (who really is the boss of the economy when you think about it) on how their own finances, and the nation’s finances, work. In short, we believe that the president-elect and policy makers around the world will need to bring the consumer-taxpayer along with them.
The lack of this same understanding of how money works directly contributed to American taxpayers rejecting out of hand the recent $700 billion bailout package (a horrible name for a credit restoration act, I might add). An even though Congress ultimately voted for it, they first voted against it, having a lot to do with mainstream voter sentiments, and many American citizens still to this day believe that it was a payoff for “rich fat cats” on Wall Street.
They did not recognize that it was really about adding much needed financial lubrication to the seized up credit markets, and not about fat cats on Wall Street, but soon to be “skinny cats” roaming your street.
We live in a “free-enterprise democracy” in America, Andrew Young recently said, and the President-Elect will need to bring American consumer-citizen along with him, securing their buy-in, along with at least a basic understanding of his economic revitalization plan(s), along the way. If he does not, then the average person will be just as distrustful, and lacking of understanding of his economic team’s proposed solution, as they are of the current round of proposals being implemented by very bright people in the U.S. Treasury Department and at the U.S. Federal Reserve today.
If the consumer is not educated, the new president will get little to no credit for many of his successes two-years out, unless of course individuals somehow feel those changes directly; say at the gas pump, at the grocery checkout counter, with their mortgage holder, or in their pockets.
Without a consumer public that is financially literate, things could be even worse than a global banking crisis, or a public not giving their president “credit” for his successes in turning it around; we could experience a domestic and international economic slump significantly exacerbated by low levels of consumer confidence, resulting in economy crippling low-levels of consumer spending. Without financial literacy education, it is hard if not impossible for individuals racked with economic fear to have confidence and hope in the future.
The challenge ahead becomes clear when we all finally understand that the global consumer will in many ways determine the future health of our world economy.
The Future of financial literacy around the world
Respectfully, financial literacy as currently articulated and taught around the world, is not going to be effective as a meaningful tool in the economic tool box of policy makers, market participants, nor in the lives of the poor, the working poor, nor the middle class individuals we seek to reach, teach and impact.
The future of financial literacy must be rooted in the following 8 practical principles:
1. It must be aspirational. No one wants a mortgage loan or a bond (if you live in a country like South Africa), they want to become a homeowner. If you want to put a child to sleep, offer them a course in financial literacy. Respectfully, no one cares about an education in and of itself, other than an academic. Even education must relate to ones aspirations in life, in order to have relevance in their life. We must connect financial literacy to the hopes, aspirations and dreams of people. Like Operation HOPE’s new 5 MILLION KIDS initiative (www.5MK.org), we must show young people how to do well, and get rich even, legally.
2. It must recognize the very personal and emotional role that money plays in people’s lives. Teachers, volunteers and advocates promoting financial literacy, should not approach financial literacy education as if it is a simple math equation. It is not math. Money is highly personal, and emotional, and math is not. No one is shame to admit they do not understand calculus, but most people around the world are shame to admit they don’t understand money, or their own household finances. Most domestic disputes are about money.
3. It must be taught differently. Traditional education around the world is based on a 20thcentury agrarian model, and centered around a teacher in a classroom talking to students. Basically, a one-dimensional model. But this generation has grown up on the Internet, with message texting and social networks, and is accustomed to learning in a more interactive and personal environment. The only real way to reach and teach people about financial literacy in the 21st century will be through a strategy of engagement and empowerment. Really “connect” with those you want to reach and teach, by being vulnerable, sharing your own personal story and the challenges and disappointments you have met along the way in your own life. Tell them they can “make a mistake, and not be a mistake.” Understand that while you have been broke financially in your life, you are not poor, and neither are they. Make the experience interactive and empower those you speak to.
4. It must be seen in the broader context of real life experience in order to have power. In the 21st century financial literacy must become a localized civil right, or the first in a series of empowerment based global silver rights, in order to have power. The 20th century was dominated by the global discussion of democracy and freedom, and gave birth to civil rights movements from America to India to South Africa. This important conversation continues here in China today. In the 21st century we increasingly live in a global free enterprise democracy, but billions of people who now have the right to vote, do not have a basic bank account, an understanding of how the system works (aka financial literacy), or basic access to the levers of free enterprise, capitalism, or entrepreneurship. Without these new tools for the 21st century, individuals are not free.
5. It must lead to an increase in global stakeholders and local taxpayers. Financial literacy should lead to the emergence of a new stakeholder class of global depositors, new clients and customers, and owners and stakeholders, and ultimately, new taxpayers too. “Poor people cannot hire anyone,” as a friend once told me. A robust and growing tax base is the only way to raise democracies, insure safe streets, provide for a progressive social safety net, improve the standards of living, and stabilize communities long-term. The world needs a global generation of new entrepreneurs and innovation, which will lead to new jobs, and a growing tax base. The door to entrepreneurship is financial literacy empowerment.
6. It must ultimately make a business case. Financial literacy should help to make a business case for the future. If we can find a way to bring 4 billion of the poor into the financial mainstream, to move individuals from the working class into the middle class, and help the middle class to grow assets, and over time to remain middle class, and to pass down those assets from generation to generation, everyone wins. Prosperity is the ultimate partner to peace.
7. It must be rooted in dignity and self respect. The civil rights movement was not about a black man sitting next to a white man at a lunch counter in the southern states of the United States of America. It was about respect and dignity, and hope. It was about empowering people to participate in the system, to see their stake in that same system, and to build a society where everyone has an opportunity to live out their dreams in relative peace, security and a sense of shared prosperity. The goal of financial literacy, if it is to have a broader relevance and a future, must be the same. It is the door that allows people to live out their dreams, with dignity and respect, in a world seemingly driven by money. It is about a hand up, and not simply a hand out.
8. It must be based on hope. Financial literacy empowerment allows individuals, from urban cities to the most rural parts of our world, and from the minority poor in America’s inner-cities and Europe’s poor suburbs, such as those struggling with the basics of life just outside the bright lights of Paris, France, to the emerging economies of China and other Asian countries, Africa, India, the Middle East and Latin America – to learn to do for themselves. It gives them confidence in themselves, and a hope for the future. It allows them to place their foot on the first step of the prosperity ladder in life. It gives them a hope for the future based on love and not fear. It gives them a voice in the global conversation called prosperity.
A focus on the future
From south central Los Angeles, to southern China, to the south of France, to southern India to South Africa, the impact of not endowing our young people with what I call the “language of money”, or financial literacy, and with it an understanding of free enterprise and how capitalism works (and can work for them) is apparent, and the results are not good.
In schools from Los Angeles to New York City, in the US dropout rates among all young people is alarming at 30%, but increases exponentially for young people in urban communities, hovering between 50% and 70% — young people who, unfortunately, don’t see education as relevant to their futures. The best way to make education relevant to youth is to show them how to get rich responsibly and legally. That’s financial literacy, free enterprise and capitalism, ownership, opportunity, and for those with public record, entrepreneurship.
Additionally, when you teach a young person about the value of savings and investment in and for themselves, you open a door of opportunity centered around that same young person becoming an investor in his or her own life and future; versus them simply living for today, and not seeing much of a future or a reason to work towards one. Through that open door educators can then step through other important messages and lessons, centered around the value proposition called education. That is an aspiration, empowerment and hope based approach to learning.
There simply is not enough police in the world capable of controlling a large portion of any population that has convinced itself that the system doesn’t work for them, no matter how hard they work or try.
New Orleans, Louisiana, has approximately one police officer for every 350 or so residents, compared with Los Angeles, California, with no more than one police officer for every 700 or so residents (less police officer-to-resident ratio in Los Angeles).
In this example, one should be able to conclude and assume that New Orleans would be approximately twice as safe as Los Angeles, but such a thing is very far from the truth.
In fact, the truth is almost wholly an inverse of this model assumption. New Orleans is far more dangerous a place to visit for tourists, walk the streets for residents, shop or live, than Los Angeles. Why you ask?
It’s the HOPE factor, that’s why.
If you look at Rwanda and South Africa, these democracies have gone from genocide and apartheid to relative peace and prosperity in less than 15 years. The challenge in both places is very simply the same; the challenge of poverty and opportunity.
The question becomes, “how do we move a level of individual prosperity for people at all levels, as soon as humanly possible, without engaging in a wholesale give-away program (which, by the way, never works in the long term. People want dignity and self-reliance too).” How do we do this?
At Operation HOPE it starts with giving individuals the tools to understand self-sufficiency and choices. It starts with financial literacy as the door into a much broader and deeper conversation around opportunity.
No community survives without hope. And in a capitalist society and a system of free enterprise, financial literacy and a basic understanding of the language of money is the very first “silver right”.
I want to empower people with a hand up, and not simply a hand out.
I see a new generation of dignified young African, Asian, Indian, Latin and West Asian entrepreneurs.
I see young people who understand the “language of money” and use it to empower themselves with choice in life.
I see a global “silver rights” movement where capitalism and free enterprise will overcome the obstacles of being poor.
As we move to restructure our global economy, we need to make sure that the conversation has a long-range vision, is based on a love leadership model, and that we are preparing and empowering people to participate and to become legitimate stakeholders in the system.
We must make capitalism and free enterprise relevant to the poor, and finally work for the poor.
We must launch and sustain a global silver rights movement.
We are all in this together.
Onward with HOPE
John Hope Bryant is the founder, chairman and CEO of Operation HOPE, the vice chairman of the U.S. President’s Advisory Council on Financial Literacy, and the chairman of the Council Committee on the Under Served. Bryant is also a financial literacy expert for the Global Agenda Council of the World Economic Forum. Bryant is the innovative behind of the global silver rights movement.