Although Asian countries exhibit similar saving patterns to the way we do it in the West, with similar savings institutions, we save far less here in the U.S. than they do in the East. What gives?
One answer is culture: the major distictions between what is valued in Western vs. Eastern culture greatly contributes to this phenomenon.
We often value tangible and superficial "things" while many Asian nations value community relations, spirituality, and modesty more-so than frivolous "things". The tangible "things" we value are often more expensive than those intangible "things" valued in the East. You can't be both modest and ostentatious at the same time...
Still, even European nations (including the poorer countries) with similar cultures to our own save more than we do...
Even more interesting is that the U.S. has weaker “social safety net” which would suggest that we'd save more, according to economic theory. However, that's not the case. According to Princeton professor Sheldon Garon, economic theory is “dead wrong” in this particular case.
Nonetheless, Garon says we cannot simply say culture is the culprit:
Such cultural explanations have serious limitations. We must explain not only why East Asians save so much, but how powerful norms contribute to the free-spending propensities of Americans. Why not invert Greenspan’s words? In the United States, consumption—stoked by a culture of instant gratification and fueled by excessive consumer finance—surpassed families’ incomes and decimated savings.
Instead, Garon believes the American institutions play a greater role in the problem than our culture itself. The esteemed professor goes on to explain what he calls the “Gospel in America” and the ideas behind that gospel are the reasons many Americans don't save enough.
The gospel says that the Social Security system means Americans don't have to save additional money because they know they'll get retirement savings and social benefits from the government anyway...
Because the U.S. has a welfare state and a Social Security system, Americans typically don't feel fear for their future in the same way they would without these programs. Consequently, that lack of fear isn't there to motivate them to save responsibly.
Then, when the welfare and Social Security systems fail due to abuse or a lack of funds, panic ensues...
The main issue here is that so many of Americans are now living in poverty, that even the households that are saving can't make up for the overwhelming group of families relying on the credit system – ultimately, drowning the country in more and more debt.
Sounds like America could learn an 'intangibly valuable' lesson from East Asian – even European – nations that have established public policies that encourage citizens to save.
Take a look at this video interview with Mr. Sheldon Garon for further insight. Here, he explains why the traditionally accepted economic theory is failing in the United States:
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