Playing with Fire: The Moral Shortcomings of the FIRE Movement
Methodical unshackling or lone-wolf free-riding, or is it really even FIRE’s fault?
On paper, restricting oneself in terms of spending, reading up on shrewd investment and summoning the magic of compound interest to amass enough wealth to retire by the time you reach your thirties sounds like a fantastic plan, and the determination and willpower required to be a successful proponent of FIRE (Financial Independence, Retire Early) are surely commendable. However, in practice, such individual empowerment seems to come at the expense of societal goals.
The main tenets of FIRE: budget carefully and save wisely, in order to have invested enough money by the time you’re in your thirties or forties to have the ability to maintain your lifestyle without having to work full time. Various blogs, where proponents of the movement track their path to financial independence, display the scrutiny and mathematical method with which each expense is accounted for, and each dollar invested. The movement is particularly popular with millennials, but the GameStop gambit has widened the stock market rabbit hole enough for me to witness unsuspecting zoomers from my general entourage falling inside and becoming addicted to money.
However, such an intense focus on personal finance can lead one to forget about the external impact of economic choices, whether it be on the environment or on others.
There’s a first although lesser indictment regarding the ways in attachment to low prices can support destructive and inhumane practices. Of course, FIRE proponents are already doing the environment a service by consuming less, and it’s also true that tracing where products you buy are coming from can be difficult, as can be knowing what labels are actually backed by solid ethical practice, especially depending on where you live. But what’s sure is that buying imported or industrially produced goods in a massive supermarket has a much higher carbon footprint than trying to buy locally sourced products. Consuming less is essential, and for that the FIRE movement is commendable, but what you consume still matters.
For the American wing of the FIRE movement, what’s more problematic than what money is spent on is the way it’s spent: credit cards.
Credit cards aren’t really a thing in France, where I live. Neither are they really a thing anywhere in Europe, for multiple reasons. However, in the US, more and more YouTube personal finance gurus are posting videos like “The Five Best Credit Cards for Beginners in 2021”, racking up hundreds of thousands of views.
And indeed, for those first getting into personal finance, minimizing spending, and maximizing saving, the rewards offered by credit cards are a mouth-watering and seemingly straightforward first step. There remain reasons why credit cards aren’t so widespread in European countries.
Firstly, every time you purchase something with a credit card, the store owner has to pay a certain percentage as a merchant fee, which is higher with credit cards than debit cards, often leading stores to raise prices store-wide. This isn’t very practical for the store-owners, and the possibility of increased prices isn’t worthwhile for European consumers who are slower than the US when it comes to letting cash go and opting for dematerialized transactions.
More importantly, the magic of credit card rewards, like all things that seem to good to be true, comes with a dark side. The only reason you, as a careful, non-compulsive, financially literate spender, can enjoy the free money provided by credit cards, is that the credit card companies know that for each free dollar they put in your wallet, a less careful customer is buttered up in credit card debt and paying them over twofold in interest. Thus, the credit card companies basically function as a casino: you have winners, which personal finance addicts want to become, you have losers, and you have the house, and not only can you only win as long as others lose, but the in the end, the real winner is the house.
The investing side of the coin isn’t angelic either. FIRE investors are looking for long-term passive income. Thus, they often prioritize so-called “Dividend Aristocrats”. The name is rather telling: dividend aristocrats are companies which annually increase shareholder payout. Is supporting high shareholder payout really what we need, when almost two thirds of all stock bought in US markets in the past 30 years were bought by the top 1% of the population, and it is therefore directly contributing to heightening wealth inequality, not to mention the critiques which can be made of how disconnected the stock market is from the real economy? On top of that, among the top dividend aristocrats figure Exxon Mobil and Atmos Energy, two oil and natural gas giants who represent the opposite of what we should be giving money to right now.
A perhaps less directly indicting but decidedly important issue with the FIRE movement is the fact that the self-limiting behavior it argues for is only economically sustainable as long as it is followed by a limited group of individuals.
Imagine if we all decided to drastically limit our spending. Fewer coffees from shops, instead we make our own. No more going to the cinema with friends, instead we to stay at home. When cash isn’t flowing from our wallets to cash registers, soon store owners can’t repay their debts, can’t make rent, and eventually are forced to shut down, leaving people jobless and, in the case of independent, passionate businesses, dreams shattered. The pandemic we live in has forced us to face the economic implosion which occurs when people can’t go out to support businesses and products they enjoy.
Of course this remains an overly simplified thought experiment, where the drastic situation portrayed is miles away from the current situation. However, attempting to universalize behaviors in such a way can be interesting for ethical inquiry. Without wanting to sound like a dogmatic moral deontologist, it does trigger something inside me when people behave in a way that is beneficial to them but that wouldn’t be sustainable if we all were to behave that way. It seems at a glance like the FIRE-ers are taking from the economy in which they live and thrive, all while not giving much back, and that just doesn’t feel right.
An immediate counterargument to this moral intuition is that restricting oneself in order to be free of the burden of labor by the time you’re in your thirties or forties isn’t something that everyone sees as in their interest. You could argue that people who spend their money do so because they want to, and people who don’t spend their money don’t have to, and as such it doesn’t pose any major economic issue and therefore a moral conundrum would be pure extrapolation and theoretical nonsense. And, to a certain extent, this is true. But there still does seem to be a winner-loser dynamic, as there most often is in the American economy.
The example of credit cards which we previously used is a perfect example of how a system which functions purely on the fact that there are winners and there are losers.
More generally, if you want to consider retirement as the absence of the necessity of full time work, as do proponents of FIRE, it seems absurd to consider that it isn’t something that everybody wants. “It’s less about retiring early and more about having the freedom to pursue your dreams and ambitions,”, says Deacon Hayes, author of You Can Retire Early! That sounds exactly like the youthful hope everybody living in a western society dreams of at night and mourns as they sit in traffic on their way to work. It seems hard to believe that anybody wouldn’t follow such a philosophy given the chance.
But for FIRE-ers, the question seems to be: How hard do you want it? Indeed, some proponents assert that financial independence is within everybody’s reach, and if someone believes that it isn’t in theirs it means that they aren’t saving enough. However, this comes off as quite out of touch with most people’s reality. When 17% of adults aren’t able to cover their monthly bills, and 12% wouldn’t be able to if a 400$ expense were to befall them, they can not be told that they are just living their lives wrong, spending too much and saving too little.
Furthermore, the investments required to achieve the financial goals set up by the FIRE movement require a certain amount of financial literacy, which not everybody grows up with. Those who have salaries allowing them to even conceive choosing the path of FIRE have probably had the chance to come from a background where such financial education is prevalent. However, this is definitely not everybody’s case. So, then, you must factor in the opportunity cost of dedicating time to giving yourself a financial education, rather than working to earn money or simply taking a moment to enjoy your life. Some people have so little time and money that such a tradeoff is impossible, they must work to survive. Some people have a bit more time, but not enough so that their day wouldn’t just be a constant cycle of working, eating and investing, which doesn’t sound like a life anybody should have to live.
This is quite worrying, as it establishes that, according to FIRE proponents “Having the freedom to pursue your dreams and ambitions,” is impossible to a sizeable portion of the American population, since it’s considered that financial independence is what gives you the time and space to pursue your dreams. This should be a burning urge for structural changes in the way the economy works. At the very least, we should all be in a position where we can make the choice to pursue the goals of FIRE, which isn’t even the case yet. And, as established previously, if everybody were to live the way of the FIRE, the economy which allows such a way of life would crumble.
Thus, it seems that even more than just giving the people a chance to choose FIRE, the fact that such a movement even exists should be a wake up call regarding structural elements of the western economy and way of life. Should we really have to constrain ourselves for years, sacrifice pleasures and our consideration for those and the environment around us just to have a chance to do what we love? On top of that, should we sit with the fact that the path to financial dependence lies within broken institutions like the stock market, which contributes to widening wealth disparity and massive crises?
The massive, organized societies we live in must be capable of more than what’s being done to give everybody a chance at financial independence. It isn’t a coincidence that FIRE is a predominant in the United States. The social safety nets and inexpensive education provided in most European countries give people free their citizens from the weight and violence of poverty and necessity, although only to a certain extent. Due to a desire to cling on to individualism, the power of collectivism is only being partially administered.
Because neither the environment nor humanity can suffer the ethical concessions necessary for an individual to enjoy their life, FIRE must spread from the individual level to society, where we can work as a unit to make sure we each have a chance to pursue our dreams without the fear of ending up by the gutter, or that by doing so an economic crisis could be sparked. If we could reach financial independence as a collective, there would be no need for movements like FIRE.
Let’s stop tiring ourselves beating our own trails to our dreams, when together we could be building highways.
