George Bush infamously asked Americans to go shopping to show their patriotism and jumpstart the economy after 9/11. This morning the AP ran a story titled “Americans save just when economy needs their money.” And I have been thinking about this whole question of how economies work and whether I’m going to be contributing to the problem. But it’s not an easy questi0n to answer without getting an economics degree. Wait, I do have an economics degree, from way back in 1984, but I don’t remember much about it. I wasn’t really that interested in it even at the time.
The AP article says American’s new frugality couldn’t be happening at a worse time. They cite the “paradox of thrift”: that what’s good for individuals – spending less and saving more – is bad for the economy when everyone does it. But the article continues by quoting economists who say the amount of spending of the past two decades was unsustainable, fueled only by gains in home equity, which was an illusion.
My first thought is that we Americans operate in extremes. We’ve heard for decades that we don’t save enough, and we’re drowning in debt. I suppose now if everyone really started saving half their paycheck and not frequenting their local shops and restaurants, that might not be the best thing to get the economy back on track. But that’s not going to happen. Wouldn’t it be better if more people started saving for an emergency and not buying things they don’t need on credit?
There’s also the issue of short term versus long term. In the short term, the economy needs to get back on track and maybe we as consumers need to help out with that. But in the long term, we really need to focus on these issues of climate change and environmental damage and how we contribute to the problem with materialism and overconsumption. So I think that long term goal is even more important than the short term goal of fixing the current economic crisis. And I put the burden of that job more heavily on government, banks, and corporations, than I do on myself or consumers.
Finally, just because I’m not going to buy any Gap clothes or Pottery Barn accessories this year, it doesn’t mean I’m not going to be contributing to the economy. For one thing, I still have to buy food and I’ll still be going out to eat. And we’re not giving up wine and beer, so Trader Joe’s will be getting just as much of our business. Also, there are plenty of services I’ll still be using- I see no reason to give up getting a haircut or going to the car wash occasionally. Going to the car wash uses much less water than doing it in your driveway. So in a way, the title of my blog is misleading. I’ll still be spending, just not buying new stuff.
But this is an ongoing question I’ll be exploring. My hunch is that the economy would do just fine if everyone cut back and saved responsibly and didn’t go into debt. It’s the Wall Street bandits and corporations that have been making huge profits that might feel it if people stop buying cashmere mittens and designer kittens. So I say not buying all their crap IS patriotic!
What do you think? Can the economy get back on track if people stop buying new stuff?
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