The recession is over, according to the National Bureau of Economic Research, but very few people actually appreciate that fact and the consensus explanation is that our economy will remain sluggish until consumers start spending again. So to some small degree, I am responsible for the ongoing malaise.
As a consumer, I understand by various reports, I am a data point in what is allegedly 70% of the total domestic economy — the cash splashing mass of us who keep everything from drying up. Ensuring that we keep spending has been an objective of economics for as long as I can remember. They’re counting on us for the recovery.
Restarting consumer spending was one of the basic arguments of last year’s stimulus program, which was designed to reenergize economic activity by distributing money to projects and programs that would then initiate further economic activity, and so on and so on until it came around to consumers like me. And then, we were supposed to spend it.
It’s the argument that’s been used for decades to defend deficit spending by governments, always built on the same premise that consumers will invariably spend money if they have it, and won’t object or reconsider according to price, and won’t anticipate future costs and liabilities. I may be a consumer but I make my own decisions about what to buy and when to buy it. In fact, I strive to spend less and save more.
This is because I’m more than a consumer: I’m also a producer, or at least a worker, and I know what I have to do to earn whatever money I have. More important, I believe that my work (and everyone’s work) is more valuable, more constructive, more contributory to my own success and to the general prosperity of my fellow citizens than is my purchasing activity. I think everyone’s work adds much more to our prosperity than our consumption. Consuming provides us with stuff; working allows us to earn income and confidence. It leads to financial and personal growth.
If I wasn’t already sure of this reasoning, I’d be getting suspicious about the importance of consumer spending anyway. The policy makers and businesses most insistent on a revival of consumer spending are not acting with much concern for the consumers’ prosperity. Most businesses that have managed to make it through the recession did so by cutting costs (including employee costs) and reducing their own spending. Now, indicators show that business spending still has not rebounded. In fact, businesses are hoarding cash at a rate unseen since the early 1950s, the Federal Reserve revealed recently. If it’s a sensible plan for them, why should individual consumers do otherwise?
Regarding the Federal Reserve, that organization indicates it's ready to increase the supply of U.S. currency — because it wants more of it in the hands of consumers. They need consumers to increase spending even more so because businesses aren’t doing it.
But this effective currency devaluation will be fine with the White House and Treasure Department, who insist they will double exports of U.S. goods over the coming five years. More dollars available will help that effort even if it means all dollars are worth less. It will be bad for consumers but good for companies borrowing cash at low interest rates and selling U.S. products in foreign markets.
Consumers’ interests don’t seem overly important to the U.S. Congress either, which is willing to raise import tariffs on Chinese products in response to China’s currency manipulation. China probably won’t be persuaded to change its policies, but U.S. consumers will have fewer choices and will pay more for goods and services.
Policymakers, elected officials, and economic analysts want “the consumer” to resolve all the financial problems we face. The consumer is expected to provide the cash that will keep everything growing — growing for everyone but the consumer. As each consumer comes to understand we’re being used to accomplish someone’s economic strategy, we should remember that we cannot buy our way to prosperity. We’ll have to work for it