Two claims made by pundits and politicians caught my eye today. Both, I believe, are completely misguided.
First, last month the US savings rate FINALLY started to increase, even as consumer spending dropped. But wait! The pundits don’t like this. Saving money is the opposite of stimulating the economy, we should be out there spending. Remarkably, savings has become a bad thing for a society that has the lowest savings rates of any major industrialized state in history.
Second, politicians are criticizing Obama’s plan for too much long term structural change and not enough short term direct stimulation for the economy. A stimulus should get money pumped in NOW, they argue! Spending to help states deal with their budget crisees, supporting education, going green with fuel efficient cars and buildings…those things don’t fix the problem right away. This argument is completely wrong. Stimulating a short term burst of consumer spending in an already indebted society that has been living beyond its means would be the functional equivalent of finding someone with massive credit card debt, about to go into bankruptcy…and giving them one more credit card so they could pay minimums and keep spending a little while longer. It only delays the inevitable.
The only way the American economy will recover is if we restructure it so that production increases and we are able to cease living beyond our means. The massive budget and trade deficits of the last nearly three decades created an intense imbalance that led to the de-industrialization of America and a bubble economy that created artificial illusions of wealth, and increased tremendously the gap between rich and poor.
Today President Obama, in response to Republican delays on the stimulus bill, said pointedly that he had inherited an economy destroyed by the Republicans and their policies — and that if we didn’t act quickly, things could get catastrophic. He was partially right. The Republicans are to blame. So are the Democrats. These policies started with Reagan, but continued with Bush, Clinton and Bush the Younger, with Congresses dominated by both Republicans and Democrats. As I’ve noted many times, the economy of the last 28 years or so was built on a kind of a lie — it felt good because we were consuming far more than we produced.
Pumping a lot of money into the economy to get consumers buying stuff is precisely the wrong thing to do. It’s like giving an addict more of the drug to stop the withdrawal effects — it only reinforces the addiction and bad habits that led here. Consumerism is the problem! Hyper-materialism and a belief that there is no need to save for the future set up this mess. There is no way out of this without a real, deep, and painful recession.
If Obama’s stimulus plan was just tax cuts, or checks to citizens to go buy stuff and stimulate the economy, I’d be ardently and adamantly against it. I was against any talk of a stimulus package when it first was brought up, fearing that it would be just a short term pseudo-fix, and could increase inflation. The only reason I give it support now is that it really does seem focused on restructuring the economy, and giving money to states to handle pressing local problems. Even then, it’s still a gamble. But given the depth of the current crisis, I’m willing to roll the dice.
The increase in the savings rate by Americans heartened me, even as it got short term thinking economists worried that frugal Americans might lengthen the recession. Americans may be waking up from their hypermaterialist dream and recognize that the idea that life would be this ever expanding mass of consumption and acquisition was fantasy. President Bush said we are addicted to oil. Yes, but only because we are so addicted to consumption.
By the way, for new readers of my blog, I had a series of posts about consumerism and it’s dangers last summer, before the economic storm (which I was predicting) hit. These posts included: Material Saturation, Spiritual Dehydration, Triumph of Will, Consumerism and Fascism, Consumer Cathedral, and Carnival Consumerism. Little did I know that reality was about to pop the consumerist myth later in the year. (Those were some of my favorite posts, especially material saturation and spiritual dehydration).
In short, our culture fell victim to a true addiction to consumption. Shopping was our stress relief, our path toward meaning in life, the focus of our existence. Our culture, television, films, and magazines all seemed to emphasize getting new and better stuff as a path to a more satisfied future. And, like addicts, the rush of the new purchase would soon give way to a feeling of emptiness as the stuff didn’t really fulfill us, so we’d need to go buy more. In so doing we savaged the economy. Like the cocaine addict who loses the house and destroys his life to satisfy his habit, we drove our economy into severe structural imbalance through high debt and no savings.
That is why those who argue for quick stimulus and growth as a solution are wrong headed. Just like any addict, we as a culture have to change our way of thinking and behaving. Impulsive buying, living with high credit card debt, refusing to save, and getting absorbed int he world of things has to give way to a more frugal lifestyle, connection with friends and community, and people helping each other out. We need to recognize that consumption distracts from life’s meaning, it doesn’t provide it.
And, if we can learn that lesson, redirect our culture, and focus on the hard work of producing and rebuilding, we won’t recreate the wild hyperconsumption ride of the 90s and 00s, but we might create a sustainable economy. And, if we rid ourselves of our addiction to consumption, we may find that focusing on the things that matter is a lot more satisfying then going shopping at the mall.
A friend of mine worried today about the economic crisis and whether or not we might not be leaving our children a world without the same opportunities we’ve had. Perhaps not, measured in material terms. But if we leave them a world that is built on a sustainable economy where people value friends, community and shared effort over the latest Ipod accessory, well, maybe it will even be a better world after all.