http://roomfordebate.blogs.nytimes.com/2009/09/24/saving-the-world-without-us-consumers/?hp September 24, 2009, 6:32 pm Saving the World, Without U.S. Consumers Shoppers at a Best Buy in Los Angeles. If Americans donât start buying a lot of stuff again, can the world economy be saved? Whatâs the global Plan B? These are fundamental questions at the summit of the Group of 20 industrialized and developing nations in Pittsburgh. In previous global downturns, Americans have come to the rescue, getting out their credit cards and buying up what the rest of the world produces. âOur spending is currently equal to the entire economies of China and India added together and then doubled,â as Fareed Zakaria has pointed out, representing the single biggest chunk of the world economy. But the American consumption option may not be available anymore and may also not be desirable. Is there another model, like the one outlined by the Nobel Prize-winning economists Joseph Stiglitz and Amartya Sen? Why have consumers in other countries â like China and Germany, which produce far more than they spend â failed to step up to the plate? * Juliet Schor, author of âBorn to Buyâ * Bernard Baumohl, The Economic Outlook Group * Michael Pettis, Peking University * Lawrence Glickman, historian * Desmond Lachman, ex-I.M.F. economist Global Growth, American Thrift Juliet Schor Juliet Schor is a professor of sociology at Boston College and co-chairwoman of the board of the Center for a New American Dream. She is the author of âBorn to Buyâ and âThe Overspent American.â Expecting the U.S. consumer to be the locomotive for global or even domestic economic growth is foolhardy for two reasons. First, as is now well understood, much of the robust consumer growth of the past two decades was underpinned, not by income growth, but by the expansion of debt and unsustainable growth in family labor hours. A department store in Fort Wayne, In., 1970. Hourly wage rates have stagnated since the 1970s. Especially recently, workers have been unable to capture their productivity gains. Parents aged 25-54 added a whopping 358 hours of work to their annual schedules between 1979 and 2000. Questionable credit practices and a now-popped housing bubble allowed consumption demand to grow, but before the crash, debt to income and asset ratios were stratospheric. Furthermore, consumers have been burned and chastened â many are articulating that theyâve changed for good, rejecting the happy-go-lucky spending of the boom for a more cautious, grounded and sustainable consumer attitude. Consumer sentiment is in sync with a growing mountain of research that shows relatively small gains in well-being from additional consumption above threshold income levels. The wallets that snapped shut last year will be far harder to open than the post-WWII recession experience would suggest. Will U.S. Prudence Force Chinaâs Hand? Bernard Baumohl Bernard Baumohl is chief global economist at The Economic Outlook Group. What kind of economy do we want? Should we remain perennial borrowers, where our life style continues to be dependent on the generosity of foreign lenders? Or has the time come for us to jettison our past shopping habits and instead focus on increasing savings and being more successful selling goods and services abroad? For more than a decade, the U.S. economy has been caught in a destructive cycle that saw American consumers gobble up underpriced exports from Asia. Indeed, the amount Americans consumers spend in one year is greater than the entire G.D.P. of China, India, Canada and Russia â combined! The problem isnât that we have a hunger for laptops, flat-screen TVs, cars and appliances. Itâs how we paid for them. Only 65 percent of our shopping bill was paid for out of wages and salaries. The rest was financed by borrowing and through the depletion of our savings. This was a pattern that continued for decades â until finally the borrowing binge helped precipitate the greatest financial crisis since the Great Depression. How Beijing Suppresses Spending Michael Pettis Michael Pettis is a senior associate of Carnegie Endowment and a professor of finance at the Guanghua School of Management at Peking University. Americans are unlikely to return to their free-spending ways any time soon, and unfortunately there is almost no chance at all that Chinese consumers will be able to take up the slack. The Chinese save such a high fraction of their income largely because of long-standing policies aimed at promoting and subsidizing domestic investment and manufacturing. A weak safety net and slow wage growth discourage Chinese household spending. These policies inevitably require households to foot the bill, primarily through sluggish wage growth, low interest rates on their bank deposits, an undervalued currency and a weak social safety net. Since total savings is just the difference between what is produced and what is consumed, subsidizing producers at the expense of household consumers necessarily causes savings to rise. But Beijingâs massive stimulus will probably prevent the necessary adjustment toward faster consumption growth from taking place in the near future. Instead of reversing those policies that shift income from households to producers, which might have also caused a surge in unemployment, Beijing forced through a large increase in investment. Positive and Negative Consumption Lawrence Glickman Lawrence Glickman, a professor of history at the University of South Carolina, is the author of âBuying Power: A History of Consumer Activism in America.â Throughout the 20th century and into this decade, commentators have predicted or encouraged a âreturn of thrift.â Time after time, however, restraint has lost against pent-up demand following recessions and depressions. A major exception was World War II during which restraint on consumption was mandated by government policy, and strongly abetted by consumer activists, who were among the biggest advocates of rationing and the policies of the Office of Price Administration. Shortly after the war ended, however, America went on a massive and extended buying binge, whose parameters were largely shaped by a state policy favoring home buying, educational expansion, and an enlarged warfare/welfare state. Our current problems are largely rooted in underconsumption, not only by individuals but also by local and state governments. Historians are better at analyzing the past than predicting the future, but I think itâs safe to say that history provides little solace for those who hope that lasting restraint will emerge from the current recession. So much wealth has been lost in the last two years (especially in real estate and equities) that it may, in fact, take some time before spending reaches the levels of the early years of this decade. The Selfish Germans and Chinese Desmond Lachman Desmond Lachman, a resident fellow at the American Enterprise Institute, is a former managing director of Salomon Smith Barney and a former International Monetary Fund economist. As the G-20 heads of state ponder the policies that might be needed to support the global economic recovery, one consideration should be foremost in their minds. The U.S. consumer, long the worldâs consumer of first and last resort, is no longer going to be the principal driver of the global economy. This prospect should focus the G-20âs attention on the critical issue of finding an alternate source of aggregate demand to keep the global economic recovery on track. Two considerations would make one think that U.S. household consumption is all but certain to be very weak in the period ahead. The first is that with U.S. unemployment likely to remain at around 10 percent for a protracted period of time, U.S. wage growth is going to be flat at best and could very well decline by the end of 2010. The second is that households are almost certain to continue to increase their savings in reaction to their record levels of indebtedness and to the large losses they have recently suffered on their equity and housing wealth holdings. Trying to save more when income is stagnating could lead to an actual decline in U.S. consumption levels going forward.
Yeah, if their pants are not falling down or being held up with a hand, chances are they got something stuffed into waistband. Bumped into some kid yesterday at Wally World and nine DVD's fell out of his pantsleg, then he had to grab his pants. ROFL I doubt our youth is going to do the buying that the baby boomers had.
Romanian Gypsies travel in caravans, wearing baggy clothes, in groups of 20 or more, teaching their toddler children how to steal: http://www.bbc.co.uk/iplayer/episode/b00mkjyd/This_World_Gypsy_Child_Thieves/
I went to best buy a few weeks ago to get my kid a Wii. (they just dropped the price today duh!) Anyway, best buy was packed. I don't know how they pack em in, but the store looked like it did 5 years ago, this was weekday afternoon. Just slammed with people. World keeps on spinning.