We have always known when people are doing better economically, they buy more, and when they are doing worse, they buy less. This has become painfully evident to many businesses as they find their customer base shrinking under the pressure of an economic downturn.
In any other time, this would be something worthy of great applause. Americans stand head and shoulders above other developed countries in consuming more than our share of the world’s resources, so by reducing our consumption, we are doing an important part in preserving our environment and becoming sustainable for the long term.
It is quite ironic that now, unlike at any other time, excess consumption would be a (relatively) good thing. Now is the time when corporations truly need our money, not merely out of greed but as a matter of survival.
A recent example is the automobile industry, which has taken a 37 percent drop in sales as of last November; the giant General Motors may run out of money within the next year.
Smaller businesses, which make up the majority of America’s market, are even more endangered, lacking the cash reserves possessed by most of the larger, newsworthy firms.
Job losses and sales losses feed each other in a vicious cycle.
One might argue that it is better for everyone to buy more Christmas (or Hanukkah, or Kwanzaa, or Diwali, or Eid al-Adha, or Boxing Day or anything you celebrate) presents to support our economy, even if we are buying items we don’t really need. Perhaps some short-term resource depletion is a necessary tradeoff to save hardworking Americans from more layoffs and possible starvation on the streets. (Good news: Recent statistics say Black Friday shopping wasn’t as badly affected as most predicted. However, we don’t know yet if that will hold up for the holiday season.)
But recessions, like expansions, are temporary conditions. Some number of years from now, the economy will turn up once more, employers hire again and employees buy again. Corporations raise their sights beyond merely breaking even to look for real profits. This is the time when we can afford to live frugally without risking the very foundations of our capitalist economy.
At that time, we would be wise to cut back, pay off our individual and collective debts, and green our lives. History shows market bubbles of any kind eventually burst, generally causing enough pain to wipe out previous gains. But a bubble can never burst if we don’t inflate it through our reckless consumption and over-optimism.
Instead, by living strictly within our means at all times, we can grow our economy at a controlled pace to avoid creating bubbles and build up reserves of credit and purchasing power to absorb the impact of any unexpected economic shocks.
Kenneth may be reached by e-mail at kenneth.lan@asu.edu.
