Our capitalistic economy is built upon the notion that you and I will always be buying things. A box of corn flakes, a DVD player, a new house: buying things we need or think we need is the fuel that fires the economy. While spending by businesses definitely helps expand our economy, consumer spending is the main driver of our country’s economic growth.
Like everything else in the universe, consumer spending goes through cycles. Because of high unemployment and the collapse of the housing market, consumer spending is in the trough of the current cycle and understandably so. Folks are hesitant to spend when they are unsure about the future. With personal savings rates now at almost 20 year highs, frugal rather than frivolous may be the adjective that best describes consumer spending.
The question is, does this frugality point to the trough in the cycle or is this the new normal? Is Thorstein Veblen’s concept of conspicuous consumption a thing of the past? Should we learn to live with a lower GDP? Could a beautiful little curly-haired girl provide some answers?
After finding out we would be keeping our 15 month old granddaughter for a couple of days, my wife literally ran to Target to buy some new toys. She returned home an hour later with $93 worth of “fun stuff.” That’s right, $93 for toys for a toddler. Now before you get the idea I might be a cheapskate grandfather, let me make it clear why I am emphasizing the $93. This was clearly capitalism at its finest, but our granddaughter would have none of it!
Following a delightful dinner of peas and carrots that first afternoon, we went for a walk. Among the usual flowers, leaves and sticks she discovered in the pasture, our little angel found a true treasure: a metal cap, the kind of cap you would find atop a chain-link fence post. It did not take her long to find 3 or 4 rocks to put into the cap. It took even less time to figure out she could dump them out and put them back in, again and again. When it was time to head back to the house, she took her cup of rocks with her.
If you have kids, you know how this story ends. Oh, she glanced at that $93 worth of new toys on the carpet. She even played with a couple of them for a few minutes, but for the rest of the evening she played with her cup of rocks. When she got up the next morning, she played with her cup of rocks. Despite the obvious irony, was there a message hidden in her actions?
We will not crush our economy if we cut back a little on our spending. Being a little more frugal will not be the downfall of capitalism as we know it. Spending smarter will not close down the local Wal-Mart. Most of our economic problems today have a lot to do with people and businesses who were “living beyond their means.” Maybe the new normal should be “less is more.”
Our granddaughter showed us that you can still have a lot of fun without spending a lot of money. She is probably on the right track. As far as her grandmother is concerned though, capitalism is alive and well.