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Topic: The Remarkable American...

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UGoGirl Posted – 6/3/2007 10:36:21 PM | show profile
...Consumer. From the American Enterprise Institute. Our greatest accomplishment, our consumerism and willingness to go deeper into debt as individuals and as a country.

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The Remarkable American Consumer

"The American consumer is a very persistent spending machine. It is American consumption growth running at higher than 4 percent annualized--well above its long-term average--that has kept the economy comfortably out of recession for the past six months as the housing slowdown has subtracted more than a percentage point from growth. ...the American consumer's spending surge has still been enough to keep GDP growth in positive territory.

Durable American consumption growth is an immensely important factor for the world economy. It creates a reliable and persistent source of demand growth that accounts for over 70 percent of U.S. GDP growth and a substantial portion of rising demand for the exports of the rest of the world, including rapidly industrializing economies like China's.

...The persistence of consumption growth since the early 1980s is even more remarkable ... in view of the fact that since 1982-85, personal saving as a share of disposable personal income has dropped from a range of 8 to 10 percent to minus 1.3 percent over the past year. The most rapid drop in the personal saving rate occurred between 1982 and about 2000, by which time the saving rate had fallen to what was then viewed as a dangerously low 2 percent. After hovering around 2 percent until 2003, the personal saving rate made another swoop down and has been in negative territory since 2003. It is, of course, the negative personal saving rate coupled with public sector deficits that has boosted American net borrowing from abroad to about 6 percent of GDP. That said, a negative saving rate and rising indebtedness to the rest of world have failed to dent the persistent rise in American consumption, due in part to the willingness of foreigners to lend to America at low interest rates the funds necessary for it to keep spending in excess of income.
UGoGirl Posted – 6/4/2007 8:33:02 AM | show profile
From Carolyn Baker:

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...I was recently gifted with [the] book [The Great Depression] by a friend who thought that as an historian, I would appreciate it and find it timely, and certainly I do, but due to current events and how rapidly they are unfolding, my comments about it here will not be from an academic perspective.

...One cannot thoroughly appreciate the catastrophic nature of the Great Depression without understanding what preceded it. The decade of the 1920s, ... was a time of dizzying, unrestrained, and frantic consumption. It was the apotheosis of the ?conspicuous consumption? about which Thorsten Veblen wrote in his turn-of-the-century classic The Theory Of The Leisure Class. ... the consumption ethic has not abated but rather intensified since then.

... Clearly, the consumption on steroids that we have been witnessing the past sixty years in the United States is no longer capable of ?curing? an economic depression, but it is certainly capable, along with mountainous debt, of contributing to the occurrence of a Second Great Depression.

Elevated levels of consumption are almost always attended by an increase in ?individualism? and a decline in a sense of community. The Great Depression reversed this trend in America dramatically, and for me, that is perhaps the most riveting feature of McElvaine?s book as he writes, ??the most significant fact about the Depression era may well be that it was the only time in the twentieth century during which there was a major break in the modern trends towards social disintegration and egoism.? (xxiii)

From the perspective of today?s world, whenever I reflect on the 1930s, I never cease to be amazed at the spirit of cooperation that blossomed amid the hardship and impoverishment of the times. Of this McElvaine notes: ?The economic collapse that started in 1929 obliged people who had begun to accept the new values of unlimited consumption and extreme individualism to take another look at these beliefs in comparison with the more traditional, community-oriented values that had existed in earlier times.? (xxiv) The author also notes that many men who had become unemployed and found themselves spending more time at home also found themselves in the position that women had traditionally experienced?that is, at the bottom of the economic hierarchy. Whereas in the Victorian era, the Horatio Alger-style, self-made man was championed, during the Depression the ?self-made man became the self-destroyed man.? (xxiv) In other words, during the Depression, people began to recognize the value and necessity of interdependence which manifested in a preference not for the highly individualistic urban lifestyle, but for rural and small-town life.
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