Consumer habits key to recovery
It seems as though the economic slowdown is not going anywhere anytime soon. This past week left us yet one more bittersweet historical first: the highest drop ever recorded in consumer spending.
As a financial neophyte and a son in a low-income household where spending on non-essentials is an aberration and not the norm, my natural reaction was, "So what?" Somebody had to explain to me why responsible money management and saving habits are a problem.
The answer became painfully clear after only the first round of reflection. We are nothing but a nation of compulsive spenders who buy more than we produce.
We were constantly told to save for retirement and for a rainy day. What nobody told us is that this was just another scheme to get us spending. The money we save becomes capital that banks then loan to those who – encouraged by easy credit – spend happily and, more often than not, irresponsibly. Sadly, such irresponsible behavior has been keeping our economy afloat until now.
We are not the financial powerhouse we once were, but a fragile transit hub for somebody else’s money. Our riches are not the fruits of labor and sustainable production, but the illusion of spending and credit lines.
I feel like a fool for once arguing against some, now vindicated, foe who summarized our main weakness in not uncertain terms: "You Americans have everything but own nothing."
How right you are, my friend. The house I live in belongs to the bank; I don’t yet have the title to the car I drive; and the furniture I sit on, the clothes I wear and even the computer I’m typing on are not really mine, for I have not finished paying back the credit I used to buy them.
The U.S. managed to place itself atop the financial world following WWII because almost everybody was buying from us and not the other way around. Importing only raw materials, we produced the equipment, technology, manpower and financial tools to build and rebuild the world. Circumstances have changed. It turns out my mortgage may have been ultimately sold to a big bank in China, and part of the reason we are struggling is because banks and investors abroad are no longer willing to lend or invest money in the U.S. Talk about role reversal.
For years we relished our cleverness in creating financial instruments that allowed us to operate on credit and keep our cash to buy more and even invest some. And that was all fine until we corrupted the system to keep only the spending part and forgo the American enterprise impetus that called immigrants here in the first place.
It seems such complacency – combined with a hunger for possessions – has driven American production under the wheels of multinational corporations that favor foreign products in the name of profits in their books, but not in our land. No matter how hard I try, I cannot find "Made in USA" labels at Wal-Mart.
Politicians have, as usual, had their hands tied. Protectionism is an outdated practice and most are neck-deep in those multinational interests anyway. So it may be once again up to us. Let’s whine less and work harder and better, support our own economy by buying local (a tough call since foreign is now cheaper and more abundant) and replace spending with production as the top priority. Labor bosses and preppy CEOs, of course, need to set the example and stop lavishing themselves with money borrowed in the name of the company from a foreign bank.
Government incentives should reward those who produce what we consume and export. More taxes? Sure, but only for those who do not produce tangible and exported goods: lawyers and lawmakers, doctors in private practice, actors and entertainers, bars and night clubs, adult stores and pornographers, luxury goods, gambling and even drugs (legalize and tax them).
Perhaps then we could pass from a debt-ridden society to a nation where the riches come from what we sell to others and not to ourselves.
Bonilla, a project management technology graduate student, can be reached via [email protected]