Question
If the US economy is 70% dependent on consumer spending, how can it ever produce more than it spends?
Answer
I strongly disagree with Matt Ford's economics-based answer, because this is fundamentally not an economics-based question. I also disagree with User's answer, because austerity is not the answer either.
The economics is just the symptom. Three economic symptoms are important: portion of the economy that is consumer, consumer debt and savings rate. The three together paint a picture of the social-psychological health of the economy.
And right now, the picture painted is not pretty. A community that is economically driven by consumption is full of "consumers." People whose lifestyles and scripts are dominated mainly by narrow and limited forms of production (often dehumanizing forms of production that rot their brains -- burger-flipping McJobs) and complicated patterns of consumption, much of it based on the psychology of addiction: the creation of demand for, and supply of, new things.
A person who gradually consumes more, and in more complex but fundamentally empty ways, while producing less, in less complex ways, fundamentally becomes a lesser human being over time. This dehumanization process is something I call "Gollumization", an idea I discussed in this blog post:
http://www.ribbonfarm.com/2011/0...
A comment on that post, quoting an Internet discussion somewhere else, said it best:
http://www.ribbonfarm.com/2011/0...
On the other hand, the answer is not to consume less and become some sort of cabin-in-the-woods minimalist survivalist living off some crappy paleolithic technology base (plus, since this is America, a gun). This is what science-fiction author Bruce Sterling calls "acting dead." Overly scarcity-minded and savings-oriented polities ultimately do not create wealth either, but only copy. This is also why I don't buy theologies like permaculture.
The trick is to achieve a fine balance between production psychology and consumption psychology. One keeps people human and able to grow and evolve, the other keeps them desiring things and wanting to grow and evolve. It is almost (but not quite) as bad to become overly addicted to producing and making, because it can foster overly practical and money-minded cultures with no taste or appreciation for the finer things and more philosophical pleasures of life.
Ultimately, the narrow macroeconomic goal of being a production surplus country in a competition with other nations is a means to an end: a culturally healthy nation with a population that is evolving, growing (though not necessarily in an economic 8% sense or even some naive "standard of living" sense) and turning into better human beings.
The aim is to evolve in ways that are broader than the merely economic.
This is fundamentally the reason why I still believe more in America than in China. This broad outlook and understanding of growth and evolution as a phenomenon that is primarily social and cultural, rather than narrowly macroeconomic, has historically been at the root of American political and economic resilience. Losing that and getting caught up in dumb numbers games is guaranteed to kill the golden goose.
The economics is just the symptom. Three economic symptoms are important: portion of the economy that is consumer, consumer debt and savings rate. The three together paint a picture of the social-psychological health of the economy.
And right now, the picture painted is not pretty. A community that is economically driven by consumption is full of "consumers." People whose lifestyles and scripts are dominated mainly by narrow and limited forms of production (often dehumanizing forms of production that rot their brains -- burger-flipping McJobs) and complicated patterns of consumption, much of it based on the psychology of addiction: the creation of demand for, and supply of, new things.
A person who gradually consumes more, and in more complex but fundamentally empty ways, while producing less, in less complex ways, fundamentally becomes a lesser human being over time. This dehumanization process is something I call "Gollumization", an idea I discussed in this blog post:
http://www.ribbonfarm.com/2011/0...
A comment on that post, quoting an Internet discussion somewhere else, said it best:
http://www.ribbonfarm.com/2011/0...
“When you don’t create things, you become defined by your tastes rather than ability. Your tastes only narrow and exclude people. So create.”
On the other hand, the answer is not to consume less and become some sort of cabin-in-the-woods minimalist survivalist living off some crappy paleolithic technology base (plus, since this is America, a gun). This is what science-fiction author Bruce Sterling calls "acting dead." Overly scarcity-minded and savings-oriented polities ultimately do not create wealth either, but only copy. This is also why I don't buy theologies like permaculture.
The trick is to achieve a fine balance between production psychology and consumption psychology. One keeps people human and able to grow and evolve, the other keeps them desiring things and wanting to grow and evolve. It is almost (but not quite) as bad to become overly addicted to producing and making, because it can foster overly practical and money-minded cultures with no taste or appreciation for the finer things and more philosophical pleasures of life.
Ultimately, the narrow macroeconomic goal of being a production surplus country in a competition with other nations is a means to an end: a culturally healthy nation with a population that is evolving, growing (though not necessarily in an economic 8% sense or even some naive "standard of living" sense) and turning into better human beings.
- The aim is not to "win" in some sort of stupid balance of trade competition with China.
- The aim is also not to uncritically praise consumerism as good.
- And the aim is not to operate by some idiotic set of spartan values that ennoble poverty for its own sake.
The aim is to evolve in ways that are broader than the merely economic.
This is fundamentally the reason why I still believe more in America than in China. This broad outlook and understanding of growth and evolution as a phenomenon that is primarily social and cultural, rather than narrowly macroeconomic, has historically been at the root of American political and economic resilience. Losing that and getting caught up in dumb numbers games is guaranteed to kill the golden goose.