If constant growth is possible, then ...
Can Rich Consumers Rescue the Economy?
Our contributor makes many fine points, yet is constant and expanding consumption necessary or possible? Your body needs sleep. Much of the world has winters. Can periods of lax economic activity become likewise beneficial? Readers can contact the writer through delusionaldemocracy.com.
by Joel S. Hirschhorn, January 2009When I was young, talk about millions of dollars impressed me. When I was older talk about billions of dollars dismayed me. Now, regular talk about trillions of dollars, especially government spending, nauseates me. People never seem to learn that they control the fate of the American economy.
It is far too easy to blame in bad times or thank in good times Wall Street, the government, or super-rich and powerful financial entities. In actual fact it is always the spending of money by the general population on consumer products and services, housing, cars, or investments that constitutes the economy. The core problem is that the public does not act in concert to serve its own interests but, instead, takes its cues from the media and puts its trust in the wrong people and entities.
In other words, besides all the blame that rightfully can be heaped on many others for the current recession, it is also true that the public through its dollars drove the nation and the world into the current meltdown, mostly by using far too much borrowing. They got suckered into using easy credit. True, in many cases, they acted on incorrect and intentionally misleading information and were taken advantage of. But so much of this consumer behavior was driven by greed or stupidity. Confidence was placed in government regulation, Congress, and banks and mortgage and other financial companies. We had delusional prosperity because most of the population had willingly let themselves be deluded or manipulated by the power elites running the government and the economy.
Ironically, consumers constitute over two thirds of the economic activity of the nation. Long before the current economic meltdown, I kept writing about the potential political power of consumers. To get desired government actions, millions of consumers could threaten to cut their spending in order to get actions, like stopping the Iraq war or impeaching George W. Bush. But without leadership consumers just kept borrowing and spending, maintaining the delusional prosperity that they themselves propelled. Now they must act to fix things.
Now that the economic meltdown has cost many people their job or a good chunk of their savings or both, they need to understand that depending on the usual power groups to turn the economy around is dumb. Thinking that President Obama, Congress, and various federal agencies, in particular, will save us is continuing the delusional thinking that has been like a chronic disease. So what could save us?
Even after the meltdown, according to the Federal Reserve’s own data, there is presently a historic amount of cash is in bank and money market accounts, an astounding $8.85 trillion. Not the value of homes and investments but somebody’s surplus cash. Compare it to the trillions talked about to spur economic recovery through bailouts, which must somehow channel money into consumers’ pockets or make credit for them more available. A modest fraction of all that cash, say a quarter, has the economic power to do more good than anything the government does. The nation needs it to avoid still more massive federal deficits and borrowing and inevitable tax increases.
That humongous amount of cash, $8.85 trillion, comes to about $29,000 for every man, woman and child in the nation, or roughly $88,000 per household. Your first thought may be “I don’t have that kind of cash!” In fact, economic inequality has risen terribly in recent years, helped by various public policies, making the affluent rich and the rich super-rich and most of the middle class poorer. This means that much of this cash belongs to a relatively small fraction of the population, perhaps 20 to 30 million people. To try to turn the stock market and just about every segment of the private sector around, 10 to 20 million Americans must start spending and investing with gusto, acquiring home appliances, computers, cars, clothing, furniture, new homes, travel, and so on.
No matter how much cash we have, we must put our faith in ourselves more than the government or the business and investment sectors. We the people must do much than vote. We must use our dollars to save our own financial health. Unless we shift our thinking and spend, we will stay in economic hell for a long time. We are the economic stimulus we’ve been waiting for.
JJS: Yes, let’s believe in ourselves and change our thinking. However, “we” don’t have that nearly nine trillion dollars; as noted, the elite does. Hence, “we” couldn’t spend our way to recovery. Not unless we confiscate and redistribute all those trillions. But doing that does not get to the root of our problem. Here are three points that do.
The rich already have all they need. They don’t need to consume more. (1) It’s the people without huge savings who need some basic necessities.
Also, recessions are natural. While the depth of recessions -- and the heights of prosperity -- are not natural, slowing down for a period of time is natural. And they happen regularly. You can make them comfortably endurable with economic justice but without you’re just wasting our time and money. (2) We just need the income and savings to get us thru the slow times.
Finally (3), the planet needs a break from so much human economic action that chews and spews, that depletes resources at one end and pollutes the environment at the other.
There is a way to end poverty, ease us thru slow times, and to keep us within eco-constraints. That is, forget taxes and subsidies and instead recover and share all our spending for Earth. That flow of money for land, resources, spectrum, etc, is trillions annually. It’s enough to operate the basic, justifiable services of government and still pay ourselves a dividend, a la Alaska’s oil dividend. Having to pay “land dues”, owners and investors would no longer speculate or over-extract, giving the natural world a needed break. And receiving the extra income, people would not be poor and slow times would not be worrisome. It’s called geonomics and works wherever tried.
Jeffery J. Smith runs the Forum on Geonomics.
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