Why is it that the word “consumption” has been inextricably bound to the adjective “conspicuous”, and the phrase has come to mean a condemnation of our consumer-based economy?
It is a fact that retail sales, i.e., products sold to an end-user, make up the vast majority of our economic activity. It is also a fact that Americans have been buying more than they can afford, for several decades now. And it’s a fact that Americans consume 25% of the world’s energy resources while being comprised of about 5% of the global population. So the “conspicuous” nature of our economy is related to the disproportionate consumption of resources, paid for by borrowed dollars. We borrowed from others, and we borrowed from our own futures, and we borrowed from our kids. We even borrowed from our grandkids.
Be that as it may, the consumptive nature of our economy is not the problem, even though it has been tied to the problem of conspicuousness. I would like to offer a new phrase, to wit, “auspicious consumption”.
If each of us didn’t spend money to buy something, other people would not have a way of earning a living. If they can’t earn a living, then they can’t buy something from us, and we can’t earn a living. Our entire economic system, however Byzantine its apparent complexity, can be boiled down to this simple truth: we have to spend money to be able to earn a living. Without trade, none of us can thrive or even survive. Take a look at Eritrea, for example.
Since independence from Ethiopia in 1993, Eritrea has faced the economic problems of a small, desperately poor country, with 80% of the population involved in farming and herding. Eritrea has a centrally controlled economy under the direction of the sole political party, the People’s Front for Democracy and Justice (PFDJ). This approach to economic development has resulted in a whopping annual per capita GDP of seven hundred bucks. This is an economy that is pre-industrialization, and is a contrast example in modern times of how market-based economies built on leveraged access to resources can improve the standard of living of a population. One of the poorest countries in the world, Eritrea is no poster child for the benefits of moving away from a consumer-based economy. And there aren’t any others either.
Sure, we need to save money for the hard times. Like now. But we also need to put money to work or we won’t have any trading partners and our own livelihoods will be threatened. Right now, by some estimates, there is $13-15 trillion sitting on the sidelines in the U.S., waiting for some sign from the Oracle so it can go to work. The choice is to keep that money out of the market and watch its value erode steadily because the economic bases for its worth continue to erode, or start putting the money to work by investing in long-term business models and value-creating assets, so that the people who receive the money can start making intelligent purchases again. And the vast majority of Americans do make fairly intelligent purchases. What we’re experiencing in the financial markets currently is the impact of a minority of the population making stupid decisions which benefited even fewer people, which we’re all paying for now.
So let’s bet on the hard-working majority of the population. If you have cash and you’re sitting on the sidelines, it’s about time you started investing before you lose the opportunity to translate that cash to real value. It’s time we all engaged in auspicious consumption.