For a site which purports to be the IPE Zone, some readers may be dismayed by the number of posts devoted to the US in recent weeks. I offer two justifications which should satisfy most: First, given that the US is the world's largest export market, many countries are going to be affected by a consumer-led slowdown in the land of the free. From East Asia (South Korea) to Latin America (Mexico), things will get more difficult. Export-oriented growth models are great--so long as you have someone to export to. Second, it is undeniable that the US is a bellwether for trends in economic governance, whether others like it or not. Not so long ago, the Varieties of Capitalism literature was all the rage in Britain. However, given how heavily the US (and the UK) are now meddling in market affairs, it is fair to say that liberal market economies in the neoliberal mold are dissipating even in the very places which spawned them and pushed them elsewhere. If these countries in the vanguard are retreating from the excesses of one interpretation of laissez-faire, then others will be less likely to follow.I've come across an interesting op-ed in TIME which neatly lays out the case against America consumers continuing their jihad on fiscal sanity. Here, Nancy Gibbs reminds that as opposed the mindless consumerism which has brought household debt outstanding to over 100% of US GDP, the country was founded on principles of thrift and sacrifice--neither of which characterizes it much anymore. George W. Bush urging Americans to go shopping in the wake of 9/11 illustrated how much the US economy has become dependent on megaconsumption, nevermind its deleterious effects on the pocketbook, the waistline (Americans are purportedly fattest people on Earth), and the environment (the US was, until recently, the largest greenhouse gas emitter). Needless to say, America telling other countries to follow its example of "financialization" have often fallen on deaf ears as the reflected image of today's US isn't an attractive one.
Simply put, the US needs some "structural adjustment" away from (unsustainable levels of) consumption, currently accounting for over 70% of its GDP. It will be a painful process, and neither of the current candidates promise much in the way of necessary belt-tightening of America's excesses even as the country's bill is now coming due with spectacular effect. Whether the US can weather painful adjustments is anyone's guess. Thrift needs to restart at the grassroots level, and it will be interesting to see if that can happen. More likely, it will have to happen:
American greatness--the vision of the founders, the courage of the pioneers, the industry of the nation builders--reflected a mighty faith in the power of sacrifice as a muscle that made young nations strong. Banks were like gyms for the soul: the first savings banks in Boston and New York were organized as charities, where "humble journeymen" could exercise good judgment, store their money and not be tempted to waste it on drink. Architect Louis Sullivan carved the word THRIFT over the door of his "jewel box" bank nearly a century ago, for it was private virtue that made public prosperity possible...Like for so many other spendthrifts, the midnight hour has come to America.
Somewhere along the way, thrift did not just stop being a value; it became a folly. Saving was for suckers; you'd miss the ride, die leaving money on the table when you could have lived it up. There are no pockets in a shroud, as the saying goes. We once saved about 15% of our income. By the roaring '80s the rate was 4%; now we're in negative numbers. Bob Hope liked to joke that "a bank is a place that will lend you money if you can prove that you don't need it." But that too changed as easy credit bloomed and usury became another of those vices that had somehow lost its juice. The average American has nine credit cards with a total $17,000 balance. We borrow against our houses and pensions to live in a way that dares us to actually grow old. "Never invest in any idea you can't illustrate with a crayon," Fidelity mastermind Peter Lynch advised, but we embraced all kinds of investments about which we understood nothing except the hollow promise that they would never fail. When the economy began to swoon we kept spending, effectively sending ourselves rebate checks from accounts already way overdrawn, as if it would make us feel better to buy a new TV and charge it to our kids. States fund their schools, which among other things are meant to turn children into responsible adults, by selling lottery tickets...
There's no way to tell during this current distress whether we're repenting or just retrenching. Thrift store sales are up. Cars are shrinking. P. Diddy retired his private jet to save on gas. In hard times, people often rediscover the peace that prudence brings, when you try to spend a little less than you have because tomorrow might be worse. But that feels almost un-American; we're optimists by nature, and we've been living large for so long that solvency feels like a sacrifice. It will take some sustained character education--and leadership--to understand that morning in America is more likely to come again if we prepare for midnight.
