As I walk the dogs past the masses of discarded packaging and Christmas trees that decorate the city’s streets, I am reminded of the darker side of this holiday season.
The following text is taken from an interview by Marty Moss-Coane with Princeton professor and author of Beyond Our Means: Why America Spends While the World Saves, Sheldon Garon. Full interview can be found here.
“We are told that our economy depends on consumer spending, that if we spend, companies will hire people and that will get people back to work,” true but…..
“Households have to spend in a way that’s within their means, that doesn’t so destabilize their finances that they’re incapable of spending in the future, and that’s where we are right now, people are tapped out, they’re over indebted from housing, from credit card debt and they can’t really jump start the economy the way it needs to be now, because of an excess.”
As compared to the Germans, French and other central European countries, America has a much lower savings rate. Why?
European governments “for the past 200 years have promoted small saving. In other words, they set up a series of financal institutions called savings banks and post office savings banks, that make it very easy for lower income people, the small saver, to come in with very little money. There are no fees, there are no minimum balances, so they have been very accessible to the entire population.”
In addition, these countries are “much more stringent on regulating credit, whether its consumer credit or housing credit than we have been. And they have policies to protect their citizens from what they call over indebtedness, a term that doesn’t even exist in our country.”
“Average debt in the USA is $16,000 for households $5,000 for individuals, which is dramatically different from European counterparts.”
The standard model in American economics departments is that generous welfare benefits should act to depress saving, but instead in Europe it seems to do the opposite. Why?
“The welfare state in Europe does something that we really don’t do, it keeps most of its population from falling into poverty and distress. Simply by keeping people in stable middle class situations, you automatically increase your saving rate whereas in our country, so many people have fallen through the cracks that they find that whereas in Europe, if you are in trouble, you get welfare. In America, when you’re in trouble, we give you more credit so people get over their heads in this country in debt and therefore our saving rate goes down so I think actually a welfare state tends to promote saving rather than the other way around.”
So if Americans made more money and were able to get out of debt, would their spending habits change? Would we see an increase in saving?
“Our institutions promote consumption and credit so heavily that if Americans made more money, they probably would spend all of it.”
The 1980s was a turning point with massive deregulation of financial institutions, all of a sudden it became easy to get money, money that people didn’t have. Credit becomes our welfare policy but with high interest rates and fees, it seems to sink people deeper into the abyss than to help them out of it.
These factors, compounded by the psychological implications of consumerism which Dan Gottlieb discusses in his radio program Greed present a challenge for the American citizen. Can we face the existing structural and motivational obstacles and begin to act differently? Can we objectively examine our traditions and habits and make concessions based on a respect for one another and the Earth?
The piles of materials and objects that lay like corpses once a week on the sidewalk, waiting to be picked up and carted to some hidden location that will eventually be our backyard, serve for me not only as a reminder of the disrespect for our planet and its resources but as evidence of our role in its assault.
