Tuesday, September 7, 2010
The Paradox Of Thrift
This is a WSJ article written by Kelly Evans, one of my favorite TV commentators, in which she describes the great fallacy of today: That anyone, including "Middle America", can (or will) spend us out of recession.
I'd like to take this one step further: I see this phenomenon as a fundamental failure of personal responsibility. We already accept that freedoms come with responsibilities, but irresponsible consumerism has brought us to the brink of financial ruin.
I'm going to tip a sacred cow here: I believe this irresponsibility started with "The Greatest Generation", the World War II generation. The generation who came through the Great Depression, beat the Nazis and the Fascists and the Imperial Japanese- and then came home to live the American Dream.
What was "The American Dream"? "A house with a white-picket fence", a "good -paying (union) job with good (union) benefits", etc. "The good life" became defined by advertisements for brand-name products. That generation spent more- consumed more- than any previous American generation. People became defined by the value of their possessions. And this generation taught their children, who repeated the cycle in their own adulthood, and who took the notion a step further-
"Everyone deserves a chance at the American Dream".
In order to facilitate "everyone's chance" to own "the house with the white-picket fence", mortgage lenders were barred from considering the ability to make payment when deciding to approve or deny a loan. Housing prices inflated with the increased demand. In order to facilitate the "good-paying (union) job with good (union) benefits", the influence of labor unions drove up the costs of payroll, benefits, and retirements to unsustainable, bankrupting levels. Rabid consumerism paid the costs of these union programs, for awhile.
And now the bubble has burst.
Demonstrating the pervasiveness of Keynesian economic principles, the public seem to believe that "the public" (i.e. "everyone else") should spend every available dollar to "jump start the economy". Thankfully- and this brings us back to Kelly's article- some people are becoming responsible with their money.
Is this a condemnation of the capitalist system? ABSOLUTELY NOT! It is a failure of the entitlement mentality ("I deserve -blank-"), and the failure of unsustainable spending.
People are more conservative with their own money these days. Let us hope that, come November, they will vote to be more conservative with other people's money, too.