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A Funny Thing Happened on the Way to the Election in 2012….

Late yesterday evening, I saw a commentary piece entitled “How to Sabotage a Recovery” posted at Real Clear Politics. It’s from Salon, which most of us recognize as being a leftist website, but I was curious so I decided to check out it.

Basically, it’s your typical “Obama inherited the economy”-“Republicans are trying to destroy the economy”-“Rich people and evil banks are sitting on hoards of money while our economy is dying” type of article. It was the kind of written piece that promotes socialistic redistribution of the wealth via application of governmental policies but never comes right out to speak the truth about doing so. Yet there was one little paragraph in the middle of the article that caught my eye…

What’s needed is to get that money moving. Businesses aren’t hiring because there’s too little demand. Unemployed, underemployed or merely scared middle-class consumers — some 70 percent of the economy — aren’t spending (emphasis mine)

I found myself chuckling rather quietly in response to the statement that some 70% of our economy just isn’t spending. This wasn’t exactly news to me. I observe it day in and day out in my job in the retail sector of industry.

Today, there have been many other suggestions made as to why our economy is remaining stagnant…everything from excessive regulation, not enough governmental stimulus, even Federal Reserve manipulation of currency values.

I think the answer is actually simpler than that. For many years, citizens of this nation lived in a somewhat warm cocoon-like sense of economic security that allowed them to have the confidence that they could make purchases on the basis of future expectations of income via credit.  Due to the policies and action of the Obama administration (and many Republicans in Congress as well), citizens have developed a strong distrust of our government’s economic policies. This has revived a rather old-fashioned concept called prudence. Individuals are taking greater responsibility to apply prudence in evaluating how their disposable income should be spent. They are tightening their belts, and have been for over a year now.

A funny thing happened on the way to the election in 2012…

I get the opportunity to talk to customers day in and day out. What I hear from them is how they may have had plans for the future, but they’ve had to re-evaluate their priorities in regards to spending patterns. They speak of facing adversity economically and the challenges of trying to overcome that adversity. What may have started out as short-term behavioral patterns designed to respond to an immediate economic crisis have existed in their lives for a long enough period of time to become long-term behavioral changes where new habits are becoming entrenched in their lives.

But where the conversation becomes truly revealing is when I ask “If there was an uptick in the economy tomorrow, would you go back to the old spending habits that you might have had three years ago?” Roughly 85% of the time, the answer is no. Their spending habits have changed. They’ve become accustomed to new spending behaviors, including fiscal prudence. They even speak of a sense of accomplishment and achievement that they’ve experienced in finding ways to face economic challenges head-on in their personal lives, and of how empowering it has been to see themselves succeeding in specific goals, such as paying off debts.

Where the laws of supply and demand are concerns, it is usually individual consumers who ultimately drive demand for a product or service. Not government or banks or even the manufacturing industry. And as long as individual citizens are of a mind to apply fiscal prudence, demand for products and services is likely to remain stagnant.

On a positive note, this means that a greater number of citizens have shifted in the direction of acting as fiscal conservatives, at least in regards to their personal finances. This could be to the benefit of Republicans in the elections in 2012. (I’m going to guess that the left never considered this particular unintended consequence when they started down this path of “spreading the wealth around”).

All of that being said, there’s a chance that no single intervention on the part of government will be the sole motivator in bringing about a resurgence in our economy.

Consumers will have to make up their own minds on that point, not politicians.

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