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What is a good citizen? During the bubble years, a strange idea developed: that good consumers were good citizens.
That did fire up economic "growth," but it was unsustainable; consumer confidence is now at a record low. Maybe now is a good time to take a hard look at that mind-set.
He who has the most toys is the best citizen
After the last recession, the president himself advocated citizens spending money. Your country -- and economy -- needs you! Apparently many people didn't require much arm-twisting. This helped result in a perfect mess, since the new asset bubble that was inflating was the housing bubble, with many people extracting equity from their homes to finance lavish lifestyles, not to mention utilizing credit card debt far out of proportion to their incomes.
Television pundits marveled at how consumers just kept spending and spending, even in the throes of the last recession, but seemed to fail to make the connection that much of that spending (and economic growth) was fueled by borrowing.
Welcome to the era of consumerism. Rampant consumerism. And the powers that be would still like to see us spend more now, even with so many consumers already in trouble.
Unfortunately, many people should have applied a heck of a lot more critical thinking -- not to mention personal responsibility -- when this behavior was being encouraged.
I philosophically accept consumption as a driver of business and business practice and even as a tool for change (hopefully for the better). Don't like the way Monsanto (NYSE: MON ) does business? Then go to Whole Foods Market (Nasdaq: WFMI ) or vow to buy organic whether you shop at Safeway (NYSE: SWY ) or local farmers.
Wal-Mart (NYSE: WMT ) got the message that people didn't particularly like some ways it did business and it has worked to show it's more concerned about communities and environmental issues. And of course, companies like Google (Nasdaq: GOOG ) have tried to tool their missions to the vision of how a corporation can profit and do good in the world, and of course consumer goodwill figures into that equation.
The consumer dollar -- spent or withheld -- can be a powerful tool for change, when wielded mindfully.
Indeed, investment dollars can work the same way. The thing that first attracted me to investing was not untold riches, but rather the recognition that being a shareholder can be a tool for democratic change, at least in theory. Shareholder activism can work in this manner. Remember how major shareholders recently agitated against ExxonMobil (NYSE: XOM ) regarding environmental issues? And if you've ever glanced at shareholder proposals in proxy statements for companies like Monsanto or Halliburton (NYSE: HAL ) you'll see similar spirit.
Shop till you drop, citizen
Unfortunately, the idea of rampant consumerism as good citizenship became common and Americans responded with enthusiasm. When has being a good citizen been so much fun, after all? The Federal Reserve's interest rate policies that fired up the bubble certainly played into the idea that cheap credit would give economic growth a shot in the arm. Unfortunately, what transpired was unsustainable as so many American citizen consumers got in over their heads in a feeding frenzy of epic proportions.
And of course, John Maynard Keynes' Paradox of Thrift set the stage too; when consumers save rather than spend, the economy becomes, shall we say, a bit more growth-challenged. We are seeing the downward side of the Paradox of Thrift right now as frightened consumers try to pay down their debts and sock money away, instead of spending it like drunken sailors.
Of course, the other side of that is, the easy access to credit may have fired up the economy for many years, but the truth was that such growth was neither sustainable nor arguably real when consumers can't pay back the debts they incurred without thought of economic realities. Good times do not go on forever; that's just common sense. So that frenzy of consumption didn't really add up to being a very good citizen at all, did it?
Digging holes, in more ways than one
Many people have been blaming unrestrained free market policies for our current problems, but I've been wondering about what seems to have been a heavy Keynesian strain at work in all this. Keynes in fact railed against people who saved during the Great Depression, encouraging people to get out there and spend.
Plus, Keynes condoned government deficit spending -- even if that spending is pointless or inefficient, as evidenced in his quote about building pyramids and digging holes in the ground -- when the business cycle downturns. And while that may benefit in creating jobs in the short term, even beyond problems like inefficiency and the difficulty in unwinding government programs, let's not forget our government had already generated a monumental debt after our last recession and before our current crisis. We were already well in the hole even before we became Bailout Nation. This new variable on the old theme strikes me as incredibly dangerous.
And of course, rampant deficit spending bled out into our general consumer culture, given the implication that the spendthrift, even debt-laden, consumer was a good citizen.
What is a good citizen?
To my way of thinking, a good citizen is a responsible one, who takes personal responsibility for his or her actions in the world and exercises awareness and self-restraint. In troubled times, it is the person who looks around and tries to figure out how to help those who have fallen on difficulties, or donates money to organizations that support such people, recognizing community. A good citizen with a bright idea might look for ways to create a new business venture, investing in the future. A good citizen can be the true long-term investor, who invests in companies that are well run and sees investment as ownership, not empty and unreasoned speculation.
A good citizen as a "good" consumer, who doesn't save for tomorrow or worry about how to pay debts back? That idea has failed. The good citizen as a responsible, self-reliant individual who thinks about the future must make a comeback, otherwise, over the long term, our economic picture may look pretty dismal indeed.