Does a Good Consumer Make a Good Citizen?

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.

Dollar power
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.

Wal-Mart Stores is a Motley Fool Inside Value selection. Google is a Motley Fool Rule Breakers pick. Whole Foods Market is a Motley Fool Stock Advisor recommendation.

Alyce Lomax owns shares of Whole Foods Market. The Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (21)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 28, 2009, at 8:49 PM, Atrossity wrote:

    I represent the comments made in your article Ms. Lomax!

    I’ve got a extra large Sports Utility Vehicle since it’s a need. I need the utility of all that space when I engage in my favorite sport of going to the mall and supporting our great countries’ retail economy then hauling the loot out to my car to my home. Since I’m such a sports fan I realized I needed a bigger place to house all my stuff so I bought a McMansion with an adjustable rate mortgage, since everyone knows that real estate is always a good investment. Did I mention my SUV has an American Flag sticker on its rear? Now how can you get more patriotic than that?

  • Report this Comment On January 28, 2009, at 9:40 PM, bspersonal wrote:

    Shopping at Whole Foods does not ensure that your money is not going to Monsanto. While organic foods are not supposed to contain genetically-modified organisms (GMOs) or be subject to dangerous petrochemicals, Monsanto owns seed producer Seminis. Seminis produces organic seed, including hybrid varieties. So, if the organic grower purchases Seminis seed, you are supporting Monsanto by default.

    As a farmer, I advise all gardeners and other farmers to check the sources of their seed and buy from a Seminis-free seed dealer.

  • Report this Comment On January 30, 2009, at 5:09 AM, Amerikakers wrote:

    God Bless and Help Amerika!

    S.I. Fishgal wrote in "KOSHER HOOKS":

    "Amerikakers are fabulously rich, awfully wasteful and corrupt... (In case that Russian, Yiddish or German languages are not your forte, kaka and kaker mean feces and its appropriate derivative.)

    ...Amerikakers believe to and cram all, but understand zilch. The unabated consumerisms, incompetence, currency debasing and keeping up appearances indebt their offspring, enrich their enemies and turn capitalism to kaput-alism. Amerikakers are above Marx’s and Lenin’s teaching that such deeds ruined even Rome and will the US Empire of debt and “useful idiots” (Lenin’s term). They borrow money they do not have on the stuff they do not need. Yet, Amerikakers do not own their useless stuff. It owns them and is not loaded on a hearse anymore. It was quite liberating not to keep up appearances during the American Revolution. Then the troops lined worthless bills called shinplasters in the knee-length boots.

    Amerikakers convert the capitalist society to the capital-less one and vote for the like corrupted nobodies, bigots, cranks, hustlers, and pulpit artists franchising race or faith into a fat living and political career. For the world revolution, Lenin, Trotsky, and, for the corrupted democracy, some US presidents ruined countries regardless of the people acceptance.

    Since US universities develop one’s entire abilities, especially the idiocy, the educated idiots are most dangerous. An economist (let leave him nameless for his own sake) became a Nobel laureate for his math exercises on options, applied that in his hedge fund, and did not ruin the entire financial system just by accident. Of course, Sir Isaac Newton failed to gauge “the madness of the crowd” (his term) too, but he ruined fiscally only self and became famous not just for that.

    Luckily, Roma (Mr. R. Karpfengal by then) was with those who took the other side of the highly educated idiots’ trade. God bless and help America, the country of best brightest politicians (i.e. masterly liars), incompetents, useful idiots, and great opportunities, especially for fraud!

    Amen!”

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