consumption that was conspicuously conspicuous."
-- Matt Frei, BBC News
And might I add that there were equal portions of corporate greed, Madoff style fraud and political corruption in the mix as well.
After BBC News Reporter, Matt Frei interviewed residents in what he referred to as "ground zero of the sub-prime crisis" he found that despite the large number of foreclosures, for many in Miami, suffering means downsizing from four cars to two.
In his article "Miami Consumption", Frei makes the case that the decline in consumer confidence is in large part a reflection of the fact that consumers can no longer buy the things that they don't need. While I agree with much of Frei's analysis, it is important to note that the situation in Miami is just one small piece in America's economic puzzle.
"So much of the prosperity we took for granted was based on consumption that was conspicuously conspicuous. We did not need most of the things that we bought on credit and that were produced cheaply for us by China, Vietnam or India.
We were, if we are being honest, perfectly comfortable without them. We are living in a saturation economy in which demand was fueled by a combination of superb advertising, peer pressure and easy credit.
Such an economy cannot cope with the fear of losing a job. That is why the declines in consumer confidence and consumption have been so dramatic.
We have stopped buying the things we do not really need. And there are a lot of them.
Yet none of us are missing any meals. Most of us are not homeless. And that is the absurd tragedy of the vicious cycle we are in.
Without our conspicuous consumption, China's economy cannot continue to grow at 8% a year and the US cannot create 100,000 jobs a month, to keep in line with population growth.
President Bush's glib post-9/11 advice to America to just go out and go shopping seems rather prescient these days.
But if we stop all conspicuous consumption, then our economic woes may become a self-fulfilling economic catastrophe that is more worrying than any we have previously experienced.
Can the billions of dollars borrowed from the tax-payer inject confidence into the banks to resume lending and confidence in us to resume spending?
Not for a while, I think."
While in Miami there are many who have nothing more to fear than giving up the family vacation and the extra car, millions of Americans are facing foreclosure, have lost their health insurance when they lost their jobs or, are choosing between buying food or medicine. And there is a small group like Addie Polk, the 90-year old, Ohio resident who are considering ending their lives rather than be kicked out of their homes. People who were once living the American Dream are now struggling with necessities.
If our economic prosperity is really based on conspicuous consumption then there seems to be a very important question that very few in Washington are willing to ask much less answer.
Is the system sustainable? Or, is the current economic model deeply flawed?
And if the answer to the latter is yes, is bailing out a flawed system the right long-term solution?Like most Americans, I don't hold a PhD in economics. Nor am I an economic policy expert but here is what I, and most Americans, do know:
- Only a few months ago a number of prominent politicians and economists were declaring that the fundamentals of the economy were strong.
- In 2007, former President Bush was blaming the foreclosure crisis on consumers who were trying to buy more house than they could afford or who didn't read the fine print on their mortgage agreement.
- Democrats are blaming the current economic crisis on Bush Administration deregulation
- Republicans are claiming that Bush inherited economic problems from Clinton.
- While the middle-class has been going down the tubes for the past eight years, the rich have been getting exponentially richer and sheltering their wealth in off-shore banks.
- Consumers are told to shop in order to stimulate the economy and then are blamed for not saving and/or carrying excessive debt.
- Washington politicians voted in favor of the banks and passed a bill to make it harder for consumers to declare bankruptcy so banks could buy corporate jets, gold plated toilets and give their employees multi-million dollar bonuses as a reward for failure.
Dear Members of Congress,
The American people may be slow and too naive but we are not stupid. Throwing billions of borrowed dollars at an economy that is fundamentally flawed in design is like giving heroin to an addict in order to cure his crack addiction.
Virtually everyone agrees: Americans need jobs, homes and affordable health-care; small businesses need credit and tax relief; and, that none of this is going to happen over night.
Congress, all but a few of you, (Democrats, Republicans & Independents included), acted like the fabled three monkeys and pretended not to see, hear or speak evil for eight years.
You stood idly by while corporate America outsourced labor and small towns faded into memory.
You let lobbyists rule the day and Wall Street run amok.
You cut taxes on the rich and watched them hide their money in off-shore banks.
You let the banking industry pillage the poor with exorbitant fees, penalties, and all manners of usury.
You watched the previous administration award billions in no-bid contracts to war contractors who in return literally electrocuted, poisoned and rape American men and women who were serving their nation.
Many of you sold your soul and sold America to the highest bidder. And now, when all of your sins are laid bare before the world, you still can't pass an economic recovery bill without playing partisan politics and trying to load the bill with pork.
Members of Congress, Americans are watching you and we will not be deceived.
The economy is in trouble and something needs to be done. But for heavens sake, take your time and get it right.
Pass a real economic recovery bill that has both short-term and long-term impact and includes a plan for accountability. Forget the earmarks. If programs are worth funding they should be able to stand on their own. Forget the partisan grand-standing and one-up-manship, it only plays with the radical right and the radical left.
For once in your political careers, do the right thing and represent the people who've elected you. You have a lot to answer for already.
Troubled Times Bring Mini-Madoffs to Light
by Leslie Wayne for the NYTimes
Other related posts:
Watch for the Signs, October 2007