SIN OF THE MONTH: Spending

SIN OF THE MONTH • BY ABBY BARDI

A few weeks ago, I was on the Beltway half-listening to NPR when I heard something about the US economy that did not sound like bad news. Apparently, according to a report by the Bureau of Economic Analysis, our economy was up in the third quarter after a comparatively poor showing in the second quarter.  At first I thought I had confused money news with a story about football, but as I continued listening, I heard that our economy had recently grown modestly due in part to “stronger consumer spending.”

It was nice to hear something that sounded positive for a change, but the more I thought about it, the more I wondered exactly what “consumer spending” means and why it is so important to our economy.  Did it mean that poor people were now able to afford more essentials items like food, medicine, or shoes?  Or did it mean that rich people were buying more private jets than ever?  What exactly was this spending, and what did it signify?

I am the cheapest person in the world, and I hate shopping, so when I picture spending, a nightmare vision rises before me of millions of people crammed into a giant Marshall’s, pawing through bargains.  Or, just as bad, of being locked in Nordstrom’s trying to find a pair of socks for under forty dollars.  The more I thought about it, the more it seemed to me that if our economy is based on “spending,” something is definitely amiss.

This might have led me further into a meditation on economics, except that I know nothing at all about economics. It’s not that I haven’t tried to understand; I have on several occasions asked my friend’s husband, a noted economist, to explain various key points to me, but whenever he answered my questions, a sound like white noise began to buzz between my ears.  I used to blame myself for this: it seemed to stem from stupidity on my part.

Now I just blame economics, and because no one else seems to be able to understand it either, I’ve begun to suspect that not knowing anything may be an advantage.  It enables one to cut to the chase and try to figure out how this whole situation makes any sense at all.

Let’s review.  Apparently, the US economy does well when consumers spend money, or when they seem to be demonstrating what’s called “confidence.”  This kind of news causes the stock market to rise.  What is the stock market?  A mechanism that enables people who have money to buy portions or “shares” (sharing is good, right?) of companies.  By definition, only people with a certain amount of discretionary capital can buy into the stock market, plus people who have bought in more or less without wanting to, i.e., those whose pensions are invested in the market.

The system is set up so that people with money can make more money.  When do they make money?  When corporations in which they have invested turn a profit.  That profit must increase steadily, or people who buy stocks will sell all their shares, which will lower the value of the stocks.  How do the companies get their profits to increase?  By laying people off, cutting the costs and thus the quality of their goods, outsourcing, and/or raising prices.  The people who own stocks make money on them when the company squeezes things at the back end—or maybe I mean the front end.

How do these companies make money, anyway?  By selling goods and services.  What goods are they selling? Mostly goods from other countries, since America doesn’t actually produce anything anymore.  So the people who make money on the sales of goods, i.e., our spending, are in other countries?  No, here’s the beauty part: the people who make those things are not unionized or subject to our minimum wage laws, so they don’t make much money at all.  Who makes the money? The people who own and/or run the companies and their stockholders.

Who buys all this stuff?  We do.  Where?  At stores like Walmart.  Why do we shop at Walmart?  Because things are cheaper there.  Why are they cheaper?  Because their goods are made in countries where the labor is cheap and because they sell a lot of them.  Why do they sell a lot of them?  Because they’re cheaper.  Why are they cheaper?  Etc.

How do people know which things to buy?  Perhaps they have seen them in advertisements, i.e., short dramatic presentations in which the many fine qualities of products are demonstrated.  If we didn’t watch the advertisements, perhaps we would not know that L’Oreal Revitalift will help you stay young, or that if you spill something on your military uniform, a Tide to Go Instant Stain Remover will take care of that instantly.

By the way, how much did it cost to produce the TV ad for Tide to Go?  I’m glad you asked. Televisionadvertising.com estimates the average cost of a TV ad at $500k and approximately the same amount again to run it in prime time.  How much does a Tide to Go stick cost?  Approximately $2.99.  So to make back their approximately $1 million investment on advertising, how many sticks would Tide have to sell?  334,448. Each of the approximately 706 Walmarts in America would only have to sell 473 of them to make that much, plus Walmart gets a cut.

Viewed from the perspective of someone who doesn’t understand economics, several things become clear:

  1. Although unemployment is high and there is a widespread desire to cut government spending to help those in need, consumers have recently somehow managed to buy enough things to cause a slight uptick in the “growth” of the US economy.
  2. The well-being of the American economy apparently depends on this process.  But what if Americans don’t need to buy things?  We’re told constantly—constantly—to buy them anyway.
  3. What if Americans can’t afford that?  No problem: we have credit cards.
  4. Why can’t the unemployed work for the corporations who want us to buy things?  Because paying minimum wage or union scale would impinge upon the corporations’ profits and what they dole out to their shareholders.
  5. Why can’t the government create jobs for people, just to get the economy going, if “spending” is so darn crucial to it?  Because we allegedly can’t afford that without raising taxes.  Why can’t we raise taxes?  Because many people feel they can’t afford to pay taxes, since they are already working for wages that haven’t kept up with the cost of living, if they’re working at all.  What about those rich people, AKA the top one percent?  They could afford it.  Yeah, but they can’t pay taxes because—um, I’m sure there’s a reason.  Oh, right, because they don’t want to, and have funded the campaigns of the people who could vote to tax them.
  6. One percent of the US population controls approximately 40 percent of the wealth.  Because of the way this whole economic situation is set up, only government regulation could change that.
  7. The top one percent does not want government regulation, and they fund the campaigns of the people who decide these things.

In short, our entire economy is one big vicious circle.  If patriotic consumers don’t spend money we don’t have on things we don’t need, the nation will founder.  But if we do spend it, we will founder.  We the 99% are between a number of rocks and hard places, and there is nothing left for us to do but occupy something.

About the Author

Abby Bardi
Takoma Park expatriate Abby Bardi explores the wickedness of modern life in her Voice column, "Sin of the Month." Born and raised in Chicago, Abby has worked as a singing waitress in Washington, D.C., an English teacher in Japan and England, a performer on England’s country and western circuit, and, most recently, as a professor at Prince George’s Community College. Author of "The Book of Fred," (Washington Square Press: Simon & Schuster 2001), she is married with two children and lives in Ellicott City, Maryland.