A year ago, during the wake of the financial crisis, it was fashionable to lambaste the greedy. Today, however, the moral pendulum has swung the other way. With the U.S. still sluggish in its recovery, commentators point towards to a new culprit: the global saving class, from the likes of Germany, Japan and China. Their evidence is the U.S. current account deficit, which now stands at US$123 billion dollars. From their point of view, the U.S. has long shouldered the responsibility of the global consumer, gobbling up exports from other countries to fuel their growth. Now, in order to boost global aggregate demand, other countries need to start pulling their economic weight by boosting consumption. Matt Yglesias writes:
Long story short, the issue here really and truly is one of German households engaging in a very high rate of savings and not one of Germany firms being somehow extra awesome at making desirable products. German firms are great, the German people make a lot of stuff, and on a per hour basis the German workforce is incredibly productive… But they’re not actually not outproducing the United States of America, they’re buying less stuff. Which would be fine if when the world turned around to look at what’s happening with these savings we saw the world’s finest banking system financing highly productive investments all ’round the world. But is that actually what we see?
…It seems to me that people all around the world—but not least in Germany—would be better-off if German households owned more XBoxes, MacBooks, jamon iberico, and feta cheese and fewer indirect claims on mortgage-backed securities.
In short, the logic behind such arguments can be distilled into this: if greed is a virtue, then parsimony must be a vice. For instance, in Japan, thrifty spending habits had weakened aggregate demand, stunting economic growth perpetuating a deflationary cycle. According to such thinking, if Japanese consumers had been less reluctant, then they would recovered much earlier.
While I’m no expert in economics, let me just raise one simple objection from a cultural point of view. Broadly speaking, Americans just like spending money a lot more than Germans, Japanese or Chinese. This isn’t a value-judgment, but a cultural fact.
I once joked with a friend that the Chinese economy gets a stimulus package every Lunar New Year, thanks to the giving out of red packets. When he heard this, he shook his head and grimly replied: “No, not in China. Most of the time, we end up putting the money back in the bank anyway, so there’s zero net effect.” In Germany, monetary prudence is celebrated as a national virtue. And if anybody objects, the Germans will point out that its was their taxpayers’ money who saved the Eurozone from plunging into a debt crisis.
Therefore, Yglesias’ indictment for German consumers to spend more is a strange one. While economics recognizes greed as a virtue, different cultures perceive it otherwise. And, if such parsimonious habits are so deeply ingrained, it’s hard to imagine the saving nations turn into a consumeristic Americana any time soon, even though the world could do with such a transformation.