What would happen to the American economy if everyone started living in the simple frugal way that my wife and I do?

SolitaryRoad.com

Website owner:  James Miller

[ Home ] [ Up ] [ Info ] [ Mail ]

What would happen to the American economy if everyone started living in the simple frugal way that my wife and I do? My wife and I don’t spend much money and don’t consume much.

● My wife and I drink no alcoholic beverages. The beer industry, whisky industry, and wine industry would all close down completely. The manufacturers, distributers, and sellers would all go out of business. All bars would close. Everyone working in these businesses would suddenly lose their job.

● Neither of us smoke. The tobacco industry would close down completely.

● Neither of us touch any pornography. The pornography industry would close down completely.

● Neither of us use any recreational drugs. The recreational drug industry would close down completely.

● We almost never eat out. (At most it is an occasional $1 sandwich at a fast foods restaurant.) The restaurant and fast food industry would collapse to nothing.

● We almost never stay in a motel (not if we can avoid it). The motel industry would collapse to a fraction of its size.

● Neither of us gamble. The casino and gambling industry would close down completely.

● We don’t go to movies or watch home video. The movie industry would collapse.

● We eat very simply and avoid all sodas and junk food. The soda and junk food industry would collapse. We eat very little red meat, no beef, some ham. That industry would collapse. We don’t eat pastry. The pastry business would collapse.

● We spend very little on clothing. I mostly dress very simply, wearing blue jeans in the cooler months and shorts in the summer months. We buy at Salvation Army stores, Dollar stores and Wal Mart. The clothing industry (manufacturers, wholesalers, and retailers) would collapse to a small fraction of its size.

● We have only a single motor vehicle and I always try to get as many years as possible out of each one. The last one (a Toyota truck) lasted me 19 years until someone rear-ended me and totaled it. The one before that lasted 14 years before the same thing happened to it. The automobile industry would go into heavy recession.

● We don’t go to beaches or resorts or take expensive vacations. The resort business would collapse.

●We don’t spend money on entertainment that costs money such as skiing, scuba diving, golf, etc. These businesses would collapse.

● I don’t watch any television (my wife watches it some). If everyone did as I do, that industry would collapse.

● We don’t have any emotional or mental problems and have no need of counseling. The counseling business would collapse.

● Because of our good habits, our health has been good and medical expenses low. The medical industry would be heavily impacted.

The truth is that if everyone in the country suddenly started living as we do there would be an economic collapse of enormous proportions. Hundreds of thousands of businesses would suddenly shut down. People would be losing their jobs left and right. Half of the people in the country would suddenly find themselves without a job. (Possibly far more than half.) You would have a depression that would dwarf even the depression of the 1930's. It would be a national emergency of historic proportions. What is my point? My point is to show how dependent the economy of the entire affluent western world is on unnecessary, foolish, frivolous, profligate spending. It is all that unnecessary, foolish, profligate spending that keeps the wheels of business and industry turning. It is all the fools squandering their money, doing what they can’t resist doing, that creates a large portion of the jobs of an economy and keeps things going. Fools buying what they don’t need and often things that are bad for them.

See Twelve things people waste their money on

The above leads to a thought. Perhaps the best way to build up a slow economy is to invent more foolish games and silly kinds of entertainment, more crazy enticements to induce fools to squander their money.

The above observation also gives insight into the difference between the wealthy First World economies and the poorer Third World economies. In the First World economies people make enough (perhaps due to automation) to cover their basic needs and still have enough left over for a substantial amount of frivolous spending. This frivolous spending allows for the expansion of business and creates a lot of jobs. In the Third World economies people don’t make much more than what they need for bare survival and there is not much left over for more luxurious accommodations and frivolous spending.

What would happen if something happened to cause the masses in the western world to suddenly become really frightened and to stop squandering their money, stop spending it so frivolously, start living more as my wife and I do? There would be a depression of gigantic proportions that might last for many years.

In view of what I have observed above, I have some doubts about the following assertion of Ludwig von Mises:

A nation cannot prosper if its members are not fully aware of the fact that what alone can improve their conditions is more and better production. And this can only be brought about by increased saving and capital accumulation. Ludwig von Mises

The essence of Keynesianism is its complete failure to conceive the role that saving and capital accumulation play in the improvement of economic conditions. Ludwig von Mises

It is obvious to me that it is demand that drives business expansion. Business will only grow if it can sell its products, if there is demand. If demand shrinks, business will shrink. What role does saving and capital accumulation play in regard to business expansion? If the demand is present, then lack of capital might limit business expansion and availability of accumulated savings may enable it to expand. However, in a depression where people are not buying, accumulated capital will not cause business expansion. In general, if a person saves his money instead of spending it, it seems obvious to me (from my above observation) that that will hurt the economy rather than help it.

July 2016