by Gregory Bresinger via the Ludwig von Mises Institute,
Our grandparents believed in the value of thrift, but many of their grandchildren don’t.
That’s because cultural and economic values have changed dramatically over the last generations as political and media elites have convinced many Americans that saving is passé. So today, under the influence of Keynesian economists who champion government spending and high levels of consumption, thrift has been devalued.
“The growth in wealth, so far from being dependent on the abstinence [savings] of the rich, as is commonly supposed, is more likely to be impeded by it,” according to John Maynard Keynes’s The General Theory of Employment, Interest and Money.
“The more virtuous we are, the more determinedly thrifty, the more obstinately orthodox in our national and personal finance, the more incomes will have to fall,” he writes. “Saving,” Keynes wrote in his Treatise on Money, “is the act of the individual consumer and consists in the negative act of refraining from spending the whole of his current income on consumption.”
But saving, pace Keynes, isn’t “negative.” It is deferred consumption. “The great producing countries are the great consuming countries,” writes Benjamin Anderson in Economics and the Public Welfare. More importantly, high rates of savings will lead to higher productivity, which would benefit our children and grandchildren, classical and Austrian economists have explained.
“We are the lucky heirs of our fathers and forefathers whose saving has accumulated the capital goods with the aid of which we are working today,” wrote Ludwig von Mises in Human Action. Saving, ultimately, is consumption, writes Detley S. Schlichter in Paper Money Collapse. “By setting aside some resources for meeting financial consumption needs, we invest them.”
Nevertheless, Keynesian ideas dominate the Obama administration and mass media. Most politicians, including Republicans who often pretend to be friends of thrift and self-improvement, are tacit or overt Keynesians. That’s because politicians, whether they have studied Keynes or not, generally love the idea of cheap money. Most delight in spending taxpayer dollars. They believe this is the way elections are won.
This Keynesian dominance has led to dramatic economic and cultural changes. These changes have been going on in America for over a half century. For instance, the United States has gone from a nation with one of the highest rates of savings during the 20s to having one of the lowest rates among major industrial nations today.
Yet penalizing thrift, the lifeblood of job creation and better tools that make current workers more efficient, has hurt the nation’s ability to grow and employ millions of young people looking for jobs. That’s because Keynesianism, according to its modern interpreters, amounts to a celebration of consumption. It is a belief that government spending combined with low savings rates lead to permanent booms.
It is the government’s role, Keynes’s followers believe, to keep the boom going through spending. So it is consumption, not supply, that makes a successful economy, they say.
Mainstream media rehashes the message that the consumer, not the producer, is the biggest part of the economy. Politicians agree.
As the economy started to slow down in 2006, President Bush urged Americans to “go shopping more.” Newsweek, in a headline story several years ago, told Americans to “Stop Saving Now.”
This anti-saving philosophy is more than just bad macro-economics. It is the doctrine that has come to take over economic thinking, now dominated in the popular media by Keynesian economists such as Paul Krugman. In his latest book, End This Depression Now, he explains why growth rates are low. The administration hasn’t been sufficiently Keynesian enough. Obama’s stimulus, he complains, was on a “wholly inadequate scale.”