Thursday, June 11, 2009

Economics: Not the End of Capitalism

TORONTO, ONTARIO - I am often amused by some of the hand-wringing which has come out of some United States commentators in recent months about how "we may need to enter a post-Capitalist world" and that "the end of consumerism means the end of the economy as we know it." Their belief seems to be that the entire United States economy was based on out-of-control spending for goods, that the era of such spending has ended forever because it is unsustainable, and this means that the entire United States economy will never recover.

Have these people never traveled outside the United States? The degree of consumerism in the vast majority of the rest of the developed world never rivaled the spending rates in the United States--just look at the savings rate in countries like Germany and Great Britain as compared with the United States. Yet, somehow the economies in these countries were sustainable, and last I checked they were all based on capitalism, even they might have had a few more socialist elements.

One need look no farther than Canada for an example. The vast majority of Canadians never spent like their southern neighbors. The average Canadian kept (and probably still keeps) their car for five years instead of two and tended to shop for value rather than prestige in their purchases. One of my most interesting experiences in moving here was in finding out how differently salespeople behaved. I was amazed to find a furniture salesperson accept my preference for the cheapest, on-sale sofa bed in his store after looking at everything available, saying, "You're making the right choice. It's clear from the look on your face that you don't think the others are anything special." This was not a unique experience. When shopping for a GPS, a salesperson showed me several more expensive models and when I chose the cheaper one, he told me, "Based on how you say you're going to use it, you're making the right choice." Here, if the salesperson makes a sale at all, they're happy, not just if they sell the most expensive item with the highest commission.

Clearly, the Canadian economy has been traditionally been functional. Despite the reduced consumerism, business went on and people made money from their enterprises. If the United States economy does reduce its level of consumerism--and that hardly seems inevitable--then it will probably resemble the level in the Canada. Based on the Canadian model, there seems little reason to think that will mean the end of capitalism, or even the end of economy as it has been known. A few weaker or more frivolously-oriented businesses that might have survived before might not, but it will hardly be a paradigm shift. The hand-wringing can end; how about directing that energy to campaign finance or health care reform instead?

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