[ARTICLE] A thought about savings and consumerism #02

 

                       A tought about savings and consumerism

There is a very widespread myth that saving is an enemy of economic growth, and that consumption fuels the development of a country. Those who like Keynes often emphasize that good policies are those that stimulate consumerism and cheap credit.

More consumption means more demand and more demand means higher production, this is the recipe for growth! - say the friends of Keynes, who keeps the savings as one of the greatest enemies of this incredible formula.

Sounds like a good idea, does not it? The problem is: In our daily lives things work in a different way.

First, this view is based on the idea that individual and voluntary actions are not based on a rational process that comes from an analysis of market conditions and life, but an irrational and purely emotional boost. Someone stops spending and starts saving for a reason that does not have a clear logic, it is just following a feeling.

No one is saying that if all people stopped spending more than what was strictly necessary and started saving it would have no effect on the economy, as this would lead to a change in demand for certain products and services. The question here is what happens from the moment we take the savings as a positive thing and consider the real “social function” of saving.

The money that is saved creates two types of effects. One short term, which is what we all know and what many think is the only one that exists: We no longer have certain luxuries in our life, we stop traveling, we don’t buy a new car or have lunch at our favorite restaurant.

But what really matters is the second effect generated by savings: Money saved and deposited in banks does not stay there in a dark and cold room, it is reversed in loans and investments that will serve as the impetus for the creation and expansion of other businesses in several areas.

The conclusion? Without savings there would be no investment, and without investment there is no growth. But if everyone starts saving a portion of their income, would not that cause the demand for many goods and services to fall, pushing the economy into recession?

The answer to this is in the reason for us to save. Look at this image:

People do not spare with the intention of never spending the accumulated money, but rather spend it in the future. Savings are nothing more than the retention of present expenses for the execution of future expenses.

If I spare today, I can invest tomorrow in order to produce more and save more, and so the cycle repeats itself, making me have a better and better quality of life. If I consume everything I produce, without saving, I will never be able to revert some money into investments, because I have never accumulated resources for this.

Therefore, we must keep in mind that consumption, whether present or future, is the end-activity of any economic system, we all work for the purpose of consuming something, whether basic products such as food and housing or with secondary activities like a movie theater or a trip.

After all this, we can see that a scenario where a society consumes everything it produces would be an anti-capitalist society, since there would be no investment and no progress, everyone would be too busy producing basic products such as food and clothing, without time to worry about future.

Without the savings we would never have the opportunity to create the tools and technologies that have brought us here. What do you prefer? To have a good life now and an uncertain future or restrict yourself from some luxuries today to have the security of a better tomorrow?

                            Thanks for reading! If you like this thought, please upvote, coment, and maybe even resteem it! ;)