The recession, lack of spending, unemployment, debt, foreclosure… are you as sick of these words as I am? Well if you want them to stop, go spend money and do your part in turning around the economy, duh silly! 😉 As consumer spending makes up a significant, but debateable percentage of the national economy it’s not hard to understand that the fate of the economy is in large part in our own hands. Knowing that you have two choices, spend money and support the economy we know and love from the past few decades (big with lots of stuff) or enter the realm of frugal living, you’re left to wonder… is frugal living bad for America?
Less Spending = Smaller Economy
We need other people to spend money in order to make money; Whether it’s as a worker or the owner of a business. If goods and services aren’t being traded the economy weakens since not as much is going on. Frugalists and miniamilists (of which I’d consider myself to be in both camps) are something that directly weakens the economy because they contribute less to the consumer spending side of the equation, thus decreasing demand.
Is Not Spending Unpatriotic?
Since we know that less spending means a smaller economy it becomes apparent that in a country that values growth this doesn’t exactly seem like the right thing to do. We want growth, we want more, we want year over year gains, but by becoming a frugal citizen you’re taking a step backwards according to popular measures. Does this make you unpatriotic?
In response to the recession the US government has called for Americans to spend money to help recharge the economy. They’ve used stimulus packages and even offered $8,000 to purchase a home. It’s simple to see that the American government wants you to spend money. It can be summed up like this:
Smaller economy = less tax dollars = smaller government = less money for politicians to spend.
I try not to get too political in this blog as it focuses on the individual rather than the political affiliation and taking responsibility for your own life whether you’re a democrat, republican, independant, or whatever else, but it’s just something interesting to think about. I’m not advocating a smaller (conservative) or bigger (liberal) government, but the implications of choosing a frugal lifestyle directly impact how the country’s economy looks.
A Different America
I wouldn’t say that frugal living is bad for America, but I would say choosing to live in a frugal manor helps shape the country one conscious spender at a time. A frugal consumer wastes less, they value the things they have more, and they often have more time to do the things that matter more than work (or time to do work they enjoy more than work they have to do to pay for their stuff). I think a society of people who think this way would be more beneficial than one in which one only measures success by more and the quantity of stuff rather than the quality of their life. By choosing to be frugal you are changing the dynamics of the economy, but as we’ve seen over the past few years the economy may not be all that perfect after all. Whether or not that makes you a good American citizen… well… that’s debatable.
Do you consider frugal living to be something that is unpatriotic?
Do you support more spending and a big government or less spending and a smaller goverment (assuming tax rates stay neutral)?
I don’t feel unpatriotic for being frugal. Not at all.
Hey Ryan, I’m definitely in the camp of encouraging frugality. I think wasteful spending and buying what you can afford is what’s caused this mess.
That being said, I think maybe a little government spending towards infrastructure (FDR style) could go a long way towards rejuvenating the economy. Nationwide high-speed rail line anybody?
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The economy ebbs and flows like most of life. One, two, three, or many more frugal Americans may affect the economy in the short run, but in the long run, the majority of American consumers will eventually spend money again. Maybe not as freely as they did, which could cause the economy to shrink and then stabilize. However, it’s not un-American to decide to live frugally. America wasn’t founded on the principle of spend, spend, spend. It was founded by men (and women) who wanted freedom from tyranny, a life that they could mold into whatever they wished, a pursuit… Read more »
It’s a natural reaction to become frugal when times get tough. Think about the Great Depression — if you had less, you spent less (because you HAD to). I don’t think it hurts the economy too much — the economy tanking is what starts the trend in earnest to begin with, as most people aren’t following that kind of lifestyle. So the economy contracts before it can expand again. And once it does, the big spenders will come out to play once again (but not me!)
I actually have a post exactly opposite, about how it’s such a bull market b/c everybody is spending so much!
Are things slow in Honolulu Ryan?
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This post got my worked up enough to write my own blog post about it.
Ryan, with all due respect, I will disagree with the notion that spending is a good thing, at best its a band aid solution.
We are in this mess because we out spent and end up with the credit crisis that still haunts us to this day. At what point is spending not the patriotic thing to do?
My post: Save, it’s the most patriotic act. http://www.samerforzley.com/2010/07/05/save-it-the-most-patriotic-act/
Respectfully, @sforzley.
their are definitely times where i am frugal, but also times i feel i am the only one stimulating the economy.
i have a funny personal joke going on with myself after a long weekend and i see how much money i have spend, i tell myself, well at least i did my part to stimulate the economy….
With all the stuff people buy, doesn’t Pareto’s law kick into gear? You use 80% of the 20% stuff you have? So if you buy more stuff, do you really need/use it?
So maybe instead of buying more stuff to stimulate the economy, maybe the frugality mentality can help mold a different definition of success, that could in turn help the economy?
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I like @Neil’s line, “be frugal and proud”. In my mind frugality means spending responsibly and wisely. The recent economic calamity was partly caused by people spending foolishly. Using their homes as atms to buy vacations, expensive cars and home improvements. It was ‘fake’ spending, because it was done with credit. They were using money they didn’t have. My husband and I spend money, but we are very choosy about what we buy and we use cash. We might not be blowing large sums of credit on big screen tvs, furniture and spectacular vacations, but we might some day have… Read more »
We may be spending less but I think that is because of what is still being offered to us. Sure businesses are closing up left and right but come on, do we really NEED a Starbucks on every corner? Aren’t there enough Wal-Marts to go around for everyone. When we need a pair of pants we don’t get in the car and drive to the corner store to get a pair of pants. No, we have 100 choices to make as to which store we will buy those pair of pants. We simply have too many choices. But people say… Read more »
Not sure if frugal living is unpatriotic or not, but it is a means to wealth. And wealth is part of the American dream, isn’t it?
Say we’re frugal, and we invest in the S&P 500. Are we not spending our money on the 500 biggest companies in the U.S. and hoping they do well? Or is that not truly consumer spending?
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The issue is, if a signifigant portion of the economy took up frugality, then those S&P companies wouldn’t have as many customers and they won’t do as well. One the one hand, I want to believe that increased frugality would cause a shift in the world economy back to they way the economy worked in earlier eras. On the other hand, there are already more workers than the economy could support if everyone became frugal and spent less. And, for the foreseeable future, the population is only going to increase, which means the economy also has to increase to absorb… Read more »