By Dale Schlundt, M.A., MA.
For years now our society has witnessed economic growth. The bull market alone has enriched many. Comprehensively, the economy has facilitated new jobs and given the means for living within a middle socioeconomic status for many others. However, despite our familiarity with the last economic downturn, aptly referred to as the Great Recession, it can be easy to overlook those lessons learned.
Volatility in the stock market and fluctuations in the overall state of the economy are, of course, normal. As most economists would argue, they are nothing that should cause concern. Still, another aspect of our capitalist system, and arguably any globally integrated economic system, is that recessions or depressions are inevitable. A basic knowledge of America’s economic past reveals the inevitability at the heart of this discussion. To name just a few from past, the Panics of 1819 and 1837, the depression of 1873, the Great Depression beginning in 1929, and the recession of the early 1980s. This list falls very short of being comprehensive, yet it lends itself well to the primary argument here.
As many economists have suggested, the farther away we are from last the economic downturn is also the closer we are to the next. Consequently, the inevitability of a recession is not in question, just the catalyst and date. The economic growth we have been witnessing could halt in the next few months or be prolonged for years, despite some of the current signs for concern.
It, therefore, may seem almost counterintuitive to argue this next point. The suggestion here is that we should all decrease our spending, if we have not already done so. Yes, there is more than just consumption that affects the economy. It is why the fed recently lowered interest rates, slightly. However, one of the fundamental catalysts for a prolonged growing economy is spending, whether that be in investments or on consumer goods and services. The problem is that this also has the potential to create bubbles and we know what bubbles ultimately do. Subprime mortgages and the housing market crisis, which contributed to the 2007 Great Recession, was an excellent example. Hence, one could easily argue that now is the time to save.
Companies and the larger economy love for you to spend your every dollar on their goods and services. Undoubtedly, all of us are more willing to spend our discretionary income when the economic prospects are perceived as being promising. The challenge is that we are also more apt to overspend and incur debt, making purchases that are overpriced based on the real value they hold. Subsequently, it will be those who have saved for that period that will not only have the ability to buy those goods and services, but the opportunity to purchase them at a relatively lower price when that bubble pops. Investments are no different. Hence, the very basic old adage that states, one should buy low and sell high.
The most valuable lesson that history teaches us is that consumerism is nothing new and that it is inherently driven by emotion. American colonists drank tea not just for the taste, but because of a social trend. This was part of a process called anglicization, where the elite in England drank tea, which made it even more desirable in colonial America when it could be afforded in future decades. T.H. Breen, in the Journal of British Studies, employs an excellent example of this consumer transformation. As a member of the colonial elite stated in mid-18th century, “Our people, both in town and country, are shamefully gone into the habit of tea-drinking.” This certainly shines a new light on the Boston Tea Party. It also illustrates how persuasion can often culminate in populations spending, rather than saving when appropriate. Consuming, as it has been for centuries, becomes ideological because society associates it with status. One may prove this by simply posing the question, which is more appealing, reading this article about saving money or going out to a restaurant where the affluent dine? For me, it is still the nice restaurant, but that is the problem. Let us make financially sound decisions today, devoid of emotion, so we will be prepared for tomorrow.
Dale Schlundt holds two masters degrees, in Adult Education and History. Dale has taught at Northwest Vista College and Our Lady of the Lake University. He is currently a faculty member at Palo Alto College and co-chair for the Texas Regional Alignment Network.
 T.H. Breen, “An Empire of Goods: The Anglicization of Colonial America, 1690-1776”, Journal of British Studies, Vol. 25, No. 4, Re-Viewing the Eighteenth Century (Oct., 1986), 478.