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Consumption Spending is NOT “The Economy”

September 2nd, 2010

We are daily bombarded with variants of  the “Consumption is 7/10 of the economy” argument. Governments constantly monitor spending, and they encourage people to spend rather than save or invest, because consumption spending is a necessity for debt-based currency. They know that the only way the system can continue is if people continue spending, mindlessly.

But that doesn’t make a people rich (OK, it might make some people rich, but you are not one of them), it makes them slaves to their possessions.

The only thing that can make people rich is production.  An “economy” is not “spending”. An “economy” is a system of production and exchange in order to allocate scarce resources towards the alleviation of wants, needs and discomforts.

When he wrote the General Theory, did Keynes know what he was doing? Reading it, one gets the impression that maybe he did not, for example there are parts where he pretends to be a stalwart defender of free markets and other parts where he vilifies them. Certainly he could not have anticipated the destructive long-term effects of his system fully implemented. Or maybe he did, and he just didn’t care.

After all, in the long run we’re all dead.



  • Matt says on: September 2, 2010 at 2:19 pm


    We are the dead. Sounds like Orwell.

  • Gil says on: September 4, 2010 at 12:13 pm


    Yet I believe Austrians say that consumers are king in the marketplace not producers.

    • David Z says on: September 5, 2010 at 1:35 am


      in a productive economy (i.e., not a zombieconomy) a consumer must also be a producer. :)

    • David Z says on: September 8, 2010 at 9:48 am


      Gil, check out this somewhat related piece from Bob Higgs at the Independent Institute:

no third solution

Blogging about liberty, anarchy, economics and politics