Consumerism Schizophrenia: Consumer Spending Up, Consumer Confidence Down

The 2010 holiday season was good for retailers in the United States as Americans are back on a shopping spree, often buying what they don’t really need, and foremost what they can’t afford unless they put themselves further in debt. Despite the recession, consumerism is still America’s favorite addiction. But strangely enough, while consumer spending was up to a level similar than the one before the global financial meltdown of 2008, the Consumer Confidence Index fell in December, and is currently scoring at a very low 50 percent. As an indication, in periods of economic prosperity, the index is at around 90 percent. Is this trend, yet another confirmation of the fundamental irrationality of consumerism when people who are worried about the economy are spending more? Or is consumerism a way for Americans to cope with their deep anxiety?

MasterCard was reporting two days ago that sales from early November through Christmas Eve were up 5.5 percent from last year. Sales were especially strong for luxury good items and jewelry, which obviously means that rich people are feeling “bullish” about their own financial predicaments, if not about the overall economy. Two very different realities are at play in the current dysfunctional US economy: On one hand, for  the few individuals beneficiary of  the vast and fast growing transnational corporate wealth, the recession is over; on the other hand most Americans are still victims of the Great Recession, and can barely make ends meet.

The fact that consumer confidence is down is anchored in the reality experienced by an overwhelming majority of Americans: The housing market is very bad with real estate values still eroding nationwide; the unemployment rate remains at around 10 percent; gas prices are skyrocketing and some analysts say it could pass $5 a gallon in 2011. However, and this is the only good news in the economic forecast, the stock market is doing well.

So once again, we have this big and unsustainable social dichotomy. For the well off few, with investments on Wall Street, it is the “best of times” while for the majority of Americans, it is still the “worst of times”. The United States has now two separate economies moving on completely different tracks in a form of economic apartheid (separate and unequal) between transnational corporate interests on one side and everyone else on the other. And while it is “good times” again for mega-corporations and the wealthy at the top, 2011 is likely to have more despair and misery in store for most Americans.

In 2010, big corporations made giant profits focusing on the expanding markets of China, India and other fast growing emerging economies. Meanwhile, the same corporations, sitting on large cash reserves, are still cutting down on their US operations and are not hiring US workers. For example, General Motors, a company bailed out by the Obama administration with US taxpayers’ money, is now making more cars in China than in the US. General Electric is keeping its payroll down in the US, but will invest $ 2 billion in China and $500 million in Brazil, in a venture that will not create any jobs in the United States but instead  1,000 jobs in Brazil.


8 Responses to Consumerism Schizophrenia: Consumer Spending Up, Consumer Confidence Down

  1. Jason December 30, 2010 at 5:15 pm

    I know headlines are meant to attract attention but it is insensitive and ignorant to use a severe and sad mental illness that affects 1% of the world’s population and their families.

    • no sense December 31, 2010 at 8:33 am

      no sense, that last post made no sense

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  3. oceanic926 December 31, 2010 at 9:20 am

    Please stop using schizophrenia to describe a situation whose characteristics do not even match those of the condition. I could understand maybe a personality disorder being used (not that it should be, however), but if anyone actually read up on the condition before misattributing it they would come to understand why it just doesn’t fit. The word is in the dictionary, and serves a linguistic purpose (much like “irregardless” I suppose), but this does not mean it should be used. After all, it is somewhat offensive to those who suffer from the condition (and no one wants to be politically incorrect, right?). That’s my 2 cents for now…

  4. Jarik January 2, 2011 at 9:53 pm

    Did the consumers actually spend more? If we did spend more, does this take into account that things cost more?

  5. Kevin January 2, 2011 at 9:54 pm

    As indicated in the article, and according to the folks of MasterCard tracking it, consumer spending between November and Christmas Eve was up by 5.5 percent from 2009. Further, most department stores carried big discounts from Thanksgiving to Christmas in order to compete and boost sales, so on average prices were not subjected to inflation. But what is highly significant is the sharp increase in luxury goods and jewelery purchases, which is an indication that rich people with plenty of disposable income went back to a pre-2008 spending behavior.

  6. Terex January 2, 2011 at 9:54 pm

    I bought my wife a few nice things, some jewelry, but I’m not “rich, with plenty of disposable income.” I have SOME disposable income, together we might make about $100k per year. With two kids, I think that’s hardly rich.

  7. Tranis January 2, 2011 at 9:55 pm

    Well, let’s put that in perspective. The average family of 3 or 4, in the U.S. lives on less than 40k a year, and doesn’t own property –actually unless the house is owned outright, you don’t own it. The bank does. They may or may not (these days far more may not) have health coverage for themselves or their kids. They usually don’t have any disposable income, and most likely no savings whatsoever, let alone a retirement plan.

    So… I’d say you might want to count your blessings and be grateful for your abundance.

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