I read an interesting article in the Times which basically calls upon Chinese consumers to repeat all the mistakes that western consumers made over the last century. According to the author Carl Mortished, the way to revive the global economy is for consumers to revert to the spending spree that characterised the bubble which preceded the recession. Since western consumers are supposed to lack money, Mortished wants Chinese consumers (especially the rural ones who would rather save than spend) to splash out on “TVs, fridges and knock-off Prada shoes”
Articles like this one are very common. The thesis goes like this: If only consumers would start spending again, the recession will disappear. This prompts me to ask: Wasn’t such extravagant spending coupled with cheap credit responsible for creating the bubble which exploded and caused this recession? Why on earth should any one recommend that in the long run extravagant spending is better than saving? Isn’t it time we realised that any economy that is reliant on customers (where ever they be located) spending money on unnecessary goods can’t be stable?