Thursday, February 26, 2009

The Virtues of Thrift

Being FOB desi, I tend to view frugality as a virtue rather than a vice. As I read this NYT article on the consequences of the Japanese cutting back on their spending and growing their nest eggs, I tried to see how that was hurting those who were practicing thrift. The demand for goods and services would be depressed and so would prices which from a buyers standpoint should not be such a terrible thing.

What the author tries to emphasize is the effect on the job market - there is lesser stability and not enough jobs to go around because people refuse to spend their money to buy. It seems that if everyone is willing to settle for a diminished lifestyle, having lower expectations from how much they can earn from a job or even how long they can hold on to one, thrift would not be the cause for a national disaster as it is frequently made out to be. The author writes :

Now, as exports dry up amid a worldwide collapse in demand, Japan’s economy is in free-fall because it cannot rely on domestic consumption to pick up the slack.

The term free-fall sounds so scary that its is tempting to do whatever it takes to prevent it. Coax and cajole people to start spending to grow the economy if that is what it takes. However, when the people do not want any part of this bigger more powerful economy, then there is possibly no recourse.

“I’m not interested in big spending,” says Risa Masaki, 20, a college student in Tokyo and a neighbor of the Takigasakis. “I just want a humble life.”

If people collectively desire a humble life and can be happy recycling bath water to do their laundry, eating cabbage and potatoes for dinner to crimp their grocery bills it would seem that the best option is to let them have their way. Someday, the cycle of thrift and frugality will end on its own, people would have had enough austerity in their lives to want something different. By then their nest eggs would be large enough to allow them the freedom to take a few chances.


workhard said...

Hi, its a very interesting point of view.. i see every where people cutting down on their expenses, but how long.. For years, spending heartily for those who have the dough has become more of a lifestyle and habit..They will eventually return to those habits

Work from home

jhantu said...

slightly mis-interprted on ur part i guess, problem with japan is "neither spending nor saving", thus the nest egg doesnt grow in japan even with forced thrift.
and following japan is a sure shot recipe for disaster.

workhard said...

Thanks for that

Heartcrossings said...

workhard - That's my point too. Frugality and spending are cyclic. One returns after the other. To force one behavior for ever is probably not even possible.

jhantu - the Japan recipe could very well be a disaster for the country on the whole - diminished economic power and political clout in the world etc. But if you were to consider the happiness index as a measure of how a country is faring - Bhutan used to come out on the top. But that is changing thanks to commercialization. What it takes individuals to feel happy is often different from what the country as a whole seeks for itself via its elected representatives.