Depression-Era Solutions May Not Save Consumer Economy

There has been a lot of discussion comparing today's economic climate with that of the Depression. The more I listen to the discussion is the more I conclude that other than having similar types of dreadful economic statistics, we are in a completely new economic situation for which history cannot give us any pointers.

During the depression, America was still an industrial society producing goods and services. This helped to position the U.S. for dependable growth through World War II and beyond. American companies created goods and services right here at home and much of the actions taken by FDR and the government to address the economic woes were executed in a protected national economy that was not intertwined completely with the rest of the world as it is now. The last vestiges of American companies and American products are also under siege; there is a lot more competition in the world and right now it appears that American goods and services are not holding up as well.

For most of the 1900s, America was a producer of goods and services exported all over the world. Now, America imports more goods that it exports and has moved away from a producer society to a consumer society; somewhere along the line America stopped producing goods and started producing consumers. Clearly, this has not been a good development. Now, consumer spending is at 70% of GDP; the consumer has to start spending again for the economy to stabilize and in order for the economy to grow, consumers have to spend even more to keep the cogs turning.

Unfortunately, as the downturn continues to go from bad to worse, the consumer is now forced to live within their means and/or saving cash as they vie for survival. Who knew that saving would be referred to as bad for the economy? When I was growing up, saving was an integral part of fiscal responsibility and lauded as a noble goal for all who were serious about moving up in the world. Now, saving is a dirty word. All who are saving are not spending and without spending, we have no economy.

The solutions that are currently being implemented are for this purpose, to get more money into the pocket of the consumer and get more money flowing for the consumer to borrow and spend. In a $14 trillion dollar economy, consumer spending accounts for nearly $10 trillion if the numbers are right. What will replace the decline in consumer spending and lift the economy?

I'm not sure Depression-era solutions will hold up in this new global economy.We need a new set of industries if we are to have firm footing again. Throwing trillions of dollars at the financial institutions and a few select industries may help to get us back to where we were. However, I don't think America should be looking backwards to restore an economy that I believe is breathing its last gasps. Consumer spending should not be the keys to America's future success.