Consumption and consumer spending don’t grow economies

Photo by Fikri Rasyid on Unsplash

You may have heard that consumer spending drives most of the economy. I want to suggest that this idea is nonsense.

Philosophy of consumption

You cannot consume what you do not produce; you cannot give what you do not have. If everyone was consuming, then nobody would be producing. If nobody is producing, then there are no products to consume; if there is no supply, then it doesn’t matter how much demand you have. Even if you have an infinite chain of consumers, none of them have the powers of production. This means none of them can consume, which makes the idea of consumption without production an incoherent idea. It’s not just implausible to say that you can grow an economy with just consumption: it’s impossible.

Production, baby

I contend that production and savings are what grow an economy. When people are productive they then can consume. Consumption is the result of production; consumption is the effect of production; production is the cause of consumption. Necessarily, if there are no producers, then there are no consumers.

Someone who has a nest egg (or inherited a nest egg) has that nest egg because someone produced and worked for years. Value was added. Money is just the medium of exchange and is worthless in the…