Page last updated at 01:17 Asia/Manila, Wednesday, 17 February 2010 PH
The global economic crisis of 2008 to 2009 has focused the world's attention on the role of domestic markets in the so-called "double-track" strategy of sustainable development. Coined by former Thai Prime Minister Thaksin Shinawatra, "double track" refers to the two major forces of exports and domestic consumption that should be both cultivated if an economy is to avoid the worst consequences of a global recession. Countries that can count on a strong domestic market can avoid a recession even if exports are declining precipitously, as in the present case. No East Asian economy has been spared drops of 30 to 40 percent in its exports over the last twelve to eighteen months. No wonder economies with small populations like Singapore, Hong Kong, Taiwan, and Malaysia have all suffered from a recession. Countries with larger populations like Indonesia, Vietnam and the Philippines--though suffering also form large export declines--have avoided a recession, thanks to their sizable domestic markets. Private consumption expenditures have saved the day for these emerging markets in the Southeast Asian region.
Another dramatic illustration of the power of domestic markets in the present crisis is what happened in China after the Government decided to spend the equivalent of $600 billion in a stimulus package. The Chinese were able to get the money directly into the hands of millions of consumers who were more than willing to splurge on all types of consumer goods, both durable and non-durable. A proof of the success of this pump priming activities was the record-breaking growth in the sales of automobiles which jumped by more than 90 percent on a monthly basis last July 2009. In contrast, the much larger stimulus package of the Obama Government in the U.S. was not as successful because much of the money did not get into the hands of consumers for direct spending on goods and services. Much of it was used to pay back loans.
Consumer research analysts in the U.S. are reporting that American consumers have rediscovered the value of thrift and will no longer be the world's engine of growth in the coming years, as they have been in the last twenty years. Even if and when the U.S. economy recovers, American consumers are expected to be more conservative and will save a larger part of their incomes. In fact, over the last year household savings have grown from zero percent of income to more than seven percent. This is still a long way from savings rates of as much as 50 percent in some Asian economies like China and Singapore. The fact remains, however, that the responsibility of reigniting global economic growth will rest on the consumers of such large emerging markets like China, India, Brazil, Indonesia, Vietnam, Mexico, Nigeria, the Philippines, etc.
Although these emerging markets still have numerous households who are at subsistence level, they are increasingly witnessing the rapid growth of their middle classes who can provide the consumers that will drive economic growth. Hopefully, these consumers will learn from the mistakes of the American consumers who are partly to blame for the ongoing crisis. They were bitten by the bug of "consumerism", a deadly vice. As the Compendium of the Social Doctrine of the Church states (par 360), "The phenomenon of consumerism maintains a persistent orientation towards 'having' rather than 'being.' This confuses the 'criteria for correctly distinguishing new and higher forms of satisfying human needs from artificial new needs which hinder the formation of a mature personality.'
"To counteract this phenomenon, it is necessary to create 'lifestyles in which the quest for truth, beauty, goodness and communion with others for the sake of common growth are the factors which determine consumer choices, savings and investments.' It is undeniable that ways of life are significantly influenced by different social contexts, for this reason the cultural challenge that consumerism poses today must be met with greater resolve, above all in consideration of future generations, who risk having to live in a natural environment that has been pillaged by an excessive and disordered consumerism."
Filipino consumers--especially the relatives of the overseas Filipino workers who are the recipients of more than $15 billion of remittances annually--face a double challenge. Since the Philippines has the lowest savings rate in the whole of East Asia, Filipino households must make a more serious effort to avoid extravagance in their spending and save a larger portion of their incomes. Although the Philippine savings rate has gone up to 27 percent of GDP over the last few years, for more than twenty years, we only averaged 20 percent while most our neighbors were saving more than 30 percent of their GDP. But over and above saving more, Filipino consumers must make sure that their spending on goods and services is creating a "lifestyle in which the quest for truth, beauty, goodness and communion with others for the sake of common growth are the factors which determine consumer choices, savings and investments." Wise consumer expenditure should form part of the values education that our youth are getting in our schools, especially in such subjects as social studies, economics and religion. For comment, my email address is email@example.com.