Providence Journal Commentary - Grinchier is healthier this year December 30, 2004
Lee Drutman
BERKELEY, Calif.
TWAS THE WEEK before Christmas, and all through the stores, consumers were spending, but should have spent more.
At least that was the view of Wall Street analysts and retail-store owners, who worried that holiday shoppers were not getting into the holiday spirit and spending with their usual reckless abandon this year.
For example, in a report issued just a few days before Christmas, Bank of America senior retail analyst Dana Cohen offered a grim prediction: "With only a few days left, we suspect that Christmas '04 is turning into a much more lackluster season than even we anticipated (and we were not too optimistic). We recognize that there are some very big days left both pre- and post-Christmas; however, we are running out of days to make it up."
Michael Niemira, chief economist at the International Council of Shopping Centers, meanwhile, complained that the holiday season had been "soft, sluggish and uneven" for retailers.
The numbers were indeed bleak for these analysts. The ICSC was reporting that Christmas retail sales were up a measly 3 percent over last year's mere $219.9 billion (which, by comparison, is a little less than Sweden's annual gross domestic product: $230 billion). And to think that the National Retail Federation had projected a 4.5-percent increase over last year, which would have brought spending up to more than $700 per shopper (up from $672 in 2003).
Meanwhile, on the crucial Saturday before Christmas (typically the biggest single shopping day), consumers spent a miserly $6.7 billion, or the equivalent of almost the annual GDP of Malawi ($6.8 billion): a full 7 percent less than they had on the Saturday before Christmas in 2003.
What was going on? Could it have been that perhaps, after years of participating in the Christmastime tradition of spiraling credit-card debt, some folks had decided to pull back a little? And could this -- contrary to the narrow views of Wall Street -- maybe be a good thing for the long-term health of the economy?
After all, the average U.S. household now owes $9,205 in debt on an average of 13.4 credit cards, and 13 percent of after-tax household income is going to pay debts -- the highest percentage in about two decades. By comparison, household saving rates in 2004 averaged just 0.9 percent of after-tax income -- the lowest ever. In October, the rate fell to just 0.2 percent. American families are declaring bankruptcy at the rate of about 1 every 15 seconds. And those retail analysts wanted families to spend more money on Christmastime shopping? What were they trying to do?
Yet because more than two-thirds of the U.S. economy depends on consumer spending -- and because some stores depend on Christmas shopping for as much as 40 percent of their annual sales -- Yuletide is always crucial for the economy. If consumer spending doesn't keep growing, goes the logic, the economy can't keep growing. And then we all suffer.
Problem is, consumers can't keep spending and going into debt forever to keep the economy rolling. At some point, something's gotta give. And it appears that we may be getting quite close to that season of "giving."
According to the International Council of Shopping Centers, 39 percent of Christmas shoppers surveyed said that they had spent less because their finances were deteriorating. And Howard Davidowitz, chairman of the retail-consulting firm Davidowitz & Associates, has said that Americans "are really starting to worry about credit-card interest. Consumers have the highest debt and lowest savings in history."
Then, of course, there is the great existential question regarding all this Christmas shopping: Does it really make us happy? Does it really bring us closer to our loved ones? Or has it merely turned all our relationships into a series of Well-what-did-you-get-for-me-this-year contests? Could the downturn in Christmas shopping be a sign that maybe -- just maybe -- some people have had it with the maddening crowds, the long lines, and the relentless materialism, which can't really be what the spirit of Christmas is all about?
According to a recent poll done for the Center for a New American Dream (a nonprofit that pithily promotes "More fun, less stuff"), 88 percent of Americans say that society is too materialistic, 87 percent say that "our current consumer culture makes it harder to instill positive values in our children," and 80 percent say that society is "too focused on shopping and spending."
Additionally, the poll found that since Sept. 11, 2001, 40 percent of Americans had "made conscious decisions to buy less," and 58 percent said that excessive materialism causes people to work too much. (Americans on average work more hours per year than people in any other industrialized country -- about 350 more hours per year than our counterparts in Western Europe.)
Finally, 52 percent of Americans say that they have too much debt. Does this mean that we have finally gone as far as we can with this whole Christmas-shopping thing?
Still, even after Christmas, the retailers continue to do what they know how to do best: push irresistible bargains on what should otherwise be perfectly resistible junk. But an economy that relies on consumers' spending themselves into ever-increasing levels of debt and doubt does not seem to be a particularly sustainable one. If big retailers and Wall Street analysts want to give the country a real Christmas present, perhaps they should start thinking about this sooner, rather than later.
Lee Drutman, a frequent contributor, is the co-author, with Charlie Cray, of The People's Business: Controlling Corporations and Restoring Democracy (Berrett-Koehler Publishers).
