Once again National Consumer Protection Week falls smack in the middle of Lent. Is this yet another coincidence, or rather a celestial reminder of the benefits of occasional restraint?
This year, in particular, no one really wants a restrained consumer, and by no one, I mean not your Occupy-Wall-Street-friendly, local small business, nor the largest of American corporations, nor the government, nor the underpaid factory workers in China. No one.
Consider this: the most recent data shows U.S. GDP growing 3 percent during the last quarter, and consumer spending up 2.1 percent. Shoppers were emboldened by the biggest wage increases since March 2007, a combined $197.3 billion in the third and fourth quarters. Consumer spending is 70 percent of GDP, so the individual decisions consumers make are a big factor in lifting our economy. But as we slowly loosen the grip on our wallets, we have to make sure that this time around we spend our dollars mindfully. If the myth of the rational consumer is dead, then let us raise a new ideal in its place and make it real: the conscious consumer.
This means taking into account how our purchasing decisions affect the world. As we rebuild our economy, we have a chance to get it right and make sure it is on a stable and sustainable foundation. We have as much a responsibility to our communities and ourselves as we would demand that corporations respect our rights and that government protects them. And that's what National Consumer Protection Week is all about. It's an adult moment for all of us: consumers, corporations, and regulators.
American consumers represent perhaps the most powerful economic force ever known to man. Eighteenth-century economist Adam Smith, author of The Wealth of Nations, himself foresaw this when he said, "Consumption is the sole end," and consumers are often seen to be on the lowest link of a very long economic food chain. Why is that? Imagine if we were organized and well-informed. There is no business or economy that could withstand the truly organized wrath of the American consumer. And one thing we should be more organized about is buying American.
Now, "Buy American" and its advocates have generally been discredited for several very good reasons. First, all things being equal, consumers will buy the best product at the lowest possible price at all times, and that intelligence fosters competition, which in turn lowers consumer prices. Second, in the globalized economic ecosystem of the 21st-century, it has become increasingly more difficult to determine exactly which products are "American." For example, the average GM, Ford, or Chrysler car may contain parts manufactured in literally dozens of foreign jurisdictions, and lots of Toyotas and BMWs are now manufactured in this country.
I'm not suggesting that anyone purchase an inferior product just because it was made in the U.S.A., nor would I suggest that someone overpay for an expensive American-made product when a cheaper foreign-made equivalent is available. But if it's a tossup between two products of comparable price and quality, one American and one not, buy American. Here's why.
After years of decline, American manufacturing has picked up consistently for the past four months. Many economists believe that the long-term health of the American economy depends in significant part on the revitalization of our manufacturing sector. This is particularly true because, again in the case of automobiles, the oversized, subpar gas-guzzlers that were produced by Detroit for more than a decade gave American cars -- and American manufacturers as a whole -- a very well-deserved bad name. Many American companies became so fat, dumb, and happy in the post-World-War-II era that they routinely produced unreliable products of very low quality, and thus a generation or two of consumers around the world perceived American goods to be inferior to those produced abroad. Today, our products have improved dramatically, but the perception lingers, and we all need to do something about that.
Moreover, despite the fact that iPhones are made in China and Toyota Highlanders are made in the valleys south of the Mason Dixon line, buying American still has a salutary effect. Unfortunately, America in recent decades has been exporting the wrong things -- like jobs and currency. When you buy a product from an American company, even if that product is manufactured partially or completely overseas, the profits are much more likely to stay here, in the form of employee bonuses, increased spending on marketing through U.S. media, and so on.
Forgetting for the moment the "get government out of our lives" crowd, even as a former consumer regulator I accept the concept that the ultimate guardian of the consumer is the consumer, and doubtless, consumer protection begins at home. We have the greatest interest in protecting our own economic well-being and are in the best position to protect it. As consumers, we owe it to ourselves to become better informed. Financial illiteracy damn near destroyed us in the past few years, and as consumers, we owe it to ourselves to get better organized.
Happily, and finally, the U.S. government is stepping up its efforts to help consumers know more about what they need to know. An important goal of National Consumer Protection Week is to promote better consumer education and awareness, and the newly minted Consumer Financial Protection Bureau has a strong mandate to ensure that Americans become more financially literate as quickly as possible. This doesn't just mean reading all the disclosures before signing on the dotted line. It means considering the ramifications of your purchase before making it. If you're being offered more house than you can afford at a deal that only makes sense because you "will" be able sell it off to the next guy two years later, you know that's wrong. It's wrong for you, and it's wrong for society to mint an economy out of such thin dreams.
Even if all corporations were in perfect compliance and had the most clear and comprehensive disclosures in the world, if you don't read them, what good are they? This is not about individual responsibility vs. corporate responsibility; this is individual responsibility and corporate responsibility.
Sooner or later, people will figure out that in a capitalist system, information and transparency are as valuable, if not more valuable, than all the regulation of business that Washington can produce. There is a middle ground. You can have intelligent regulation and economic innovation by forcing bad players away from the table.
National Consumer Protection Week starts with you. What will you buy?
This piece originally appeared on Credit.com.
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The sad simple truth is "buy American" is seldom an option. I don't mean you choose between a superior imported product and an inferior American made product, I mean there is all to often NO AMERICAN MADE PRODUCT. There's only the choice between a superior imported product and an inferior imported product.
Etsy.com is full of people making all kinds of handmade goods, from makeup and skincare products to clothing, furniture, etc. And I've found that a lot of it is reasonably priced.
But still, yes, I know what you mean. What cellphone can I buy if I want to buy american? What computer? What pair of sneakers?
http://www.nytimes.com/2006/08/28/business/28wages.html
Real Wages Fail to Match a Rise in Productivity - New York Times
"...In another recent report on the boom in profits, economists at Goldman Sachs wrote, “The most important contributor to higher profit margins over the past five years has been a decline in labor’s share of national income.” ..."
Now U.S. workers' share of national income is at an all-time low:
http://research.stlouisfed.org/fred2/series/PRS85006173
FRED« Nonfarm Business Sector: Labor Share
While corporate profits are increasing:
http://research.stlouisfed.org/fred2/series/CP
FRED« Corporate Profits After Tax
Mainly because of reduced wages and benefits:
"JPMorgan’s July 11 “Eye on the Market” newsletter put it, “Reductions in wages and benefits explain the majority of the net improvement in [profit] margins… US labor compensation is now at a 50-year low relative to both company sales and US GDP.”
The idea of putting supply before demand is more of the same trickle-down philosophy that doesn't work.
I think the intention of the article is to encourage consumers to think about where their money is going when they make a purchase, and to make purchases that correspond with more closely with their personal values.
As a rule, I think that's what consumers already do: purchase goods that save them money, regardless of origin, rather than purchase more expensive goods. The number of scenarios where a consumer has an actual choice, at the moment of purchase, between an identically priced foreign and domestic good is very rare indeed.
The appeal is sort of like asking everyone to drive 55 to save gas. Nice in theory, but when it comes down to the consumer level, nearly all individuals choose to drive faster and shorten their travel time rather than save gas.