Home > Uncategorized > Consumer demand in Europe. Don’t shop till we drop.

Consumer demand in Europe. Don’t shop till we drop.

Austerity in action: Spaniards have been tightening their belts for four years in a stretch (graph). Retail sales are down 20%. Greek retail sales are even down 30%. And where does this leave these countries? Does ‘belt tightening’ lead to prosperity? No. It leads to depressed economies, of course, with 23 and 19% unemployment. It’s “the paradox of thrift” in action. And the end is not in sight: more belt tightening is coming.

Now, this could all add up if domestic demand was replaced by foreign demand. Current account deficits of Greece and Spain were clearly unsustainable and (net) exports had to increase. But this won’t happen. Despite increases in wages and employment, German consumer demand is going down, too. And though British and French consumers did behave responsible until now, austerity in France and the UK will end this, too. Greek and Spanish exports have nowhere to go, in the EU.

Germany even threatens to take over Greek government. “History doesn’t repeat itself, but it does rhyme”, according to Mark Twain. And the situation ironically resembles Europe in 1923, when Germany had to pay war reparations, wasn’t allowed to export and the French occupied the Ruhr area. Even the language used ‘rhymes’. To quote the then French premier, Poincaré: “We, on the contrary, believe that if Germany, far from making the slightest effort to carry out the treaty of peace, has always tried to escape her obligations, it is because until now she has not been convinced of her defeat. … We are also certain that Germany, as a nation, resigns herself to keep her pledged word only under the impact of necessity”. Comes in Schäuble, at this moment German finance minister:: “Unless Greece implements the necessary decisions and doesn’t just announce them…there’s no amount of money that can solve the problem” and “”Perhaps we and our partners must look into ways to assist Greece in this difficult task in an even closer manner,” Mr. Schäuble said, alluding to the German oversight proposal.”.

  1. s h a r o n
    February 3, 2012 at 3:47 pm

    Ain’t it great? Humans are born to buy! (Then, consume, then discard.)

    • merijnknibbe
      February 3, 2012 at 3:57 pm

      Sharon, I do understand you and on a idealistic level I do agree. However… at this moment the Spanish government isn’t paying salaries anymore, according to todays newspaper. At this moment, Greek pharmacies can’t pay medicines anymore. At this moment, already very low pensions of octagenarians are reduced with tens and even hundreds of Euro’s, in Greece.


      And this list is much, much longer. The financial turmoil is starting to change into a humanitarian disaster, in Europe.

  2. Courtney
    February 3, 2012 at 3:56 pm

    Global Debt Crisis

    The greatest private fraud of human history.
    Who are the great fraudsters who are becoming the murderers of the human kind? How does the economy “illness” threaten Democracy and the freedom of people?

    By knowing what happened in indebted Greece, where loan sharks created “bubbles” and the current inhuman debt, one can understand the inhuman plan in total …understand where this plan started just to bring all states at the same end …understand how this type of plans are established…


  3. February 3, 2012 at 6:51 pm

    On the positive side, the people of Greece and Spain may have suffered birth pains of a new future we cannot yet see. Adjusting consumption to a little more in line with what Earth can sustain is painful for everyone, especially doing so without choosing to. However it happened, Greece and Spain are ahead in the grand struggle to solve the riddle of prosperity with a shrinking level of economic intensity; and they are well known to have thought deeply about it.

    Yes, it is sad that the Greeks and Spaniards have been and continue to be pushed this way and that whilst learning it is reasonable to be indignant watching pirate capitalists with no respect for law and order destroy civilization. The wanton, free-for-all to grab for the last crumbs from dying Earth is a stunning example of pathological greed as social cancer eating the life of civilization, sociologically, scientifically. Perhaps Spain, Greece, Portugal – and maybe even Italy dragging France and Germany – will focus the genius of their hundreds million strong clear thinkers and point to an easier path for all of us who open our eyes and follow.

    Modern economics includes democracy through out. It is from the information age population we learn economic analysis that replaces a healthy portion of commercial life with education, health and freedom, leading to a gently declining population and then eventual rebound of Earth’s health and bounty, for less people, who are still intent upon reaching the stars.

    I am an applied economist who has proven in physical reality that the sustainable future can include a glittering economic facet of houses that pay the people to live in themselves. Now the reality of this possibility is a known.

    At this point the question grows to answer is ; What kind of economy is it that does not base on growing to infinity upon a finite planet?

  4. robert r locke
    February 3, 2012 at 7:52 pm

    All this is grand reading but it just verifies what we all knew instinctively when the crisis broke in 2008. We had been witnessing a growing gap in income between the rich and the poor since Reagan took over, accompanied by a tremendous increase in private borrowing as consumers turned to borrowing to keep the economy going. In tfhe 1980s we all know it couldn’t last, that eventually private debt could no longer sustain consumerism and the thiing would collapse. When it came, I purposed to redistribute the wealth to the middle classes that had been redistributed from them to the top 1% in the Reagan, Bush, Clnnton, and Bush years. We got more of the same and austerity. And a leadership elite that does not seem to understand that social chaos will result from this maldistribution.

    • Alice
      February 4, 2012 at 9:28 am

      Robert says “And a leadership elite that does not seem to understand that social chaos will result from this maldistribution.”

      I agree. Thats all we got. Now all politicians have been bought by the same 1% that have been the beneficiaries of the growing inequality that they sought to suppress and deny for three decades, through the media, through the crappy second rate publications of known right wing stink tanks and through their deluging an accommodating Murdoch Press to their unresearched rubbish….there remains the gini co-eficient. The thing that moves like a snail over decades has finally left a slime trail too big to ignore.

      No its not “equality of opportunity” that matters, no its not the “second or third round effects” that matter, its here and its now and its ugly and lots of us are tired of putting up with all the lies they have been trying to bury rising inequality with for decades.

      Times up. Time to straighten the mess up.

  5. Karen Davis
    February 3, 2012 at 8:55 pm

    Declining consumption is beneficial for the planet but only when it is the over consumers actually reducing. The austerity in Spain and Greece isn’t impacting on their wealthy, nor on the wealthy of Germany, US or wherever. It is those who didn’t have a lot of resources to start with who get hit worst.
    So I can’t see the making life worse for the poor and pushing more people into homelessness as the birth of a new future. I would rather see much higher weath taxes and finanacial transaction taxes as the beginnings of a more equal society, less obsessed with economic growth and consumption, and perhaps then there’s a chance of reducing carbon emissions from the wealthy countries.

    • Alice
      February 4, 2012 at 9:47 am

      Exactly Karen – oppressing the poor and the middle isnt a start to correcting whats wrong at all – its simply a way of that the so called risk taking bond holders want to “share the risk” but not the returns.

  6. R.Day
    February 7, 2012 at 2:19 pm

    I totaly agree with a better redistribution of wealth within nations, as well as in a more global level. Nevertheless, in my relatively short life as an economist, I never witnessed a fiscal policy that is honestly meant to do that. In fact, we have always opportunist politicians and powerful lobies of “wealthy fews” that impose only minor adjustments on redistribution and this gets even worse -Should I rather say violent?- in crisis periods where a large, unweahlty share of populations are pushed to pay to wealthy ones -we all know that government borrow from the “happy fews”- through cut backs on incomes and public services. I think that today’s picture of economic crisis emerge when pure growth objectif in a pure “capitalist” world hits the bottom end of exploitation in every sense (psychological,economical, sociological, ecological etc.). What I expect then? I can only say that we will all have a hint of “prozac effect” from lobiests’ hands and get again used to live with all these growing inequalities. What I expect is unfortunately what I have seen before.

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