Over-Saving Caused the Economic Crisis

'Against Thrift' defends consumer culture while exploring the causes of the economic crisis.

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As the United States struggles to revive its stagnated economy, James Livingston defies conventional wisdom about saving and economic growth. In Against Thrift: Why Consumer Culture is Good for the Economy, the Environment, and Your Soul, the Rutgers University history professor argues that consumption, not private investment, is key to spurring the economy. Citing the historical record of past collapses, as well as the civil rights and labor movements, Livingston argues that consumer culture is vital not only for the success of capitalism, but for democratic society as a whole. Livingston recently spoke with U.S. News about the economic crisis and how to turn the economy around. Excerpts:

Why did you write this book?

The main motive I had was trying to figure out what happened [regarding the economic crisis] starting in 2006 or 2007. That is, I wrote a book on the Federal Reserve a long time ago and a lot of people sent me E-mails saying, you're an historian on banking, tell us what happened. And I thought, well, I am going to try.

[Read the U.S. News debate: Has the Federal Reserve Overstepped its Mandate?]

What did you discover?

I realized these extraordinary inequalities in transfer income, from wages to profits or from labor to capital. I thought that was the key to thinking about the crisis and that of course took me back to the Great Depression. Once I had the comparison in place I could say to myself, and say to the world, the problem is over-saving, the problem is surplus capital.

Was the market over- or under-regulated?

I am not with the left in that I don't think re-regulation of the market is the answer. It's one answer, but it's not the answer. And on the right, this idea that government is the problem, I guess in theory it might make a little sense, but in practice, if you look at the history of the republic and the history of how growth is actually created, you realize that this has been a partnership, an interpenetration of public and private. You might even want to go as far as to say that it was interpenetration of the 20th century, in our own time, while capitalism is on the one hand and socialism on the other.

[See a collection of political cartoons on the economy.]

So the system is a blend of capitalism and socialism?

We're constantly trying to socialize markets, one way or another, because we are always talking about what kind of growth do we want, what kind of incomes should we have as Americans. In other words, what is the American standard of living supposed to look like, what could it be.

Is it dangerous to see the economy in ideological terms?

I think the private-public thing is really damaging to our thinking because since the 1790s, this synergistic, synthetic, symbiotic relationship between the public and the private has driven growth. Americans never thought it was an either-or until maybe the 1980s—I am not sure even then. Right now it seems like we're there. I think the binary is dangerous.

[Read more Book Club interviews by subscribing to U.S. News Weekly, now available on the iPad.]

What is the "politics of more"?

What [labor leader] Sam Gompers was always saying is that more income buys us more time, it buys us more leisure, it buys us more time away from work. And that's what I think what the politics of more is. That's why, when I talk about consumer culture, what I am trying to do is get us away from the idea that consumer culture is privatizing, this setting in which politics becomes pointless because we are all whacking away at our electronic devices.

You suggest that we can work less and produce more?

The history since 1919 proves that we can. Our problem is not production, our problem is distribution. Our problem is learning how to consume mindfully, and that too is a crucial part of politics of more. We can produce more with less labor, but then the question is, what do we want to produce? And what do we want to do with the free time that our extraordinary productive capacity gives us? How much can we do on behalf of others? And not because we are compassionate, it's because the distribution of capital is crucial for balanced growth.