Wednesday, 18 June 2014

The Truth about Savings and Consumption

Time to squelch again the popular myth that consumption drives the economy.

Fact is:

Consumption is the final, not the efficient, cause of production. The efficient cause is savings, which can be said to represent the opposite of consumption: they represent unconsumed goods. Consumption is the end of production, and a dead end, as far as the productive process is concerned. The worker who produces so little that he consumes everything he earns, carries his own weight economically, but contributes nothing to future production. The worker who has a modest savings account, and the millionaire who invests a fortune (and all the men in between), are those who finance the future. The man who consumes without producing is a parasite, whether he is a welfare recipient or a rich playboy.

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