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US Consumers Essential to Economic Recovery - 2001-11-30


The American consumer is near the top of almost everyone's agenda, especially since September 11. From President Bush to New York Mayor Rudolph Giuliani, from Main Street to Wall Street, the message is the same: keep spending, save the U.S. economy and show the terrorists they have not cowered the American public.

Americans lately seem to be less enthusiastic about shopping. Surveys show a lot of that is due to job insecurity. Corporations struggling in a soft economy have been laying off workers.

This trend worries economists and politicians. Consumer spending is the linchpin of the U.S. economy, accounting for roughly two-thirds of all economic activity.

Maury Harris, chief economist for the UBS Warburg investment firm, says the anticipated recovery of the U.S. economy next year will depend on how quickly consumers get back to normal consumption patterns:

"I think the stage is being set for a spring recovery," Mr. Harris says. "And it's got to be led by the consumer because businesses are cutting capital spending. The rest of the world doesn't look any good. So it is up to the American consumer."

Social critics argue the pressure is almost too much for consumers to bear, especially now. There has been a lot of talk around the country since September 11 about returning to more enduring values.

Juliet Schor is a professor of sociology at Boston College in Massachusetts.

"We've come off a period of very frenetic consumption, a lot of luxury consumption, a lot of excess, a lot of sort of hedonistic relationship to consuming," she says. "And September 11 made people ask the question is this really important? And of course, many people said "no" and are looking to re-invigorate other values in their lives - family, community, country. So I think there is going to be some permanent shift after September 11."

Ms. Schor says history shows a reduction in consumer spending does not have to mean the disintegration of a strong economy, if government and corporations make an adjustment.

"If you think of the major segments as consumer spending, investment spending, and government spending, there have been important shifts in the proportions of total economic activity going into those three things," she says. "There's no reason we can't shift back to a more reasonable proportion. I don't think it's a wise idea for Americans to go out and shop to buy things they don't want, don't need and can't afford."

Sociologist Schor believes there should be a strong partnership between government and business on new directions for the economy. And she says it can happen relatively fast, as seen in the defense sector.

"Our government already is involved very intimately with business in a huge sector which accounts for billions and billions of dollars of both government spending and output. And that's military production. And we move very quickly when we see a political need to do so," says Ms. Schor.

Not all Americans are re-thinking their approach to life or the economy. Analysts note many people have already returned to their pre-September spending habits.

But social scientists, such as Juliet Schor of Boston College, are noticing a real stir at the grass roots level, people who are looking for a new direction and purpose for the economy. She believes they eventually will make their concerns and questions heard on a national scale. And that could translate into political decisions in Washington.