August 05, 2003

The Keynesian Myth of Consumer Confidence

Gary North on consumer confidence:

What this country needs is a huge reduction in consumer confidence. This might lead to repairmen who show up on time, trade unions that consent to lower wages, colleges that reduce their tuition, government clerks who work faster, and professional basketball stars who play for a mere three million dollars a year.

I'm dreaming, of course. A drastic fall in consumer confidence would lead to more money being issued by the Federal Reserve System, more cries for make-work government boondoggles, higher government deficits "to get America moving again," longer periods for state unemployment insurance benefits, and Hillary Clinton.

Consumer confidence is meaningful only with respect to whatever it is that the consumer has confidence in. If he has confidence in the State as the supplier of safety nets, then falling consumer confidence in the economy implies rising consumer confidence in the State. This has been the situation all over the West since 1932. Only in places like China and Singapore and Taiwan has consumer confidence begun to mean confidence in personal responsibility and increased entrepreneurship. This is why Asia is now replacing the West in its ability to produce.