Long Time, No Blog

My apologies for the long hiatus. I spent the first week of June in New Orleans on a mission trip to provide hurricane relief, and the next two weeks rehearsing with the praise band I play in for a concert at the state prison in Lansing, Kansas - both of which were amazing experiences, but more on that later.

For now, here's an interesting news item - with an important lesson - from the United Arab Emirates, home of Dubai, which has become a global playground for the rich and famous, with its mind-boggling real estate developments and resorts.

Consumer spending in the UAE - the Arab world's second-largest economy - grew 17.7% last year, more than doubling the pace of half a decade earlier. Per capita spending has grown to eight times the average for the rest of the Middle East in the nation that imports about 85% of consumer goods, and spending as a percent of earnings is approximately 60%.

The UAE's Department of Planning and Economy is concerned that the rampant "consumer spending at the expense of savings and investments has, and will continue to have, adverse effects on the local economy. This alarming consumption rate could, in the future, constitute a big hurdle in the face of any plans to transform the country" to self-sufficiency. "The combination of easy loans in addition to advertising and media propaganda have all combined to plunge consumers into a quagmire of spending. Some of the woes that have beset the UAE's economy have to do with this pervasive culture of consumer spending."

Sound familiar? The US has fully embraced this culture, eschewing savings in favor of consumerism. Our own government has turned a blind eye to the resulting economic problems, proclaiming consumption as the engine for growth in a once self-sufficient economy increasingly dependent on exports. Consumption comprises 70% of US GDP, vs. less than half that for the world's fastest-growing economies, those of India and China, both of which boast double-digit savings rates, while that of the US hovers near zero.

China gets it. So does India. Even the UAE acknowledges that "consumer spending at the expense of savings and investments has, and will continue to have, adverse effects on the local economy." When will US economists and government officials recognize that savings, not spending, is the true engine of sustainable economic growth?