More Responsible Consumer Behavior

Article excerpt

The global economic crisis of 2008 to 2009 has focused the world's attention on the role of domestic markets in the so-called "double-track" strategy of sustainable development. Coined by former Thai Prime Minister Thaksin Shinawatra, "double track" refers to the two major forces of exports and domestic consumption that should be both cultivated if an economy is to avoid the worst consequences of a global recession. Countries that can count on a strong domestic market can avoid a recession even if exports are declining precipitously, as in the present case. No East Asian economy has been spared drops of 30 to 40 percent in its exports over the last 12 to 18 months. No wonder economies with small populations like Singapore, Hong Kong, Taiwan, and Malaysia have all suffered from a recession. Countries with larger populations like Indonesia, Vietnam and the Philippines--though suffering also form large export declines--have avoided a recession, thanks to their sizable domestic markets. Private consumption expenditures have saved the day for these emerging markets in the Southeast Asian region.Another dramatic illustration of the power of domestic markets in the present crisis is what happened in China after the government decided to spend the equivalent of $600 billion in a stimulus package.The Chinese were able to get the money directly into the hands of millions of consumers who were more than willing to splurge on all types of consumer goods, both durable and non-durable. A proof of the success of these pump-priming activities was the record-breaking growth in the sales of automobiles which jumped by more than 90 percent on a monthly basis last July, 2009. In contrast, the much larger stimulus package of the Obama government in the US was not as successful because much of the money did not get into the hands of consumers for direct spending on goods and services. Much of it was used to pay back loans.Consumer research analysts in the US are reporting that American consumers have rediscovered the value of thrift and will no longer be the world's engine of growth in the coming years, as they have been in the last 20 years. Even if and when the US economy recovers, American consumers are expected to be more conservative and will save a larger part of their incomes. In fact, over the last year, household savings have grown from zero percent of income to more than 7 percent. This is still a long way from savings rates of as much as 50 percent in some Asian economies like China and Singapore. The fact remains, however, that the responsibility of reigniting global economic growth will rest on the consumers of such large emerging markets like China, India, Brazil, Indonesia, Vietnam, Mexico, Nigeria, the Philippines, etc. …