Economy and Spending
Having spent one and half years here in the US, I have seen one peculiar thing, which you all must also have noticed.
Americans consume a lot, spend a lot.
You will see wasteful usage of stuff - people are using things at a higher rate than they should - are spending where they should not.
When you see the number of paper napkins given by Pizza Hut with one pizza, when you see several helicopters following a car chase to show it on television, when you see the lights being on everywhere everytime, when you see 2.4GHz LCD screen computers in public labs in the school, when you see computers lying around like crap, when you see every American home having dozens of DVDs, VHSs, CDs, when you see a plumber having 3 cars, when you see every seminar or meeting giving pizzas, when you see a company paying all your trip expenses for an on-site interview, you realize.
People spend, and spend a lot.
(This is not bad; in fact, this is very good. Read the rest of this mail/article.)
Credit cards are extremely popular, which make you spend more than you can. Loans are more easily available, things are available on installments - all lead to more spending than you would otherwise do.
Brilliant advertising and marketing strategies are employed to make people buy. And people do.
Indians, have an opposite tendency. To spend only where it is "really worth it". They spend less, spend on only things they think they really need. They consume only what is absolutely necessary. They have been taught to be content and contain their desires. This is wrong. This then leads to smaller market, and smaller produce.
The difference between the results of the two behaviors are self-evident today.
The United States has the highest GDP of the world, i.e. the sum of services and products sold. Now they dont produce to throw the products on the road, they produce to sell because it does. They dont serve on some whim, they serve since there are people ready to spend to get served.
Since people spend a lot (more than they should), people can create more products and more services. There will be market, so people can produce.
Hence the highest GDP.
Knowing that people will buy, there is innovation. If you can innovate a device, create and sell it, then you will be a millionaire.....since people buy stuff.
Big companies have big R&D labs - to create new products and sell and earn.
Availability of market leads to new inventions, new products, research and development; due to all of which science, technology, health sciences, liberal arts, and all fields of human endeavor are advanced. (where did you see so much research being done in "ALL" fields in India?)
Today, America has not only increased its own quality of life, but the quality of life and productivity of the whole world. (why? most of today's technology, aircrafts, new medicines, physics, math, is due to the United States of America......today, more than 25% of all new knowledge in "all" fields is produced in one country - the US)
I have already switched to the "American spending mode" since past some months. ;)
But I am afraid when suddenly imagining how thousands and thousands of Indians pouring into the US with their bad Indian spending habits will affect the US economy...
(even when you go to India - spend so that the Indian economy rises)
(Some people might argue that we cannot spend since we dont have that much money -- but this is not so. If one person decides to spend, then this will be difficult, but if all people have the spending tendency, then automatically, the economy rises and products will also sell more. This will result in a higher income per capita and thus you will have money to spend)
UPDATE (July 16, 2003): Note: I no longer subscribe to this view. What prompted me to write this note about spending was the curiousness to understand why US is so developed with respect to India, and now I understand that the answer I had got was severely lacking economics know-how. I still dont know enought about Economics to know the answer, but know enough to understand that the spending explanation is incorrect.