Financial crisis is teaching us how to spend money

‘The time of wielding wealth is over,' remarked the U.S historian Steph Friesier on the unprecedented financial turmoil. It is much like the scene, he said, in which a grand feast broke up all of a sudden, leaving everybody running wild. The Wall Street bubble suddenly burst, with the disillusionment of extravagant consumption puffed up by the fanciful splendor.

A few months prior to the bankruptcy of the Lehman Brothers, an executive director of the once flourishing investment bank put his luxurious seaside villa on sale for $325 million. More significantly, many business tycoons even sold out their luxurious yachts, which used to be the apple of their eyes and worth tens and even hundreds of million. Before this, no doubt had been raised about the U.S superpower in consumption, as the U.S has long been acting as the engine of the world economy, and its powerful consumption determines the U.S role in the global economy as the bellwether. If the U.S consumption diminished, the driving force propelling the world economy would accordingly be retarded.

China, on the other hand, is an emerging economy and what is confronting it as a crucial issue will be the modes of consumption. So what mode to select is closely related to its economic routes with sustainable development highlighted. From the perspective of handling crisis, China will have to brace for the shrinking U.S consumption, and meanwhile, learn a good lesson from the U.S mode of consumption.

The U.S mode of consumption has served as the driving force pushing ahead the global economy, but other-handedly, it has also exacerbated the precariousness of the world economy and the trade structures, spurring the strong desire for extravagance all across the world. As Kenneth Rogoff, a notable economist at the Harvard University, was cited as saying, ‘the U.S consumers exhausted almost all on the earth, helped the country swallow up 25 percent of the world oil reserves, but had no interest in opening a saving account. He added, ‘thanks to the U.S unmatchable fiscal policies, the consumers don't need down payment before deciding to buy in a luxurious car. They can, of course, mortgage their houses to the bank for more loans. They have the courage to squander every cent of their savings, and enjoy their retirement life starting much earlier than ever.' Perhaps, only when we really understand the above statements, can we realize why the U.S is and has to be unique on the planet.

When tracing the causes to the financial storm, economists from different nations have so far reached an uncommon consensus, pinpointing unanimously the influence imposed by the consumption concept. When the capitals from world wide flooded into the U.S market, and due to the slack supervisory system, the untamed consumption loomed there. Abruptly, the credit links snapped, and the visionary bubble puffed up by the false prosperity got burst.

Once the old balance collapsed, the new one would not come into being promptly, and the world economy will have to seek a new bolstering point to keep balance. As a matter of fact, the ongoing process, in which grappling with and dealing with the crisis are addressed, is in itself a process to seek the new economic growth point and a new driving force. Currently, China, as well as its economic measures and policies countering the side effects brought about by the global economic slowdown, is stepping into the limelight, and the entire world is pinning hopes on China to lead the global economy out of the abyss by escalating its domestic demands.

Without any doubt, it is a bold but very plausible assumption. But considering China's present level in its economic development, the more important practice to be put in place may well be its economic restructuring and optimization. On the surface, it seems to be an easy job for China to push forward its domestic demands in its economic transformation. As economist Mr. Lin Yifu put it, ‘China is able to maintain a relatively high economic growth by stimulating its domestic economy and enhancing its domestic demands.' But if viewed from its nature, we will find that the enhancement of China's domestic demands also means that we will have to select a new consumption mode, or so to speak, we will have to spend money in a more courageous but much wiser way.

Now that China can hardly learn from the U.S in its consumption mode and even hardly can the U.S consumption mode set a goal for China to follow in its economic development. Therefore, the Chinese consumers will have to be armed with the idea involving more scientific and more rational consumption. In so doing, China's economy will be kept on the sound track of sustainable development, and contribute more to the world economy.

By People's Daily Online