A consumer economy relies on consumer spending, with the US often stating consumers are responsible for 70% of all expenditures. Stimulating consumer spending is necessary, but some argue production is equally important.
A consumer economy refers to an economic system that relies primarily on consumer spending. In the United States, it is often said and often disputed that consumers are responsible for 70% of all expenditures and, therefore, this class of spenders must be constantly stimulated to make money for businesses. There are other classes of spenders who account for a smaller amount of spending and are usually ignored by attempts to revitalize the economy. In this economy, some financial experts say consumption is necessary, while others say production is necessary to keep the economy satisfied.
Consumer economy simply means that there is an economy where consumers dominate the spending sphere. Instead of corporations, government agencies, pharmaceuticals or other investors, consumers dominate the world of shopping. For this type of economy to work, consumers must be stimulated to buy products, and they must be produced. To stimulate purchasing, the government usually offers higher tax returns so consumers have more money to spend, which will give businesses more capital so they can create more jobs.
The usual percentage of consumer spending is quoted as 70% in the United States, but this number is often disputed. This is because, instead of pure consumer spending, most of the statistics accumulate in government spending aimed at consumers, such as health care. This way, the economy looks inflated. Some financial experts say the percentage is closer to 40 percent or 50 percent, which would still dictate the United States as a consumer economy, but to a lesser extent.
The main principle of a consumer economy is that the consumer must consume. Products must be bought and used for the economy to function. This economy is so heavily dependent on the cycle of consumption that it can easily break if the consumer refuses to spend money and chooses to invest instead. To that end, consumers are often given extra cash to spend on products to drive the economy. Most other spenders, such as companies and manufacturers buying supplies, are often ignored by these stimulus efforts because they represent a smaller percentage of overall spending.
Others believe that a consumer economy is not about consumption but about production. If the right product is produced, the consumer will buy it, and a variety of different products must be made to meet consumer needs. If production stops, there will be nothing to consume, which is what leads many financial experts to claim that production is the driving force behind a consumer economy.
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