Nepali Times
ARTHA BEED
Economic Sense
Consumerism in time of Maoism


ARTHA BEED


The crowded streets of Kathmandu during Dasain this year did not lead one to believe we are facing an economic downturn. Nepali consumerism prospers in all times-good and bad, but especially around festivals and marriage seasons. Things are a bit different in the consumer-oriented United States. Wall Street plunges if consumers do not go to shopping malls and government economic policy hinges on how full a shopping cart is. This economic co-relation provides the Beed with endless fascination.

The American economy experienced only limited growth from 1975 to 1990, after which the graph started to soar. The budding technology industry made everyone suddenly rich, as there was money to burn. A nation that believes in deficit debt financing as a way out for a healthy economy transmitted the borrowing spree to consumers. Plastic money allowed people to buy without too much concern about future repayments.

This explosion of cash evaporated when the Internet bubble burst and all the dot.coms became dot.gones. People who based their fortunes on company shares realised their papers were worth nothing. This directly affected the purchasing power of the consumer, which in turn affected the economy. The holiday season, from November through December, accounts for nearly 45 percent of total annual retail sales in the US and initial reports this year are not good. Rising unemployment rates fuelled by job cuts are converting a society of spenders into thrifty savers. The Federal government and Wall Street need their citizens to be good consumers and buy more, but the people are deciding not to do so. Looking at all this close up, the Beed forsees another downward spiral for the US economy during this season.

Perhaps the US economy has reached saturation in most of the sectors. Shoe companies are trying to sell that second pair just as car companies advertise the need for a second vehicle. The supply has far outstripped demand and just because manufacturing bases in China produce cheaper, does not mean people will buy more than what they want. The free market encourages competition, and more players means lowering prices to survive. Undercutting is become the strategy of the times. Everyone is lowering prices in the quest of volume but with a consumer slump dogging the market, products simply don't fly off the shelves.

It is difficult to compare US economics directly to Nepal, except to draw parallels in the semi-organised consumer goods markets, especially food products. While a market-driven economy does propagate the survival of the fittest, in reality things are not as simple as that. A market awash in instant noodles or tea may have no winners and plenty of sore losers, something the fragile Nepali economy can ill afford. To begin with, it doesn't help that a lack of laws and regulations make for a very uneven field. But there are lessons we can learn from the economic slowdown in a consumer-oriented country like the US. One cannot rely on the consumer to spend more for the economy to recover and a glut of instant noodles will only strangle the market.

(Readers can post their views or comments at arthabeed@yahoo.com)


LATEST ISSUE
638
(11 JAN 2013 - 17 JAN 2013)


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