Who are they?
Does it matter?
Maybe not - unless you’re an economist, a politician, a manufacturer, an importer, a retailer looking to sell to a ‘middle class’ market, or housewife endlessly grazing supermarket shelves in search of ‘Buy 1 Get One Free’, bargains. To these people it matters a great deal.
Why? Because there are, it seems, vast numbers of them and that number has been increasing rapidly, especially in the exciting ‘emerging markets’ of the world. They have money to spend and an education that allows the exercise of choice.
These things do matter because the commentariat – the pundits, those with an ear to the ground, nose to the wind and eyes focused on a distant point -academic ‘experts’ from obscure universities and even more obscure ‘think tanks’’, are in search for the latest group prepared to step into the breech and act as Consumers of Last Resort (CLRs) for the global economy.
CLRs are important because they are mandated to step into the breech and spend, spend, spend …. Mostly in order to fudge the ill-conceived plans of governments, large business corporations and those who are not Middle Class.
The world needs CLRs right now as never before. Consumer products of every description are mounting on warehouse shelves leading to the plaintive cry, “I’d rather sell ‘em than count ‘em”.
It’s not supposed to be like that. To maintain proper equilibrium consumer products should arrive by the back door and leave by the front entrance. More are now using the back entrance for both functions.
It was consumers in the Middle East who first gained the distinction of CLR, in the 1970s. But this was not typical since the ‘consumers’ in question were mostly Governments: Saudi Arabia, the Gulf States, Iraq. They were buying fighter aircraft, tanks, gold plated solid gold bathroom fittings and Channel. They would probably have been better described as ‘Industrial Level CLRs’ or, in this instance, literally, ‘Weapons Grade CLRs’.
From the 1980s through to the present day it has been the US consumer who has filled the role of CLR and few could deny they have done so heroically. The Asian Economic Crisis that began in 1997 would have lasted much, much longer without the assistance of the US CLR.
In the 1997 crisis Asian economies were dropping like flies. Asian leaders pretty much demanded that the western economies pick up the slack. The US Dollar strengthened hugely against many Asian economies.
Goods imported from Asia fell in comparative price, while western retail buyers failed to complain when they discovered their Dollars, Sterling, Francs, etc. bought more of everything.
Today, the US remains the global CLR leader, certainly in terms of numbers. But they are not as reliable as before. They ran out of money ages ago but have bravely defended their position by extending their credit levels to truly awesome proportion.
It was the present economic turmoil – that began in 2005-06 which finally toppled the CLR role of the US consumer. Too late there dawned the realisation that ever cheaper imports were taking American jobs, unable to raise money (with their houses mortgaged many times over), and at the end of the queue for government cash disbursements, CLRs in the US simply melted away.
Their place will be taken certainly by the Chinese. Also Brazil, Turkey, India (probably), Russia (maybe) and Germany – once out of the Eurozone. Indonesia is a dark horse.
The future is yet to be written.
Watch this space.