Abigail Foygelman

Professor Kahn

JOUR 469

29 August 2021

Economic Indicator Blog Post 1

Commending Consumer Consumption

America is largely a consumer-driven nation. I would argue upper-middle-class Americans are obsessed with having the latest gadgets, use retail therapy as a coping mechanism, and have created a culture that glorifies spending. Growing up in Los Angeles, a city is known for its fondness of materialism, I was not surprised to learn that consumer spending makes up two-thirds of the American economy. From the Black Friday battlefields to our infatuation with Amazon Prime, I have always assumed a pick-up in retail sales meant a pick-up in the economy. In fact, before any formal education in economics, it was the only indicator I had recognized to demonstrate economic prosperity. As an Angeleno and fellow shopaholic, I believe “retail sales” to be the most interesting economic indicator. The Department of Commerce’s monthly release on retail and food services breaks up retail sales in various sectors, such as the sales in department stores, as well as furniture and other durable goods. An increase in consumption sends a signal to producers that demand is growing and consequently higher employment is needed to fulfill those demands. In short… money makes the world go round and not just making it but equally as important, spending it. Who would have thought your impulsive decision to buy a new couch was an essential indicator of the entire economy’s prosperity? Therefore, I believe it is essential to look back at the start of this spending craze and analyze the economic growth of the 1920s. The Balance, a personal finance website, reports the “economy grew 42% during the 1920s, and the United States produced almost half the world’s output because World War I destroyed most of Europe.” With the combination of the widening use of electricity in production and the growing adoption of the moving assembly line, there was a huge rise in the productivity of labor and capital in the mid-1920s. New products and services created new markets for products such as the electric ice-box, radios, and particularly other labor-saving household appliances. According to the Economic History Association Americans’ excitement for these high-tech products and newly gained confidence after the earlier depression, encouraged spending and accounted for the era’s generally steady consumer price index. However, it is important to note the manipulation of consumer confidence while we further discuss the “success” of 20s America, rampant corruption and stock manipulation created some false sense of stability and resulted in the economic crash of 1929. In retrospect, the 20s teach us that citizen’s emotions can be manipulated and those seemingly positive emotions impact our economy’s prosperity. I believe this time period initiated a better understanding of the individual’s influence on the greater nation. The 20s encompass the power of capital and ideas that entrepreneurs mimic in the 21st century.