Arrak: More Responsible Consumerism Indicates Economic Crisis Is Over

Andres Arrak Photo: ERR
10/30/2013 1:37 PM
Category: Opinion

It seems that, this time around, the economic crisis is over and the party is starting up again. Such is the way of the market economy, through high and low tides.

One thing has indeed changed - we are smarter today than in the middle of the last decade. We have experienced a real crisis. The Estonian people have lived through all the phases of their first full-length economic cycle.

Before the first crisis, growth seemed eternal and reaching the ranks of the top five wealthiest countries seemed like a matter of days. But when the crisis arrived, no one could say - indeed, it wasn't possible to say - "let's do things like we did last time." Fortunately, thanks to growing exports, we would duly again be among Europe's fastest growing economies.

Today, the situation of our main trading partners (Sweden, Finland, Russia) has raised new concerns about the sustainability of our growth. Estonia's economic growth is clearly slowing down.

But look around you. Look at the numbers and people's purchasing behavior or even traffic density on the Tartu-Tallinn highway. Look at the sold-out package tours. There is already two square meters of retail space per each citizen and soon there will be three. The poorest nation of the European monetary union (until the Latvians join, anyway) is scrambling into every store and shopping center to satiate its mercantile desires.

I go grocery shopping at quite random times of the day, right after opening, during midday or just before closing time. And I must admit, I don't remember being able to pay without first having to wait in line. Despite the fact that a new store or two opens every year in Tartu and business hours are long.

People even lined up for the new iPhone, with a price tag equivalent to the average monthly salary - 949 euros. Amazing but true. People are willing to cough up a monthly salary for the chance to make phone calls and listen to their tunes. In November, new tablet computers will be available to Christmas-crazed shoppers. Remember - a free man in a free country is free to throw away as much money as he wants, as if he were angry with it. That's a market-economic human right.

It's clear what would become of economic growth if people were to squander all of their hard-earned euros. Today's Postimees writes that, according to the Bank of Estonia, Estonians have never been so rich before, even though our average family has 10 times less wealth than a Swedish family (but three times more than Russians).

Wealth can be more, or less, liquid. Real estate - houses and buildings - is the most time-proof sort. Estonians have 9.4 billion euros invested in shares and stocks and 5.4 billion euros in cash and savings. That comes to 4,000 euros per resident.

With that money we could buy each of us four brand new iPhones, which would give the economy a massive kick-start. Whether we are talking about the Estonian economy is another matter. Most of these expensive wonder gadgets are produced elsewhere. And elsewhere is where we are hauling our cash through tourism.

So, to consume or not to consume? I suppose today's consumer world is a two-sided coin. Money is meant to be circulated, not hidden away in your leggings. And producers and marketers will do their best to keep us shopping.

It's no secret that much of the consumption is actually borrowed consumption. With regard to that, we can say that Estonians have begun behaving more reasonably after the crisis. Loans have stabilized since 2008, and even declined by an eighth, currently amounting to 7.6 billion euros.

I think that's an important distinction - do I belong to the bank or to myself? As to how much pretty and often senseless things a person needs to surround himself with, that's each individual's free choice. After all, it's a free country, and we are free people…

Andres Arrak is an economist, professor and columnist. The article was translated by ERR News from uudised.err.ee. It was first aired on ERR radio.


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