ABSTRACT
Consumption has two powerful effects on the national economy. On the one hand, it invigorates business sales, which supports the demand for labor, in turn supporting incomes, which support consumption, and so on. Thus, high consumption supports prosperity. On the other hand, high consumption can preclude high saving and investment. As the nation’s industrial plant requires regular injections of investment to stay modern and competitive, a prolonged period of high and rising consumption (diminished saving and investment) can slowly but surely leave the capital base old and tired. In this way high consumption can undermine prosperity.
