Will the Wealthy Consume Less?

That would be helpful.

Photo by Nathana Rebouças on Unsplash

The Shutdown 315 movement aims to make a dent in the US economy by convincing people to spend less in order to draw attention to real problems in America that need urgent attention, such as healthcare, democracy, climate change and other issues.

The movement calls on citizens to lower their consumption and participation in the economy to the minimum level necessary in order to take away the wealth and power of the oligarch class currently ruling America.

But do they have enough firepower to make a dent?

Are you asking the oligarchs to take down the oligarchy?

From what I have seen of the Shutdown 315 movement, I am confident they will make a dent. The size of that dent remains an open question. If just a small percent of the population switches to minimal consumption habits for an extended period of time, that will have an impact. But to make a sizable impact, the movement may have to convince those at the top to spend like those in the middle class. (I looked at this question of “What if the Rich Lived Like the Middle Class” about a year ago for those new to this space).

The top 10% of earners in America—households making about $250,000 a year or more—are the main drivers of the economy.

Those top 10% now account for 49.7% of all spending by consumers in America, a record in data going back to 1989, according to an analysis by Moody’s Analytics. Three decades ago, they accounted for about 36%.

A recent report by Moody’s shows that between September 2023 and September 2024, the high earners increased their spending by 12%. Spending by working-class and middle-class households, meanwhile, dropped over the same period.

The bottom 80% of earners spent 25% more than they did four years earlier, barely outpacing price increases of 21% over that period. The top 10% spent 58% more.

If history is any guide it would take a stock market selloff or decline in home values to curb the spending of the top 10%.

Tip the markets, which are fragile anyway.

The American stock market currently appears to be overvalued by 69%. In other words, it would take a 41% drop to bring the market back to its long-run equilibrium level. These estimates are based on a model that is inspired by Shiller’s cyclically adjusted price-to-earnings ratio (CAPE).

Look, it’s technical finance stuff. My background is in finance, so I can talk about this stuff all day, but I understand this isn’t everyone’s cup of tea. You can read the article linked above or do your own research. But many financial folks feel that the market is due for a correction. I pulled the above graphic from the article linked above to show just how overvalued the stockmarket is in the US. A market fall is coming. It may be imminent, but it may not be.

Those of use in the middle and the bottom cutting back on spending could just tip the markets into the red enough to cause that fall. That could cause the top 10% to jump out of the market and get to a bear market (any decline of over 20%) that would do some serious damage to oligarchal wealth.

Such a drop in the market would likely also crash the housing market, as inflated stock portfolios are the fuel that keeps housing prices rising.

But what about after the crash?

Let’s say for the sake of argument that we do have a stock market crash, whether or not that is partially caused by the Shutdown 315 movement.

Such a moment w0uld lead to a recession, which always results in the Federal reserve coming to the rescue and pumping money into the system. The dot.com bubble, the 2008 housing crash and great recession, and Covid all ended the same with the Federal reserve swooping in to save the day by lowering interest rates to get people to consume again.

But remember the 2008 great recession, which was caused by excessive speculation. The banks were bailed out and not one person responsible for the irresponsible financial behavior that led to the crisis - went to jail.

If the same thing, or a similar thing happens now, I don’t think the people of the US are going to tolerate banks being bailed out and no one in a position of power being held accountable.

The Shutdown 315 movement and other organizations in civil society need to be setting the groundwork to show that such a result is unacceptable. When the markets crash and the banks come to the government hat in hand, the people have to tell the government that they will not abide the government bailing out the banks again.

The government will say that if they don’t bail out the banks that the economy won’t grow.

The people need to be there to say, “That is what we want.”

When the stock market comes crashing down, and the economy crashes with it, prominent voices in America need to step forward and say, “Let’s not do this again”. Let’s not put the financial wellbeing of the few above the overall well-being of us all.”

We aren’t there yet. The organizing around Shutdown 315 and similar movements needs to get there. They need to train people to fight for a post-growth world where there are no oligarchs anymore and people are valued as citizens and not just consumers.

If those in the Shutdown 315 movement want to talk about that, they know where to find me. Tell them where to find you.