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Beyond Our Means

Beyond Our Means: Why America Spends While the World Saves

Copyright Date: 2012
Pages: 496
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  • Book Info
    Beyond Our Means
    Book Description:

    If the financial crisis has taught us anything, it is that Americans save too little, spend too much, and borrow excessively. What can we learn from East Asian and European countries that have fostered enduring cultures of thrift over the past two centuries?Beyond Our Meanstells for the first time how other nations aggressively encouraged their citizens to save by means of special savings institutions and savings campaigns. The U.S. government, meanwhile, promoted mass consumption and reliance on credit, culminating in the global financial meltdown.

    Many economists believe people save according to universally rational calculations, saving the most in their middle years as they plan for retirement, and saving the least in welfare states. In reality, Europeans save at high rates despite generous welfare programs and aging populations. Americans save little, despite weaker social safety nets and a younger population. Tracing the development of such behaviors across three continents from the nineteenth century to today, this book highlights the role of institutions and moral suasion in shaping habits of saving and spending. It shows how the encouragement of thrift was not a relic of indigenous traditions but a modern movement to confront rising consumption. Around the world, messages to save and spend wisely confronted citizens everywhere--in schools, magazines, and novels. At the same time, in America, businesses and government normalized practices of living beyond one's means.

    Transnational history at its most compelling,Beyond Our Meansreveals why some nations save so much and others so little.

    eISBN: 978-1-4008-3940-7
    Subjects: History, Economics, Finance
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Table of Contents

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  1. Front Matter (pp. i-vi)
  2. Table of Contents (pp. vii-x)
  3. INTRODUCTION (pp. 1-16)

    When I began researching this book several years ago, saving money was not the sexiest of topics—certainly not in America. Policymakers here have long emphasizedconsumptionas the driver of the economy, while historians prefer to write about the rise of our vibrant consumer culture. But recently the issue of saving has become maybe too exciting. Despite a booming economy, household saving rates sank to near-zero levels by 2005. Three years later, the U.S. economy experienced a housing and financial meltdown from which we have yet to recover. Americans now contend with massive credit card debt, declining home prices,...


    So goes the world’s best-known parable of thrift—a story taught to generations of children in the West and East alike. To this day, Japanese commonly identify with Aesop’s ant in explaining their propensity to save. When it comes to putting aside for wintry days and encouraging others to save, humankind has been at it a long time. Aesop may not have been a real person, but the fable of “The Ant and the Grasshopper” dates back more than two millennia to ancient Greece. Likewise, the Bible overflows with injunctions to be prudential. In Proverbs, we meet again the farsighted...


    November 12, 1859, was an extraordinarily good day for the London publisher John Murray. On that date he announced the publication of not one, but two, of the greatest sellers of their time. Charles Darwin’sOrigins of Species by Means of Natural Selectionwould transform how people around the world thought about life and society. But so, too, would Murray’s other blockbuster, Samuel Smiles’sSelf-Help,with Illustrations of Character and Conduct. Between 1859 and 1905, an estimated 258,000 copies of the latter were published in Britain alone. Smiles became the Benjamin Franklin of his era. Yet if Franklin aimed his...

  6. 3 AMERICA THE EXCEPTIONAL (pp. 84-119)

    Politicians and historians often talk of “American exceptionalism.” What each regards as distinctive about the American experience varies, but generally they highlight freedom, individualism, egalitarianism, risk-taking, and laissez-faire.³ There is, to be sure, something self-congratulatory and insular in this selection. Curiously, few Americans consider what has struck so manyforeignobservers as exceptional about the United States over the past 150 years. To an uncanny degree, travelers remark upon American abundance, excessive consumption, and the weak spirit of thrift.

    It matters little whether these visitors hailed from Europe or East Asia, from the nineteenth century or the present day. When...


    Centuries of Japanese children grew up without Aesop’s fable “The Ant and the Grasshopper,” but they did not lack for comparable parables. In the story above, Japan’s legendary apostle of thrift, Ninomiya Sontoku (1787–1856), lectured the profligate Genkichi with the sternness of the Ant. The parallels in cultivating thrift are all the more remarkable considering Japan’s isolation from Western developments before the mid-nineteenth century. For more than two centuries the Tokugawa shoguns secluded the archipelago from the outside world, permitting only limited trade and exchange with the Dutch, Koreans, and Chinese. Contact with the West did not resume in...

  8. 5 SAVING FOR THE NEW JAPAN (pp. 143-167)

    In history as in sports, timing is everything. Following the Meiji Restoration of 1868, Japan became a modern nation-state at a peculiar moment. In the world of great-power rivalries, Western nations were hard at work managing and mobilizing their own peoples. They no longer regarded thrift as simply an individual virtue, but as a vital ingredient in the making of national power and social order. In 1909 Ichiki Kitokurō, Japan’s influential vice minister for home affairs, declared: “Nothing can be as positive, and nothing increases the nation’s wealth nor contributes to the advance of the nation as much as thrift.”²...

  9. 6 MOBILIZING FOR THE GREAT WAR (pp. 168-193)

    Nineteenth-century wars were short. In the hundred years after the Napoleonic wars, hostilities between the great powers typically lasted one or two years. When fighting broke out in Europe in August 1914, both sides again expected a brief war. The Schlieffen Plan called for the German army to take Paris just thirty-nine days after mobilization. The Kaiser’s troops marched through Belgium, believing they’d be home before the “leaves dropped from the trees.”³ After the German advance stalled in September, the French and British likewise predicted the war would be over by Christmas. And for one of the belligerents, that’s exactly...


    Axis or Allies, the parties to the Second World War shared some critical assumptions. Financial planners were determined not to repeat the mistakes of the previous world war. They all planned for a lengthy struggle, obsessed with preventing the sort of inflation that had traumatized postwar Germany and weakened other economies. Rather than rely overwhelmingly on borrowing as before, belligerents resolved to pay for the war to a much greater degree by tax increases. To finance the balance, the warring states launched new waves of savings campaigns. At no other time in world history, to paraphrase Winston Churchill, would so...


    Therewassomething “fanatical” about Japanese savings campaigns in World War II. The Japanese declared war on extravagance more than a year before attacking Pearl Harbor. In July 1940 the government issued “Regulations Restricting the Manufacture and Sale of Luxury Goods.” For the next five years, the slogan “Luxury is the Enemy” appeared everywhere, in magazines and newspapers and on red cloth banners and community signboards.² No other belligerent—Axis or Ally—wrung as much savings out of their people. By 1944 Japanese households saved an extraordinary 40 percent of disposable income, compared to roughly 26 and 25 percent, respectively,...

  12. [Illustrations] (pp. None)

    Japan waged one of history’s most total wars. Its defeat in August 1945 was no less total. Some sixty-six cities lay in ruins, the targets of wave upon wave of B-29 bombers. This proud nation—which had so successfully maintained its independence against nineteenth-century Western imperialism—suffered immediate military occupation by the Allied forces. Over the next six and a half years the Japanese government took orders from the Supreme Commander of the Allied Powers (SCAP) in the person of General Douglas MacArthur and briefly General Matthew Ridgeway. Though nominally an Allied operation, the Americans dominated the occupation from start...


    Thanks to a surging U.S. economy in the 1990s, Americans regained confidence in mass consumption as the key to prosperity. This vision has proved intoxicating, and few Americans imagine that other nations might approach consumption differently. Predicted the Council on Foreign Relations’ Walter Russell Mead, “to keep their economies growing, Asian societies must develop the consumer mentality of the West. If history is any guide, Asian governments will encourage the mass retreat from thrift, just as Washington did…. There’s no getting around it; Asia’s little emperors [the young] are going to have to get charge cards, just like their decadent,...

  15. 11 “THERE IS MONEY. SPEND IT”: AMERICA SINCE 1945 (pp. 317-355)

    Japanese and Chinese leaders were not the only ones to lecture Americans about their lack of thrift. Some Americans too warned of the dire consequences of low saving rates in the United States. Those jeremiads fell on deaf ears. Until recently, that is. In the financial crisis that began in 2007, millions of Americans discovered they lacked the savings to weather the storm. They lost their jobs. They lost their homes. Suddenly Samuel Smiles’s Victorian-era injunction resonated in a different time and place. If working Americans, too, failed to accumulate “a store of frugal savings in prosperous times,” they would...


    In the years after World War II, Japanese and Europeans came to think of consumer spending as a good thing, but one that must be balanced against the imperatives of saving, investment, social stability, and the environment. The need to establish such a balance made little sense to most Americans. That no longer may be true. The current economic crisis burst more than the housing bubble. Sharp drops in housing and equity prices have shaken Americans’ confidence that the Way to Wealth lies in buying assets rather than old-fashioned saving from income. Net worth sank an estimated 17 percent from...

  17. ACKNOWLEDGMENTS (pp. 377-380)
  18. APPENDIX (pp. 381-382)
  19. ABBREVIATIONS (pp. 383-384)
  20. NOTES (pp. 385-434)
  21. SELECTED BIBLIOGRAPHY (pp. 435-448)
  22. INDEX (pp. 449-475)