Does the holiday shopping season boost the economy? Or does
it matter? Or is the economy actually harmed by it?
Or does it depend on the state of the economy?
By tradition, Black Friday is when retailers, when their
sales are summed out over the year, first start netting a profit. ( If so, we
can figure that retailers net on average over 10% profit, figuring total sales
over the month of December to be even slightly more than the average month.)
But we follow the money.
First, consumers only have so much to spend over the course of a year. No
matter how their spending is distributed, it doesn’t affect how much they have
to begin with, and that is what limits how much they have to spend. If they
spent less during the holiday season, they would have more to spend during the
rest of the year. From that point of view, the holiday shopping season doesn’t
affect the economy at all, except to make its activities uneven.
However, suppose the season motivates people to take on a
larger debt burden than they otherwise would.
This in the long run might lead to a decrease in growth in the real
economy. This is the consequence of the
fact that, when we subtract the cost of borrowing, that is the interest paid by
the consumer, the consumer has less to spend in the long run. Of course, that interest is someone else’s
income. Since borrowing is by the poor
from the rich, and the rich spend a lower percentage of their income, the
implication is that total demand is reduced, and will grow more slowly. And so
the economy with it. Also the distribution of wealth is changed, further
concentrated on the rich, and this is not a good thing.
Supposing instead, on average, the existence of the holiday
shopping season induces people to save more. Then in the long run, they would
have more to spend, because of the interest, and this would lead to greater
demand, and increased growth. In the
long run. But evidence doesn’t suggest increased savings to be the case.
There is the additional cost of increased competition, the
cost of stores open on holidays, and longer hours, the increased burden on
infrastructure. This additional
destruction of resources makes us all a bit poorer.
There is the time and opportunity cost to consumers, waiting
for their place in line, when they could be doing something more productive,
and that makes them, and all of us, poorer.
If the economy was at full capacity before the holiday
season, the increase in demand might lead to production bottlenecks, and
inflation. This might be harmful. In a slack economy, it is
hard to see this would be a problem, and might temporarily help the employment
situation. However, it shouldn’t affect
the employment averaged over the course of a year.
Anyway, at best, in net, we conclude the holiday shopping season
has a slightly negative effect on the total economy. Further, the compromising of the holiday of Thanksgiving,
(and some might argue of Christmas also,) in the unseemly pursuit of profit,
and the induced and equally unseemly pursuit of bargains, must be counted a
social negative, and evidence that we cannot evaluate the well being and progress
of a society merely by the measurement of economic factors.
