Spending vs Saving - Sample

Consumption is thought by many to be one of the main components fueling economic growth. However, some people think that without saving, a nation’s economy becomes prone to shocks and disruptions. This essay will discuss both perspectives and argue that a balanced approach is essential for long-term stability and prosperity.

It is true that most countries seek to boost domestic as well as international consumption for various benefits. Indeed, strong market demands via high consumption enable growth in both private and public sectors. This allows factories and stores to be constructed to meet excess demand, creating jobs and advancing technologies. In turn, the increased productivity from job creation and technological advances creates more wealth that can be funneled back into the economy as more consumption, creating a positive feedback loop that many economists interpret as growth and development.

On the other hand, excessive focus on consumption alone also has downsides to be considered. Without savings, the economy is much more brittle and susceptible to shocks, which in many cases are outside of central governments’ control. In an interconnected world such as ours, even seemingly minor events in faraway lands can pose enormous implications to our supply chain. For instance, civil unrest, diseases, and infrastructure issues in and around global chokepoints or major economic powers have all disrupted the global economy in the last 20 years. When these events take place, it is important that both individuals and nation states have the necessary reserves and safeguards in place to weather the storm.

The most common method employed by individuals to dampen the shockwaves that economic interruptions may cause is saving money. Savings provide a financial safety net that prevents major political or environmental issues from causing too much damage. When jobs are lost or inflation becomes too high, an individual can tap into their financial reserves to make ends meet and sustain their lifestyles, making the economy as a whole more resilient. Nevertheless, it is worth pointing out that a bigger focus on savings may cause deflation, since the amount of money saved is not being circulated in the economy to create jobs or additional value. Therefore, a balanced approach is recommended, where economic participants have enough saved to avoid financial ruin during global disruptions, but enough spending is encouraged to grow the economy at the same time.

In conclusion, single-minded focus on either spending or saving is ill-advised, and balanced policies that promote both are required for sustainable growth.

(409 words, band ~8)