Let me give you his two lines that offended me the most.

“The consumer drove us headlong into the crisis that we face today.”

“This is a tremendous opportunity for the consumer, who drove us into this recession, to lead us right back out.”

WHAT?! This man is placing the blame for the economic recession squarely on the average U.S. citizen?

He goes on to say that consumers have “started to deleverage” and “to remove themselves from the liability and risk.” (A visitor to the comment stream on TED noted that this is an obtuse way of saying that personal bankruptcy filings are on the rise.) Further, “it’s not about the consumer being in retreat; the consumer is empowered.”

Not only do I disagree with the gist of these statements, I find them paradoxical coming from an advertising man.

The advertising industry relies on the premise that the decisions of individual consumers can be influenced through branding and advertising efforts. This is an industry that is eager to take credit for the behavior of consumers. And yet here, we have an ad man claiming that consumers are autonomous, making independent decisions in concert that have tremendous impact on our society. Either he doesn’t believe in his job, or his talk is a fabrication.

The reality is that consumers presently have very little power in guiding culture and the economy. Consumers are presented with a range of lifestyle options and aspirations, and they select from that menu.

With respect to the credit crisis, Congress and various Presidents are responsible for 1) the deregulation of the financial industry and 2) promoting and subsidizing the “American Dream” of home ownership and excessive material consumption. Banks and brokers are responsible for originating and sending packaged loans upstream to unknowing investors without asking where the risk was going. The inefficacy and incompetence of auditors and ratings agencies allowed the credit craze to grow unchecked for a number or years. These stories are well documented elsewhere.

Gerzema’s accusation of the consumer is like blaming a child for binging on cookie dough that was handed out to him by his teacher. Consider this—a third grade teacher diverts the school’s supply of cookie dough to her classroom. She dispenses it freely to her class, and the kids eat as much as they can get their hands on. The next day, all the third graders are out sick, and the lunchroom has no cookies to provide to the rest of the students in the school. Gerzema would blame the third graders for this cookie calamity.

I don’t intend to overlook personal responsibility, but when the average citizen is conditioned to accept homogeneous aspirations, to be intellectually helpless, and to defer to experts and authority, it’s absurd to expect them to make good decisions, especially about things as complex as the assortment of new loan products that were showered upon them. If you hand out easy credit, people are going to take it. How much of the burden do you want to put on individual “consumers” when the powerful corporate establishment is conspiring against them? To blame the consumer is to suppose that across the nation, millions of people simultaneously but independently decided that it was now time to demand a variety of new, easy loan products, and plunge the proceeds into real estate and lifestyle upgrades. In this era, when does the populace ever act in concert, other than as the result of large scale advertising or media events?

Gerzema goes on to say, “This may be a seminal moment in American history. An opportunity for the consumer to take actually take control and guide us to a new trajectory.” He cites some pieces of evidence that consumers are now taking action:

“What you have seen is an uptick in the savings rate. Eleven straight months of savings have happened.”

“Remarkable, in the fourth quarter, spending dropped to its lowest level in 62 years.”

“Visa reports that people are paying with debit cards instead of credit cards. We are starting to pay for things with money that we have.”

The consumer is NOT empowered right now—I think the current crisis represents a low point in consumer power.

Gerzema shows that the personal savings rate turned negative at the peak of the credit bubble. The personal savings rate is defined as the fraction of income that does not go to consumption expenditures. Credit is the tool that allows us to spend more than we earn, and a reduction in the availability of credit will inevitably force an uptick in savings. The consumer has hit a wall—he is broke—and is now trying to climb out of his debt-hole by scraping together what savings he can. Broke consumers can’t spend, so the “lowest level in 62 years” is not surprising. Many consumers are experiencing increased interest rates, defaults, and bankruptcies, so the decline in credit card usage is another symptom of the contraction. None of these facts are evidence of proactive individual choices—consumers are in fact backed into a corner and can do nothing but cling to a few dollars and hope that the recession is over soon. This is empowerment? Now, more than ever, we are prisoners of debt.

Counterpoints are welcome.

Legacy costs, and declining revenue due to foreign competition and the recession of 2008-2009 led to substantial losses for the Big Three, and forced GM and Chrysler into bankruptcy. To raise cash, the companies gave up ownership to unions and governments, and sold or cancelled nameplates. The federal Cash for Clunkers program stimulated sales in July and August by cannibalizing September’s demand, which sank to less than half the 17 million rate the industry had enjoyed for the past decade.

From the same guys that brought us the “Giant Pool of Money“, another ultra-simple explanation. This time, it’s the quandary that the big bad banks, taxpayers, and U.S. government currently find themselves in, with a dollhouse analogy and a simple balance sheet to introduce the concepts.

Source: BLS Current Employment Statistics (ftp://ftp.bls.gov/pub/suppl/empsit.tab2.txt)

And a “Citizen’s Guide” resource about our national debt is available here.

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