If Everyone Acted As Frugal as Clark, Would the American Economy Collapse?

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Money expert Clark Howard fields questions from his podcast listeners every episode.

Most of the questions are practical and concrete. Every now and then, though, a listener will ask a fun theoretical question. For example, what country Clark would live in if not the United States.

Clark fielded another of those questions on a recent podcast episode that took us all back to college economics class.

What would happen if everyone in America suddenly became as cheap as … Clark himself?

Would the American Economy Collapse if We All Became As Frugal as Clark?

Would the economy collapse if everyone became as frugal as Clark?

That’s what a Clark listener recently asked.

Asked Justin in Alaska: “Hi Clark, serious question here: If everyone in America was as frugal as you, would our economy collapse?”

Clark put on his professor hat to think through this scenario. It’s a fun exercise, even if the idea of about 340 million Americans suddenly becoming as frugal as Clark is a pipe dream.

First, Clark talked through what would happen to the economy short-term (pain) and long-term (growth).

“In the short term, if everybody was a cheapskate, it would severely pinch economic activity,” Clark says.

“In the United States, we are a spending culture. And societies grow faster when people are savers and investors. [Saving and investing] ultimately leads to more productive capacity in an economy. And higher productivity overall. Which is how you create societal wealth.

“We don’t create societal wealth by going shopping at stores to buy stuff until we drop. It doesn’t work that way.

“But yes, you’re right. If everybody all at once decided to be ultra, ultra cheap, you might cause a deep recession or even a temporary depression in the economy.”

Economics 101: Consumption vs. Productivity

In other words, America is built on consumption. It’s part of our culture.

It would sting American companies in a major way if we all started avoiding expensive coffee at Starbucks, avoiding iPhones like the plague and staying at home for Christmas while avoiding flights, spending on presents and even turning off the heat in our homes.


Assuming we all saved and invested that money, and none of us were living check to check and were able to be in robust financial positions, the short-term financial shockwave would give way to something else.

“But yes, you’re right. If everybody all at once decided to be ultra, ultra cheap, you might cause a deep recession or even a temporary depression in the economy,” Clark says.

“But our economy is 70% consumption. Which may be, I’m not sure … we need an economist to set me straight on this. But it may be the world’s highest consumption rate that translates into economic activity.

“But long-term growth and improved living standards come from raising productivity in the economy. That’s the amount of goods and services produced by one person in one hour. That’s the only way you actually increase societal wealth. And we underinvest in the U.S. economy.”

How Being Frugal Impacts Us Individually Rather Than Collectively

Let’s look at what would happen to individual families if we took on Clark’s financial persona and became extremely frugal. And started to save huge percentages of our pay.

“As an individual, if we learn to save more of every dollar we make, we create more financial security in our own lives under our own roof,” Clark says.

“If we have more money that’s invested in the economy instead of spent on consumption, ultimately that creates higher productivity in the economy, which leads to more growth, which leads to more wealth for each individual in each family.”

Of course, the likelihood of getting anyone to change their financial habits can be low. Much less more than 300 million Americans at the same moment.

“If we all decide at the same time, yep, we’re done spending money? Yeah, it would lead to an economic collapse. Completely true,” Clark says.

“Not gonna happen. But your point is well taken.”


Final Thoughts

Would it be good for the economy if we all became as frugal as Clark?

Not at first. In fact, it could get extremely ugly if every American stopped financial consumption on the same day.

However, eventually it would lead to greater economic productivity and growth.

On an individual level, the results would be more promising, but it would also take some time.

Would the U.S. economy survive if we were all “Clark frugal?” Do you agree or disagree with Clark’s viewpoint? Tell us your thoughts in our Clark.com Community!