Those companies need only so much capital. In China, it's worked out since consumption was de emphasized anyways in favor of exports, but that has just led to a very lopsided economy. You need consumers to spend money, not just save it.
Money has to be lent to be saved, of course, someone has to spend it somewhere. If your country has an overly high savings rate because of a poor social security system, it's going to hurt one way or the other.
Then other companies offering other services can be created, there's no shortage of what the savers might want to do with their money once they start spending it.
I think having a high savings rate, all else equal, is actually a boon. Low time preference means that more ambitious, longer term projects can be realized. This raises the wealth of the population overall, further increasing the fraction of money that can be saved, and creating a virtuous circle of civilization.
By not eating all the food they had and saving it, the first humans were able to not go hunting/gathering for a while, and dedicate that free time to building better tools. Those tools further increased the productivity of hunting/gathering, and enabled them to save an even greater portion of their food, freeing even more time to build even better tools, etc.
Those companes can't be created domestically because there is a lack of consumption; people are saving 50% of their income for retirement and medical costs. And where does all that money go? Well, to business or government pork barrel projects.
A high savings rate is a boon like zero inflation is: both are economically disastrous. You need to encourage people to spend, otherwise those companies can't make money, they won't invest...and you get into a death spiral recession or depression!
Truth is: spending is as important as saving, go too far in either direction and you're screwed. Economics is all about balance.
Comments
Those companies need only so much capital. In China, it's worked out since consumption was de emphasized anyways in favor of exports, but that has just led to a very lopsided economy. You need consumers to spend money, not just save it.
Money has to be lent to be saved, of course, someone has to spend it somewhere. If your country has an overly high savings rate because of a poor social security system, it's going to hurt one way or the other.
Then other companies offering other services can be created, there's no shortage of what the savers might want to do with their money once they start spending it.
I think having a high savings rate, all else equal, is actually a boon. Low time preference means that more ambitious, longer term projects can be realized. This raises the wealth of the population overall, further increasing the fraction of money that can be saved, and creating a virtuous circle of civilization.
By not eating all the food they had and saving it, the first humans were able to not go hunting/gathering for a while, and dedicate that free time to building better tools. Those tools further increased the productivity of hunting/gathering, and enabled them to save an even greater portion of their food, freeing even more time to build even better tools, etc.
Those companes can't be created domestically because there is a lack of consumption; people are saving 50% of their income for retirement and medical costs. And where does all that money go? Well, to business or government pork barrel projects.
A high savings rate is a boon like zero inflation is: both are economically disastrous. You need to encourage people to spend, otherwise those companies can't make money, they won't invest...and you get into a death spiral recession or depression!
Truth is: spending is as important as saving, go too far in either direction and you're screwed. Economics is all about balance.