Aerial view of the World Cup Logo formed by performers during the Opening Ceremony for the 1994 FIFA World Cup Final on 17th June 1994 at the Soldier Field stadium in Chicago, Illinois, United States. (Photo by Todd Rosenberg/Allsport/Getty Images)
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Taylor Swift’s Eras Tour was a smashing success, but it in no way sparked domestic or global economic growth. Quite the opposite most likely. More on the Swift tour in a bit.
For now, it’s useful to point out an obvious truth lost on the Keynesian economic religion: No act of saving ever subtracts from demand. All demand is an effect of production, so unless producers are literally stuffing the consumptive fruits of their work into coffee cans, their production is mirrored by consumption.
This is worth remembering amid perhaps reasonable excitement about the World Cup. A recent New York Post headline told a predictably false tale: “World Cup expected to spark a $45B global economic boom – like ‘Taylor Swift effect’ on steroids.” Ok, total nonsense.
Without pouring cold water on the Eras Tour or the World Cup, there will be no global economic boom from the latter except for in the false measure of economic health that is Gross Domestic Product (GDP). GDP is a creation of Keynesians who believe economic activity is driven by consumption. No, consumption is the effect.
If consumption were the driver of economic growth then the global economy would always be booming. That’s because as humans, our wants are unlimited.
What eludes Keynesians is that while our wants are unlimited, our ability to fulfill our wants is highly limited. Yes, we can only consume insofar as we’ve produced first. And the less we produce, the commensurately less we can consume.
It’s a simple reminder that consumption doesn’t power economic growth simply because the growth already happened, thus the consumption. To suggest, as economists who worship at the altar of GDP (meaning 99.9999% of them) do, that it will grow thanks to $45 billion in global spending over the World Cup, is to double count. Sorry, but all the projected spending amid the excitement of the World Cup at stadiums, sporting goods stores, bars, restaurants, airports, hotels, t-shirt shops, and everywhere else is an effect of economic growth that already happened.
To be clear about it, it’s a beautiful effect of growth as was all the consumptive excitement around the Eras Tour. The brilliant signal in demand for tickets to see Taylor Swift AND all things World Cup is that thanks to an increasingly liberalized global economy, the people of the world have growing amounts of wealth to consume on life’s comforts. Again, beautiful.
Still, it’s the beautiful “seen” of production.
Just the same, the “unseen” of all the over-the-top spending on Eras and the World Cup is the savings that did not happen. About those savings, they in no way subtract from consumption. Banks, brokerages and financial intermediaries don’t rent savings, or take savings in to stare lovingly at the money.
What is saved is either loaned to others who perhaps want to see Taylor Swift or soccer, it’s loaned to businesses with eyes on hiring and other growth initiatives, or it’s invested in entirely new ideas that, in automating former human functions, will increase production more, and with it, even greater amounts of consumption.
Which is why this opinion piece speculates that the spending effect of growth in the form of high demand for all things Swift and World Cup is a relative growth somnolent as opposed to an instigator. Nothing against the consumption that always follows production, but there’s consumption on concerts and soccer, or the shifting of savings to new, economy-expanding ideas. The difference between the two speaks to the differences in economic growth that likely signal reduced growth because of Eras and the World Cup.
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John Tamny