I don't drink coffee, but if I did...

(I'm going to business school in the fall, so I thought I would write a business related post. But please, let me know if it's just boring, and I won't do it again.)

Americans have started to save money. In March we saved about 3.5% of the money we earned--and some economists are freaking out. Saving means less spending, and less spending means slower growth (at least, that's what it means in America). Over the past two decades--really, since the rise of the credit card--most of America's economic growth has come from domestic consumer spending.

But now, instead of going to a hip local coffee shop (or Starbucks), folks are going to McDonald's to buy their coffee. I don't drink coffee, but I hear that McDonald's coffee is better than Starbucks and about a buck cheaper. Good for McDonald's: their stock price has been mostly steady through the financial crisis. But as we keep saving money on coffee and other necessities and deferring purchases of luxuries (flat screen TVs...), our economy keeps shrinking. When will we snap out of it and start spending again?!

Okay I'm being facetious.

I don't think there is anything wrong with a 3.5% savings rate. It's actually sort of low. The average savings rate in America post-1929 is about 7%, and really, we should still be saving at about that rate. We were wrong to think that rising property values would allow us to live off our home equity, and we are wrong to think that we will be able to attain our financial goals (both individually and as a nation) without spending less and saving more.

But if Americans continue to save, then our economy must find a new avenue of growth. Economists have different theories about how this can happen. I'm not an economist, but I have an idea: America needs to start producing something that the rest of the world needs to buy. We've done this well in the past, first with cars, then food, then microprocessors. But now other countries can produce all of these more quickly and more cost effectively than America.

What the world needs (and what I hope twenty-first century America can offer) is technology that can produce and transport energy with little environmental impact. If America can corner the market on solar, wind, geothermal, or other technologies, then our economic dominance is far from done. But to advance these technologies will require investment in higher education and research, and it will require the government to extend visas to the best talent in the world.

America has been the world's dominant economic force throughout my life. I don't know any other way. Perhaps our world would be better served by a group of cooperative and competitive nations driving the system. But if America hopes to retain even a share in the global hegemony, then we must begin to produce something worthwhile.