Confucius Says, 'Be Frugal,' But the Global Slump Says, 'Spend'

My mom, a 63-year-old retired textile factory worker, is one of 1.3 billion Chinese whose lives are more or less defined by a traditional Chinese culture in which saving and frugality are rooted as deeply as anything portrayed in the Olympic opening ceremony. The 50 percent savings rate in China played a significant role in the accumulation of China's wealth and prosperity in recent decades, and has been envied by many economic experts in the United States, where the saving rate has been below 1 percent in recent years.

But virtue in one era can be a problem at another time. Now, the world's economy is on a downward spiral, dragged down by the fallout from the credit binge by consumers and the finance industry's recklessness in the United States. Whether the recession in much of the world turns into something even nastier – even a 1930s-style depression – will depend partly on whether China, the world's third-biggest economy, can hold up by shifting the engine of its growth nimbly from exports to domestic demand. Private consumption only contributes 36 percent of its gross domestic product currently, compared with 70 percent in the United States.

There's a campaign going on against frugality all over the world. Will we buy into the argument that jump-starting reckless consumption again will save us?