No, They Don't Need Us As Consumers

Debunking a common misconception

One common argument I hear all the time is that the people at the top won’t let us go broke since they need consumers to buy their products. It’s a nice thought—we’re mutually dependent, people think, so the folks at the top have an incentive to not let things get too far out of hand. Maybe they will even realize the error of their ways and give us a raise, or perhaps a UBI. A consumer economy needs consumers with enough spending power to buy products in order to function. Makes sense, right? How can the economy keep growing if most of us are getting poorer?

But is that really the case?

Recently, a couple of facts have caused me to question that narrative. It turns out that the top ten percent of US earners are responsible for fully half of all consumer spending! The rest of us combined account for merely the other half. In addition, the lowest 20 percent of incomes are almost economically invisible, barely responsible for any consumer spending at all. And there is a clear trend. Just ten years ago, the top ten percent accounted for 36 percent of all consumer spending. See the chart below:

That chart is taken from this website, which contains the gory details:

Between September 2023 and September 2024, the high earners increased their spending by 12%. Spending by working-class and middle-class households, meanwhile, dropped over the same period.

The bottom 80% of earners spent 25% more than they did four years earlier, barely outpacing price increases of 21% over that period. The top 10% spent 58% more. The top 10% is spending way more on an inflation-adjusted basis in the 2020s…The wealthy class exist in a different stratosphere and there are wide-ranging implications…

The article also points out that the top ten percent of earners own nearly 90 percent of all stocks indicating who is really benefiting from financialization, monopolies, private equity and stock buybacks even as longstanding businesses go under and workers are squeezed ever harder. Towards the end of the article, it posits that it’s only going to get worse in the future.

Lest you think this is some obscure interpretation by me, this trend has been noticed by an increasing number of commentators in various media outlets. In an article in Bloomberg, columnist Nir Kaissar noted that, “Millions of Americans Are Becoming Economically Invisible,” and that, “broad swaths of the workforce may no longer have the spending power to meaningfully affect the statistics.”

He begins by pondering the disconnect between the headline economic statistics, which are generally positive, and people’s perceptions of their own economic situation, which is generally negative according to various opinion polls. He notes that,

Unemployment is low, inflation has been largely tamed and the economy appears to be growing robustly. Yet consumers have the blues. According to a widely followed sentiment survey, they are nearly as pessimistic today as they were during the 2008 financial crisis and the great stagflation of the early 1980s.

Why is this the case? He contemplates various explanations, including the fact that wages have become stagnant and that it’s harder to support a family than it used to be. By his estimation, two-thirds of American don’t earn enough to sustain a family of four (no doubt contributing to reduced birthrates). He also notes that real wages are lower than they were in 2020. In the end, however, he notes the same thing I did—that many Americans are basically being shut out of the economy:

What we do see are troubling signs that low- and middle-income consumers are fading in the economic data. The top 10% of earners now account for about half of consumer spending, the highest share since at least 1989, according to an analysis by Moody’s Analytics. The top earners’ share of spending has trended higher since the early 1990s from a low of 35%, matching a rise in income inequality over the same time. Meanwhile, the bottom 60% of wage earners account for less than a fifth of consumption, down from more than 26% three decades ago.

The shrinking economic footprint of three-fifths of America’s workforce raises some uncomfortable questions. Most urgently, if the economy can thrive without the spending of some 80 million workers and their households, what incentive do businesses have to serve them or policymakers to support them? Walmart Inc. may be a preview. The company is increasingly catering to higher-income consumers, and has been financially rewarded for it so far, even as low-income consumers cut back…

If sentiment and the economy continue to diverge, we should consider the possibility that the experience of many Americans is no longer meaningfully represented in hard economic data…

And this is likely to get much, much worse. Recently, economic commentators have been noting that the “recovery” seems to be so-far confined to upper-income households. Journalists and economic analysts describe this as a “K-shaped recovery,” where the upward-sloping line represents the top 10 percent, while the downward-sloping line represents everyone else:

K-shaped economy: Why the wealthy are thriving as most Americans fall behind (PBS)

The economy is still growing, but not because more people are getting hired, or because their incomes are going up. Instead, it appears to be because of a massive investment bubble in artificial intelligence, one which promises to eliminate up to 100 million jobs by one estimation (although this is probably exaggerated). As Heather Long, a reporter for the Washington Post, observes in the clip above,

“In the first half of 2025, spending on A.I. was as big of a contributor to growth in this country as consumption. There’s a lot of risk to an economy that is so heavily reliant on this A.I. boom and the rich. And there could be some pullback. If your chair has fewer and fewer legs to stand on, it’s a lot easier to knock that over.”

And while more and more people are tightening their belts, the wealthy can’t spend their money fast enough as confirmed by the credit card data:

Lower-income earners are reining in their transactions to focus on essentials, while the wealthy continue to spend freely on perks including dining out and luxury travel, according to first-quarter results from U.S. credit card lenders.

Synchrony, which provides store cards for retail brands including Lowe’s and T.J. Maxx, spending fell 4% in the first three months of the year, the company said last week. That compares to a 6% spending jump at American Express and a similar rise at JPMorgan Chase, both of which cater to wealthier users with higher credit scores.

Wealthy consumers upped their spending last quarter, while the rest of America is cutting back (CNBC)

Meanwhile, all is not well in Dollar Store Land:

Dollar General warns low-income Americans’ finances are getting worse (CNN)

So this is hardly just me saying this (as some readers have accused)—it’s many of the leading economic analysts and publications in the country. Are you going to dismiss all of them, too?

And what is the end result of these trends? We can already see this thanks to this extraordinary article from the BBC. The article is based on a report from a venture capital firm which finds that a billion people in India—the largest country on earth by population—have effectively zero spending power.

Yes, you read that right—a billion people in India are effectively economic NPCs:

India is home to 1.4 billion people but around a billion lack money to spend on any discretionary goods or services, a new report estimates. The country's consuming class, effectively the potential market for start-ups or business owners, is only about as big as Mexico, 130-140 million people, according to the report from Blume Ventures, a venture capital firm.

What is more, the consuming class in Asia's third largest economy is not “widening” as much as it is “deepening”, according to the report. That basically means India's wealthy population is not really growing in numbers, even though those who are already rich are getting even wealthier…All of this is shaping the country's consumer market in distinct ways, particularly accelerating the trend of “premiumisation” where brands drive growth by doubling down on expensive, upgraded products catering to the wealthy, rather than focusing on mass-market offerings.

This is evident in zooming sales of ultra-luxury gated housing and premium phones, even as their lower-end variants struggle. Affordable homes now constitute just 18% of India's overall market compared with 40% five years ago. Branded goods are also capturing a bigger share of the market. And the “experience economy” is booming, with expensive tickets for concerts by international artists like Coldplay and Ed Sheeran selling like hot cakes…The report's findings bolster the long-held view that India's post-pandemic recovery has been K-shaped—where the rich have got richer, while the poor have lost purchasing power. In fact, this has been a long-term structural trend that began even before the pandemic.

India has been getting increasingly more unequal, with the top 10% of Indians now holding 57.7% of national income compared with 34% in 1990. The bottom half have seen their share of national income fall from 22.2% to 15%.

The latest consumption slump, however, has deepened amid not just a destruction in purchasing power, but also a precipitous drop in financial savings and surging indebtedness among the masses. India's middle class - which has been a major engine for consumer demand - is being squeezed out, with wages pretty much staying flat, according to data compiled by Marcellus Investment Managers. “The middle 50% of India's tax-paying population has seen its income stagnate in absolute terms over the past decade. This implies a halving of income in real terms [adjusted for inflation],” says the report, published in January.

This is the future for the entire world. The top ten percent of earners will do all of the discretionary spending, with the rest of us as merely onlookers, desperately trying to keep up with our monthly subscriptions to everything under the sun (shelter, electricity, heating and cooling, cars, entertainment, medicine, software); in debt from birth to death making our monthly Klarna and Affirm payments for everything else (clothing, electronics, furniture, etc.). And thanks to “dynamic pricing” costs for those necessities will be constantly updated in real time nanosecond by nanosecond using Big Data to extract every last nickel and dime from us (since there won’t be any more pennies, apparently).

This is not some hypothetical future scenario, by the way. This is not cyberpunk fiction. This is right here, right now!

So, no, they don’t need us as consumers. That’s a myth. We’ve been doing less and less of that, anyway, and the economy keeps chugging along. And increasingly, they won’t need us as workers either as the report above goes on to describe:

The Marcellus report also points out that white-collar urban jobs are becoming harder to come by as artificial intelligence automates clerical, secretarial and other routine work. “The number of supervisors employed in manufacturing units [as a percentage of all employed] in India has gone down significantly,” it adds.

The government's recent economic survey has flagged these concerns as well. It says labour displacement as a result of these technological advancements is of particular concern for a mainly services-driven economy like India, where a significant share of the IT workforce is employed in low value-added services sectors that are most prone to disruption.

We’re already seeing this phenomenon of “jobless growth” playing out here in the United States. In an article for Fortune Magazine—hardly an anticapitalist rag—the authors report that Goldman Sachs analysts believe “jobless growth is probably the new normal:”

The challenging U.S. labor market is entering a new normal, according to Goldman Sachs economists David Mericle and Pierfrancesco Mei, who tackled the phenomenon of “jobless growth” in an Oct. 13 note. It resonates with what Federal Reserve Chair Jerome Powell memorably described in September as a “low-hire, low-fire” labor market, in which, for some reason, “kids coming out of college and younger people, minorities, are having a hard time finding jobs.”

Some analysts blame the downturn in entry-level hiring on the impact of AI on the economy, others on macroeconomic uncertainty, especially the seesawing tariffs regime from the Trump administration. The takeaway is clear, though, that getting hired is really hard in the mid-2020s.

“The modest job growth alongside robust GDP growth seen recently is likely to be normal to some degree in the years ahead,” Mei and Mericle wrote, adding that they expect the great majority of growth to come from solid productivity growth boosted by advances in artificial intelligence, “with only a modest contribution from labor supply growth due to population aging and lower immigration.”…

Goldman finds the labor market to be “somewhat weaker” than just before the pandemic, with job growth turning net negative in recent months outside of health care, and company management teams increasingly focused on using AI to reduce labor costs, “a potentially long-lasting headwind to labor demand.”

I think these reports also pinpoint why housing is out of reach for more and more people. It’s currently fashionable on the internet and in the media to blame “NIMBYs and zoning,” which implies that the “free market” will solve the problem on its own if only the damn government and those pesky liberal do-gooders would get out of the way and let supply and demand work their magic. The “Abundance Liberals” assert that the Invisible Hand will make shelter affordable for everyone through a kind of “trickle-down theory” of housing. By building more high-end homes, luxury condos, McMansions, exclusive apartment towers and gated communities, they argue, the wealthy will decamp to them leaving more houses and apartments available for the rest of us. Problem solved and, as always, it’s due to less government interference!

But I find this theory hard to swallow. Housing is wildly expensive all over the world right now in virtually every country on earth. It’s hard to believe that housing is getting more and more expensive everywhere on earth simultaneously just due to NIMBYs and zoning. However, it does seem correlated with rising inequality. This is the logical result of everything in the economy being exclusively targeted to the capricious whims and proclivities of the top 10 percent of income earners. This comment from Hacker News makes the point more directly (lightly edited, my emphasis):

The rich are demonstrably less discerning of every marginal dollar. They will pay more for the exact same asset than someone who is only middle class or lower. This means the rich own everything, and therefore just keep getting richer, because the US abandoned any form of redistribution.

For example, Kennebunkport is a very wealthy town in Maine, including having a large vacation property for the Bush family. My father’s entire business as a half retired contractor is predicated on rich, gay, techbros moving here from California and just throwing money at him until stuff is built. He can literally double a project price overnight, and they give him a bottle of $200 wine for it. The same is true of many businesses in the area.

This is one of the reasons nobody builds lower class housing. Profit is usually percentage based. Why would you build ten starter homes and work your ass off pleasing a bunch of poor people who have to be careful with their money because even getting a loan nowadays is stupidly difficult, when you can just build a couple McMansions for the same output effort, where a bunch of rich fucks will come in and buy it in cash, for above market price, no questions asked, so you don't even have to build it well because the rich people are buying vibes and dreams, not an actual house, and they will happily eat a much higher profit margin per product.

Large income disparity means that people stop serving the lower market, because Wall Street won't invest in something that doesn't make line go up as much as just treating rich people as idiots that will pay stupid prices for things.

This “makes sense,” or at least is obvious when you remember that at a certain point of wealth, you have more money than you know what to do with, and you still cannot buy even a single extra second of time with infinite money, so spending time being discerning with your purchases is explicitly a waste.

In fact, a recent paper from the National Bureau of Economic Research (NBER) backs this up. What the paper found was that rising house prices are correlated with...rising incomes! That is, when rich people move in, house prices go up. Who would have thought? What they did NOT find was any clear correlation between the supply of available housing and the cost for houses and apartments:

…from 2000 to 2020, we find that higher income growth predicts the same growth in house prices, housing quantity, and population regardless of a city’s estimated housing supply elasticity...our findings imply that constrained housing supply is relatively unimportant in explaining differences in rising house prices among U.S. cities.

These results challenge the prevailing view of local housing and labor markets and suggest that easing housing supply constraints may not yield the anticipated improvements in housing affordability.

Supply Constraints do not Explain House Price and Quantity Growth Across U.S. Cities (NBER)

So while it may be comforting to think that they need us as workers and consumers and that things will eventually become so dire that there will eventually be some form of redistribution, the evidence of the past several decades indicates otherwise. The economy has been doing just fine with fewer and fewer of us consuming, because the rich consume more and more to compensate. As a result, the market responds by providing exclusively luxury brands, experiences, and high-end products unaffordable to the majority of people—including housing, which is now a luxury good (as are children). The rest of us are effectively shut out of the economy, forever. This is happening everywhere we look and it’s accelerating.

So the idea that the consumer economy will cease to function without some sort of redistribution is naïve. It turns out that capitalism functions just fine with only a tiny sliver of the population doing all of the spending and the vast majority of people barely scraping by. We can see this already demonstrated in India, which points toward the future of capitalism everywhere on earth. All of the spending will be done by the top 10 percent, who will continue to get ever richer, while investments in things like A.I. will make up for the lack of consumption by the bottom 50 percent. Meanwhile, the majority of people will struggle just to find basic employment or shelter. And if you don’t like this situation, you will be labeled a “terrorist” and dealt with. The camps are already being built and the Trump administration has declared “anti-capitalism” to be an offense akin to terrorism. I don’t think that’s coincidental.

Secretive Watchlisting Center Executing NSPM-7

As a final note, it’s difficult to understand what pronatalists who claim that lower birthrates comprise some sort of “emergency” are envisioning. They already see most of us who aren’t rich as “parasites” and “useless eaters” and make no secret of the fact that they want to replace all of us with AI, like, yesterday. Yet, at the same time, they desperately want people to have more babies for some reason. Why? What are they thinking? What do they expect the rest of us to do in the kind of libertarian techno-feudal dystopia they’re constructing in the United States? Do they plan to keep us as pets? As human footstools? To use us as blood/organ/tissue donors, or what? I don’t get it¹.

1. Libertarian economist and Mercatus Center director Tyler Cowen wrote a book years ago entitled Average is Over where he envisioned a future where the majority of American citizens are housed in government-owned favelas and mollified with subsidized internet, pizzas, computer games, and porn to keep them docile. It's difficult to believe that Musk and Thiel will be that benevolent, however.