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You're Not the Economy

A while ago I saw the following post:

And it’s a great post. It’s almost impossible to make money of healthy people. If you’re not in the hospital there are no hospital bills. If you pre-emptively exercise so you reduce your chances of obtaining a variety of diseases (a lot of diseases and health concerns in the Western world are related to diseases of luxury and (over)consumption), then you reduce your chances of having to seek out medical help to begin with. Yet, this is not mentioned in GDP. Healthy people ruin GDP. Bad healthy people! It’s almost as if the GDP measure and the system upholding this measure are not interested in your personal welfare at all. Strange that.


This argument also reminds me of the podcast Sarah and I recorded with Erica Verdegaal, a Dutch economic journalist for “het Financieel Dagblad”, which is essentially the Dutch Financial Times. In her interview she mentioned a key point, which has stuck with me ever since: “you’re not the economy”. What she meant with this is that often the trends we see on a more macroeconomic level, either take quite a while to, or do not all, translate into more microeconomic changes. So what happens on a country or even conglomerate level, need not impact what goes on at the household or individual level. Let me exemplify this: During the initial COVID-19 lockdowns, due to improper preparation, there was a massive economic downturn, some people spoke of it being as bad as the 2008-2009 crisis which is often likened to the 1920s krach etc. etc. There were quite a few people who lost their jobs, this is not a fact that I want to deny or sweep under the carpet, but there were also quite a few people who didn’t lose their job. These people found themselves in massively changed working conditions, but still working, and sometimes even working more hours, moving into panic mode. But financially, things did not shift for them. In the latter case, the economic downturn did not lead to a loss of financial security, at least with regards to job and job derived income. You may argue that some people did lose money in the stock market, as this also had a downturn, but from what I’ve understood, this downturn was relatively short-lived and stock prices, especially the index funds, with the help of some stocks soaring during the lockdowns, moved back to their initial levels relatively quickly. The market bounced back, and people who held onto their stocks, particularly well diversified stocks and portfolios, did not suffer remotely as much as was expected. This was very much in line with Erica’s argument, where she argues that if you’re financially stable (stable, not secure, different meanings), you will be resilient to these types of shocks. All the turmoil of the economy need not affect you, if you can continue to pay to live where you do and eat and work, one way or another. It’s definitely a position of privilege to be in, don’t get me wrong, but it does make you think… Another example of this is Amazon, as a conglomerate. Amazon’s stock price and business in general soared during the lockdowns, and continues to do so, as a lot of purchasing activity shifted online. Whatever economic downturn might have been going on in the world, Bezos didn’t notice. You know who else didn’t notice the soar in stock price or the economic downturn either? His warehouse workers or other “low-skilled” employees of the company: they’re getting underpaid, overworked and exploited anyway. Good economy or bad economy.


Taking this away from shaming Amazon and moving back to the individual: if you don’t own any stocks, what happens in the stock market might not directly impact you. The same goes for crypto: what do you care if Bitcoin plummets if you don’t own any? What do you care if Amazon does really well if you don’t work there, haven’t invested in them or don’t even interact with them? For all of the above, there may be spillover effects, but there’s no guarantee of those either. So what exactly does this economic change mean to us? Well, quite frankly, fuck all.


So what is the lesson here? Well, becoming economically or financially stable is the key message. Be healthy, ride bicycles, don’t fall into the “consumer traps” of needing to own a car. Don’t think you need to be, or that it is normal to be in debt as a result of (over)consumption. Don’t go to McDonalds. Actively avoid purchasing from companies (such as Amazon) that are not in line with your ethical values, or are really edging towards breaching basic human rights and employment laws. To be financially stable is achieved when one is living within one’s means, whatever those means may be, and is building a buffer (read: savings) to be protected from economic downturns. I keep hammering on having savings, because they offer you a type of freedom and protection that is otherwise difficult to come by. Protect yourself, build a damn buffer! Another key message here driving the point home: when massive banks turn out to be corrupt, take bribes, have not managed your (not their, your) money well enough to survive a crash, they get bailed out. They get help. When your finances fail the government doesn’t care, and you’re on your own. You’re not the economy.


Behavioural Science

Personal Finance



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