Saving: vice or virtue ?

  When we were young, many of us were taught the virtue of saving and being prepared, together with values such as respect, responsibility and other virtues and customs that were intended to shape and strengthen our character. But at the most critical moments of the serious recession we have just gone through, and faced with a sharp upturn in household savings, the slogan was launched that it was better to consume. If we all decided to save, we were told, everyone would spend less and less and this would aggravate the recession in a vicious downward spiral. So is saving a private virtue but also a collective vice?

  From the collective point of view, there are many different answers if we look at the disparity between the savings rates of different countries. Those that save the most, as a percentage of their gross domestic product, are the Asian countries, with China at their head, which puts aside 54% of its annual product as savings. At the other end of the scale we find the United States, which save 14% of their product.

  In any case, the virtue or vice of saving is tending to wane. Over the last four decades, the household savings rate for advanced countries as a whole has fallen on average from 12% to 8% of disposable income. The crisis has led to an upswing in savings rates due to precaution but, once the recession and unemployment have been left behind, it is likely to return to its underlying trend.

  Several factors lie behind the downward trend in the saving behaviour of individuals in advanced economies. The very existence of a welfare state that guarantees certain benefits in contingencies such as unemployment, illness or retirement takes the wind out of the saving lobby's sails. The degree of sophistication of the financial system and tax incentives established by the authorities also influence people's preferences when deciding between saving or consuming. But the most important factor is probably demographic. In the life cycle theory, individuals save throughout their working lives and spend their savings when they stop work; the ageing population in our societies therefore entails less saving. On the other hand, in emerging economies, the savings rate has been growing over the last few years, thanks to their dynamic growth and to younger generations joining employment.

  In spite of this downward trend in global savings, in the last few years we have even heard talk of excessive saving. In 2005, the current Federal Reserve Chairman, Ben Bernanke, coined the term «saving glut» to refer to this situation. The fact is that, in advanced economies, the volume of savings has exceeded the volume of investment in real assets (infrastructures, buildings, machinery, equipment), playing a direct part in the notorious fall in real interest rates and the consequent drop in value of capital. However, we might be at the threshold of significant structural changes. The outlook for the coming years is one of contained savings in emerging countries due to their populations' greater desire to consume, among other reasons while, in developed economies, the downward trend in savings will probably not change. At the same time, there is some consensus that global investment will tend to increase, especially because of demand from emerging countries. If this occurs, the result, among others, will be the end of the low real interest rates we have been enjoying up to now, embarking on a new phase within the global savings framework.

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