A schoolboy shows his mobile phone to a rickshaw puller taking him and other students to school on a cold winter morning in the old quarters of Delhi, January 2014. Photo by Anindito Mukherjee/Reuters


The good consumer

To revive the global economy and make society more equal we should all consume more not less. How is this possible?

by Florian Schui + BIO

A schoolboy shows his mobile phone to a rickshaw puller taking him and other students to school on a cold winter morning in the old quarters of Delhi, January 2014. Photo by Anindito Mukherjee/Reuters

Westerners are constantly worrying about consuming too much and living too well. This is not a new concern. For at least the past 2,000 years we have worried about having to pay a price for prosperity. What is perhaps more surprising is that we continue to worry. During the first millennia of human existence, increases in consumption were extremely slow, but over the past 200 years or so industrialisation led to an unprecedented increase in prosperity in the West. This was topped off by a super-increase in the 1950s and ’60s. And yet, we have still not had our comeuppance. Instead, for most Westerners, the principal outcomes have been longer and more comfortable lives.

That said, the benefits of increasing prosperity are distributed highly unequally, making growing inequality perhaps the most pressing economic and social problem of our era. Consumption is one of the areas where inequality is felt most strongly, not so much due to excessive consumption at the top, interestingly enough, but because of increasing deprivation at the bottom. If we want to correct this imbalance, through redistribution, we need to recognise that this will inevitably result in a further substantial increase in overall consumption. That might be no bad thing, providing policymakers make the effort to understand the long tradition of criticising consumption that is almost as old as Western civilisation.

The oldest and perhaps most influential critiques of consumption emerged within the Judeo-Christian tradition. The destruction of Sodom and Gomorrah is commonly understood as a divine punishment for depraved sexuality. However, as US theologian Stephen Long points out in Christian Ethics (2010), the sins committed in the two cities had ‘more to do with economics than homosexuality’. Obsessed with luxuries, Gomorrohans failed to show the selfless hospitality and charity that God expected of them.

This link between sin and material greed resurfaces in the New Testament. Using an odd metaphor, Jesus warned that the difficulties a rich man would encounter on his way to paradise were akin to those of a camel trying to pass through the eye of a needle. His advice on how to go to paradise was to radically ‘de-consume’ by giving away all material possessions.

A worldly version of this argument that does not depend on believing in God and/or the afterlife was proposed by Jean-Jacques Rousseau in the 18th century. Rousseau voiced his concerns against the backdrop of the consumer revolution that took place in his time. In his Discourse on the Moral Effects of the Arts and Sciences (1750), he lamented that, in a commercial society, possessions and appearances were the main motives of human action. Genuine sentiments and convictions had become secondary. Instead, what counted was to act in a way that helped you move up the greasy pole of wealth and prestige. The result was moral corruption. Men and women stopped living in an authentic way and instead lived for others and through others.

David Hume and other 18th-century apologists of commercial society likewise acknowledged that the fascination with consumption put an end to many expressions of passionate and genuine human feelings and impulses. But they also pointed out that this need not be corrupting. The new system helped channel human behaviour in ways that were compatible with peaceful coexistence. Men and women formed in the spirit of commercial society might covet another person’s glittery possessions; but rather than following their authentic impulse and simply take them by force, they would work hard to afford these objects of desire themselves, or else seek out the rich and bask in the reflected glow of their consumption. In commercial society, authentic sentiments were often ignored. But there was also less throat-cutting than in earlier, more genuine eras.

This was a powerful comeback, at least in theory. However, the argument was based on an excessively negative view of the so-called ‘dark ages’ before the appearance of enlightened commerce. And the civilising effects of commerce were soon thrown into doubt once again by the spread of colonialism, slavery and the mass pauperisation of workers, as Europe spread its tentacles across the globe. Rousseau’s arguments could not be easily set aside.

As industrialisation progressed, a new thread of consumption critique emerged. In 1798, Thomas Malthus used basic maths to argue that limitless consumption would condemn humanity to a life in misery. If population and hence consumption grew exponentially, while resources, most importantly arable land, were finite, then it was inevitable that a point would be reached when the system would collapse. Famines, he believed, would periodically reduce population numbers; however the insatiable sexual appetites of the lower classes meant that the masses could never rise above the most miserable level of subsistence.

Malthus’s calculations seemed irrefutable and yet his predictions did not come true. Poverty is still a problem in the West but almost nobody lives in the kind of misery he predicted, for which we can thank technological progress. Technology allowed humans to give in to their sexual urges without procreating (a kind of consumption without consequences). The progress of science also meant that existing resources could be used more efficiently, and new resources tapped. Agricultural yields have grown dramatically since Malthus’s day, and we are today using sources of energy and other supplies that his contemporaries could not fathom. Malthus’s specific predictions turned out to be wrong but the underlying logic of his doom scenario has continued to capture the imagination of Westerners.

In the aftermath of the Second World War, a second consumer revolution brought unprecedented prosperity to Westerners. Televisions, fridges, cars and air-travel became common items of consumption, which in turn, from the late 1960s, led to a new critical backlash.

In 1972, the Club of Rome, a newly created global think tank, commissioned a report, published as The Limits to Growth, which spawned an influential revival of Malthusian ideas. Its authors argued that population growth and the associated expansion of consumption would lead to the depletion of resources, excessive pollution and, ultimately, to environmental collapse. The report shaped public consciousness and contributed significantly to the rise of green political movements in this period. In 2012, the Norwegian futurologist Jørgen Randers, one of the original authors of The Limits to Growth, presented a fresh set of gloomy predictions for 2052. His basic argument remains unchanged: population and consumption grow, the increasing energy consumption and emissions lead to climate change, which exacts huge economic costs, and causes environmental damage that ultimately renders life on Earth unsustainable.

The 1970s also saw Rousseau’s social and psychological critiques of consumption hove back into view. In his seminal To Have or to Be? (1976), the German psychoanalyst Erich Fromm offered his readers a stark choice between a fulfilled life that derives satisfaction from living itself, and a false existence that revolves around material possessions. The principle of the former was collaboration and friendly coexistence with fellow men and women. The later was one of aggressive competition that revolved around deceiving customers, destroying competitors and exploiting employees. Though material acquisition looked like fulfilment, the limitlessness of our material desires meant that a focus on possessions forever kept fulfilment at bay.

consumption might be immoral but it is also the fuel that drives commerce and brings unprecedented prosperity

A more recent offshoot of this tradition is the political critique of consumption offered by the Slovenian philosopher Slavoj Žižek and others. Žižek focuses on attempts of consumers to do good by buying right. In particular, the consumption of organic food and fairly traded products is supposed to bring benefits to consumers, but also to producers and society at large. If everyone made the right decisions at the supermarket, the argument goes, a better world could be created. In reality, however, consumer choices are limited and also conditioned by political and economic structures that can be changed only through collective political action. For Žižek, the belief in consumer sovereignty is naive and ultimately damaging because it distracts us from real political activism. Or, to use Fromm’s terms, the preoccupation with what to own keeps us from confronting the question of who we want to be as individuals and as a society.

Intellectually compelling as they might be, these various critiques have mostly been drowned out by the economic successes of industrial capitalism. As the Dutch philosopher Bernard Mandeville first argued in The Fable of the Bees: Or, Private Vices, Public Benefits (1714), consumption might be immoral but it is also the fuel that drives commerce and brings unprecedented prosperity. Voltaire and other luminaries of the Enlightenment soon took up this line of defence and, ever since, arguments that balanced the public benefits of consumption against the private vices that it caused have enjoyed currency. Against the backdrop of today’s economic crisis, such arguments are especially powerful. If the route to recovery and to greater equality requires more consumption, many commentators will be disposed to overlook the moral and environmental implications. Besides, there are strong indications that increasing consumption might be the way out of the current economic crisis.

It is becoming increasingly clear that weak consumer demand played a role in causing the recent financial crisis and that it is now prolonging the economic stagnation. In the immediate aftermath of the crash of 2008, there were some attempts to stave off the crisis by increasing government expenditure. Banks and other financial institutions were bailed out, and stimulus packages were designed to revive growth. However, as the amount of debt increased and growth plunged, economic policies changed. Prominent economists such as Carmen Reinhart and Kenneth Rogoff, both professors at Harvard, advised that growth would result from limiting debt. At the same time, the old Hayekian line that cutting back the state would liberate the economic forces of the private sector made a forceful reappearance. In the UK Prime Minister David Cameron’s speech in 2013 about doing ‘more with less’ became the maxim of austerity politicians, and government budgets were duly cut. Collective abstinence was imposed on entire societies in the hope that this would solve the financial and economic crisis of Western nations.

Six years into the crisis, this policy continues, but it has failed to produce positive results. In most Western countries, debt levels have not declined significantly and growth remains weak. As a result, the economic rationale behind the politics of abstinence is increasingly questioned. A turning point was marked by a speech by the US economist Larry Summers at the Economic Forum of the International Monetary Fund in 2013. A Harvard professor of economics, and former Secretary of the Treasury to Bill Clinton and economic adviser to President Barack Obama, Summers suggested in his remarks that Western economies might have entered a period of ‘secular stagnation’.

A year in a state school and a new smartphone are both forms of consumption, and the former costs a lot more than the latter

The choice of this term was significant. It was coined by the US economist Alvin Hansen in the 1930s to explain the causes of the Great Depression. Following John Maynard Keynes, Hansen saw underconsumption as the main cause of the crisis. He argued that this type of crisis was the result of an excess of savings over investments. Such an imbalance depresses the economy because, as a matter of national accounting, savings must necessarily equal investments. If investments are too low to provide an outlet for all savings, then reducing saving will restore the balance: the economy contracts, incomes fall and, with them, so do savings. Savings and investment are once again at unity, but the economy now operates at a lower level of output and employment. If demand doesn’t increase, economies can languish in this new low-growth and low-employment equilibrium for a long time.

As Summers suggested, the prolonged period of economic stagnation that we are currently experiencing might similarly be caused by weak consumer demand. Consumers today feel the economic insecurity and hold back on expenditure or, if they have debts, try to pay them off. Yet there are also long-term trends that lower consumer demand. The most important of these is the rise in income inequality. People with high incomes tend to save more than people on low incomes; and if they do so at a faster rate, consumer demand declines. This is to some extent counterintuitive because we tend to think of rich people as big spenders. They often are: but they also save a much larger share of their incomes. This phenomenon is well-captured by the Centre for Economics and Business Research in London whose recent study on patterns of saving and consumption in the UK showed that, over the past 12 months, the top 20 per cent of earners were able to save nearly £20,000. In the same period, the lower 40 per cent spent more than they earned.

Another important long-term trend that depresses consumption is slowing of population growth in many Western countries – which will mean fewer consumers needing cars, houses, energy and food.

If our current predicament is indeed an underconsumption crisis, then increasing consumption must become the main concern of economic policy. Cheap credit has often worked as means to this end. However, at the moment, even with historically low interest rates, private consumers are rightly wary of taking out credit after uncontrolled debt was fingered as the culprit of the recent crash. Of course, governments can step in with credit-financed public-spending programmes. However, these can only be short-term remedies. A better way to increase consumption in the long term, and sustainably, is redistribution. If people on lower incomes (with their correspondingly low savings) up their rate of consumption faster than those with high incomes, this will greatly strengthen consumption. As it turns out, the social problem of inequality and the economic problem of secular stagnation have the same solution.

Of course, none of this helps us address the moral and environmental concerns raised by critics of consumption, leaving us with a classic dilemma: either we increase consumption – and accept moral and environmental decline in exchange for prosperity and equality. Or, we accept economic decline, saving our souls and the planet.

Such dramatic choices capture the imagination, but in practice the options might be not quite as extreme. Rousseau’s and Fromm’s acute observations about the prospects of human existence in capitalism are only critiques of consumption if we make the mistake of equating consumption with shopping. In Rousseau’s time, this was a fair equation, since most consumption involved individuals acquiring material objects or services. But if we look at more recent periods, a substantial part of what we consume is not acquired individually. Education, health care and security make up a very large part of what Westerners consume today, and we do so collectively, through governments or other organisations.

This change in consumption patterns matters because the pernicious effects of a competitive life centred on material possession are not associated with collective forms of consumption. A year in a state school and a new smartphone are both forms of consumption, and the former costs a lot more than the latter. However, seeing a friend on his or her way to school is unlikely to make you green with envy, while a Facebook friend bragging about a new phone might well trigger a ‘consumption arms race’, leaving you both with better phones but poorer souls.

Historically, collective forms of consumption have also played an important role in making societies more egalitarian. A large part of the redistribution that helped overcome Victorian levels of inequality took the form of expanding public services, which were used disproportionally by the poor, and funded disproportionally by the rich. In the past, a growing public sector has been the way to increase the welfare of the masses without corrupting their souls. It is once again time for a similar expansion of public services, not least because health and education are key areas in which the increasing chasm between rich and poor is most visible.

There is no inherent contradiction between more equal, greener and more humane patterns of consumption

The green critique of consumption needs to be unpacked in a similar fashion. The environmental impact of the goods and services we consume varies enormously. The emissions of greenhouse gases and other pollutants associated with a trip from A to B will be greatly different according to the means of transportation used. The same is true of a hot shower, a cold beer, and most other forms of consumption. For climate change, the most important issues are the efficiency of energy use and the source of the energy used, and both efficiencies are, and will continue to be, improved by advancing technology.

Still, the doomsayers will not be appeased. They argue that using available green-friendly technologies and developing new ones creates costs that individuals might be unwilling to bear. Jørgen Randers warns in his gloomy forecast for 2052 that even if we approach these problems collectively, the costs will be too high. In his view, there is no hope of ecological salvation without radical changes in our lifestyle.

And yet substantial steps can be taken at a surprisingly low cost. The recently proposed sweeping new regulations of power plants in the US, which would lead to a major shift towards greener energy, are estimated to cost approximately $50 billion every year from now until 2030. This sounds astronomic, but it is a mere 0.2 per cent of the US GDP, and it will not require a radical change of the lifestyle of ordinary US citizens. As Bjørn Lomborg argues in his highly influential book The Skeptical Environmentalist (2001), humanity has successfully solved environmental problems in the past and, if the political will is there, this will also be possible in the future.

There is no inherent contradiction between more equal, greener and more humane patterns of consumption. The real question is how to ensure that sufficient resources are devoted to bringing about the necessary changes. As Žižek rightly points out, this is a challenge that cannot be met by enlightened consumers but only by concerned citizens. Governments alone have the power to implement the changes necessary to make our consumption greener, and only government-led, collective forms of consumption can solve the problem of inequality in a progressive way. The question of whether our ‘consumer experience’ will make or break us in the future will be decided at the ballot box – and not at the till.