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Our Response to the Next Crisis Must Tackle Consumerism

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Via Naked Capitalism

Yves here. While one can applaud the sentiments in this post, status competition is a strong feature of most societies. Admittedly, some have revered accomplishment or sacrifice or exemplary behavior over having a lot of toys. But so much of our behavior revolves around consumerism that it affects how we tackle problems. For instance, one strong theme in Green New Deal programs is to build new energy efficient housing. Yet the energy cost of a new house is roughly 10 years of operating a not terribly energy efficient existing house of similar square footage.

Admittedly, this article focuses more on consumerism in terms of more mundane purchases like clothing and devices, but “household formation” and moving almost always involve a buying stuff. Even if your old goods work well in new digs, there’s still always something to buy…curtains, a new lamp….while in the old days, people would inherit houses, furnished, and not change them much (or if they did, gradually), or lived in rooming houses with very little.

By Rob Macquarie, a writer and researcher focusing on the financial system and its links to inequality, democracy, and sustainability. He tweets @RJMacquarie. Originally published at openDemocracy

This article is part of ourEconomy’s ‘Preparing for the next crisis’ series.

If there is one way the next economic crisis won’t be the same as the last, it will have to do with the state of our planet. In 2008, the Copenhagen Accord hadn’t been signed, let alone the Paris Agreement – or millions of schoolchildren missing Friday lessons to protest the terrifying future they will inherit.

Now, economic transformation is widely viewed as a prerequisite for halting ecological breakdown. Because of this, the next crisis is often presented by those who long for change as a golden opportunity, envisaged with massive investment in energy systems, transport, and clean industrial technology.

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To be sure, these changes cannot come quickly enough. Yet they are not the only piece of the economic, nor ecological, puzzle. The ruling elites of wealthy countries have a poor record in undertaking ambitious public spending. Instead, they look to ordinary citizens – recast over decades as ‘consumers’ – to carry the load.

Household consumption on aggregate represents the largest chunk of economic activity in most countries. Though often characterised as ‘motor’ or ‘engine’ of growth, as things stand a liferaft would be a better metaphor. During recessions, household spending can remain relatively flat compared to investment and therefore GDP more broadly. In the US, consumption, though battered by the storm of the 2008 crisis, supported employment in the face of declining business prospects.

Our economic dependency on consumerism is linked to changes afoot at the global level, both secular and cyclical. On the one hand, the gradual march of (privatised) digital technology and financialisation have undermined and disrupted investment in the real economy as a source of stable prosperity. Listlesssproductivity in some G7 nations and a massive reduction in state spending under austerity regimes have placed much of the burden on households.

In Britain, this sterling effort from the ‘good old British consumer’ comes at a cost. Households have been taking on net debt – in other words, running down their wealth – since 2016. Financial pundits present debt-led increases in household spending as a natural source of GDP growth despite only having assumed such a prominent role following the 1980s’ neoliberal turn.

On the other hand, present conditions have also sharpened our reliance on the household consumer. This is by no means limited to the relatively financialised Anglophone economies. Germany’s mighty manufacturing sector, beset by difficulties from Brexit to global trade disputes, is behind recent gloom in the economic figures. Major infrastructure projects, if badly conceived, can lock in an unhealthy incentive to keep the population spending – see the hapless development of Berlin’s Brandenburg airport, dependent on retail for up to half of its profits. Meanwhile, the UK’s sickly retail sector, pressed on one side by trade uncertainty, strains under ever-larger piles of corporate debt.

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All of this has disastrous ecological consequences. In 2009, in the wake of the global recession, Friends of the Earth Europe reported people in rich countries consume up to 10 times more natural resources than those in the poorest countries. As development raises standards of living for vast numbers of people living in the Global South, especially in China and India, keeping material consumption and carbon emissions from spiralling upwards will require a change of gear in resource efficiency and, simply put, more frugal behaviour by Western consumers.

Last year an important paper in Nature found that ‘physical needs (that is, nutrition, sanitation, access to energy and elimination of poverty below the US$1.90 line) could likely be met for 7 billion people at a level of resource use that does not significantly transgress planetary boundaries’. Meeting ‘more qualitative goals (that is, life satisfaction, healthy life expectancy, secondary education, democratic quality, social support and equality)’ for people in all countries will require major changes in ‘provisioning systems’ – that is, an overhaul of economic institutions. In other words, unnecessary material goods valued by Western shoppers put at risk the attainment of even more fundamental social and human rights for the majority of the world’s population.

So the policy response to a fresh crisis must be viewed through an ecological lens. With interest rates still at rock-bottom and quantitative easing alive and kicking, the flow of easy money creates a powerful incentive to urge an anxious public to ‘keep calm and carry on spending’. The planet cannot afford such timidity, nor complacency over a spontaneous rise in so-called conscious consumerism.

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Instead, as well as supply-side measures clustered under a Green New Deal or Green Industrial Revolution, the crisis toolkit must consider consumer demand. Policy can make a consumption surge conditional on sustainability with policies like fiscal incentives for retail companies to apply rigorous, sustainable standards. Electric vehicles already enjoy support from governments in many countries – notwithstanding some rowbacks. These schemes can be designed to contribute to the fiscal ‘automatic stabilisers’ that push back against a recession: for instance, by channeling money from penalties for emissions-intensive vehicles into subsidies for EVs.

Alongside a shake-up of the energy mix, governments must promote the circular economy. Investment can target projects aimed at reducing household and supply chain waste. Right-to-repair schemes being pioneered by civil society deserve tax incentives or other market-shaping assistance from the state. And across all industries, we must move away from early obsolescence of consumer goods. A report prepared for the European Commission in 2012 recommended a host of policies to target these issues, such as grants for industry to initiatives to improve product lifetime or reduced VAT for more efficient and durable products.

Thinkers pioneering a new economics are joining the dots between the demands of sound economic management during a downturn, social justice, and the ecological crisis. Vocal criticism of a decade of austerity laid the groundwork. Now progressives, eager to raise living standards, must watch their messaging to promote sustainable consumption. Those sounding the alarm about resource use are right that rich nations must not continue to overspend their ecological budget.

When the next crisis arrives, parties arguing for a green transformation will have to prove they understand that.

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