31 December 2008

Is consumerism always the answer?

The consensus of economists, business leaders and politicians seems to be that the solution to the current economic mess is for everyone to just go shopping. The same advice that George Bush offered to Americans after 9/11. More consumption, one might conclude, is the answer to every crisis from terrorism to economic collapse. And maybe, in the short term, it is. In the long term, I wonder.

Unless people see an increase in their incomes, buying more means running up more debt and excessive debt caused the financial meltdown in the first place. It is hard to see a long term answer here.

Then there's the overarching environmental threat. Are we not depleting the Earth's resources fast enough? Are we not polluting it sufficiently? Buying ever more stuff is a race to ecological catastrophe.

And consider those wise folk who handled their money responsibly and saved rather than going into debt. Central bankers are encouraging borrowing by lowering interest rates, thus punishing those cautious individuals who invested in instruments like GICs.

There is something fundamentally wrong here. For long term stability in the economy, we need better advice than shop until we drop. Advice, for example, like that contained in the posting by Mike Whitney "Wages, it all gets down to wages" on Another Point of View which suggests we need to create demand "predicated on wage increases instead of asset inflation." It is unlikely, however, the Prime Minister and his Minister of Finance will hear this kind of advice from their new Advisory Council. Having surrounded itself with a firewall of capitalists, the government has no ear for voices sympathetic to labour.

Nor, I suspect, will they or their council be interested in the possibility that the answer lies not in consuming more, but in consuming less and ensuring a more equitable distribution of that consumption. Yet this may very well be what the environment demands if the economy is to prosper or, indeed, to survive. To borrow Mies van der Rohe's architectural aphorism, sometimes less is more.

1 comment:

  1. The spending envisioned by the best economists - Nobel prize economists like Stiglitz and Krugman - isn't consumer spending but massive investment by governments on infrastructure projects, the sort that will return dividends to taxpayers for decades. Transportation systems - railways, highways, bridges. Gas pipelines. Revamped electrical grids. Water and sewer systems.

    These sorts of things allow governments to inject money into their economies, money that banks aren't lending to the private sector, and employ large numbers of citizens who aren't being employed by the private sector.

    Spending on high return infrastructure makes sense in any downturn. Individuals, however, are best served by bolstering their personal solvency - paying off debt.

    Best of the New Year Bill