In the United States, and in much of the world that shares aspects of US Business culture, it is common to say the consumer is king. Politicians of parties across the ideological spectrum speak about consumer sovereignty as if it is an ordained right. Neo-classical economists blithely assume the conditions of perfect markets in their theories and models, and proclaim that the consumer is always sane, always correct – and that the actions of many consumers will serve the larger social good. The development of capitalism created the conditions for the development and distribution many innovations that have improved the lives of people around the world. Just think back to the world that your grandparents grew up in, where people who owned an icebox and a radio were considered middle class.
However, today global consumption is on an unsustainable path of growth. Global populations inexorably increase, energy resources decline and become more expensive to obtain by the day, and the ability of the biosphere to sustain the throughput of resources that our consumption requires is diminishing. How did we get here? If the consumer is king, and can do no wrong, how did we move onto this unsustainable path? First of all, regarding consumer sovereignty, it is inaccurate to lay the culpability for purchasing decisions entirely on the lap of consumers. Marketers are adept at creating needs and wants where they did not exist before. We consumers apply meaning to, and use our purchases as a sort of language, or shorthand, to denote status. Governments subsidize and incentivize certain behaviors, like the pervasive subsidies in energy industries. Governments even encourage consumption through monetary and tax policy. So the idea that the consumer is king is problematic. So, the question remains, how did we get to the point where consumption is unsustainable?
We have long treated the resources that come from the Earth not as finite commodities, but rather as our dominion. For example, we charge homeowners for the extraction, delivery, and disposal of potable water, but we do not consider the water itself a finite resource. We have only recently considered what it takes to maintain healthy watersheds, to ensure sustainable water supplies. However, water is essential to the manufacture of most consumer goods. How can the price of those goods not reflect the value of the finite resource, fresh water? When water supplies dry up, water will have to be obtained in the energy intensive process of desalination. Fossil fuel energy supplies, like water, are finite resources. We humans are not good at planning for the long term of future generations. The concept of the Seventh Generation, which originated in The Great Law of the Iroquois, asks whether the decisions made today will benefit descendents seven generations into the future. A home products company that aims to inspire that kind of long-term thinking adopted the Iroquois principle in their name. However, Seventh Generation is a rarity in the business world today. The assumption by many in society today is that resources will never decline, that we will always find a new source or supply to maintain our exponential growth. That thinking is leading us on a path toward decline.
Can we create a new prosperity, one that is sustainable? To do so we will have to consider resource use from a perspective of our collective future, and beyond our individual perspective. For some people, that may mean sacrifice. Both father and son President Bush declared that “The American way of life is not negotiable” when considering how to confront climate change. The problem is that the American way of life, as it stands today, is just not sustainable. Both the government and communities of individuals must create policies, incentives, and actions to promote a new kind of consumption, and a new consumer mindset. We must strive for quality, minimize throughput of resources, and consider the entire life cycle of products, ensuring that materials can be reused or recycled. We must design our communities so that we plan for the long term, and think generations ahead, planning for a future with expensive energy and finite resources. Many of the consumption decisions we make on a daily basis are habits that people don’t consider – we need to design products so that consumers are aware of both what the product provides, and what the cost is. However, it is not enough to buy ‘green’ products, we must reconsider what we really need. To create a sustainable consumption, we will all need to tread carefully and purposely into the future. Otherwise, we consumers will find ourselves unprepared for the future we create.
John Maynard Keyes wrote in 1945 that “the day is not far off when the economic problem will take the back seat where it belongs, and the arena of the heart and the head will be occupied or reoccupied, by our real problems – the problems of life and of human relations, of creation and behavior and religion.” In the United States, we have pursued a policy of unquestioned growth and expansion, following the recommendations of prominent economists with an ardor that borders on religiosity. However, the economic problem, as Keynes described it, has not taken a back seat, but rather has the developed world in the grip of a severe recession.
In the United States we have always looked to economists for the magic to make our economy go. Milton Friedman, winner of the Nobel Prize in Economics, believed that a free market economy could expand and prosper with minimal government interference. Alan Greenspan, an admirer of Friedman, was revered as an enabler of unending growth during his service as Chairman of the Federal Reserve; he received the Presidential Medal of Freedom, the inaugural Harry S. Truman Medal for Economic Policy, the inaugural Thomas Jefferson Foundation Medal in Civilian Leadership, and was named both a Knight Commander of the British Empire and a Commander of the French L’Egion D’honneur. Presidents from Ronald Reagan to George W. Bush all trusted Greenspan with the keys to the economy. During the same time period, Bill Clinton, a Democrat, trusted economist Larry Summers’ advice that deregulation of banking and finance would also lead to continued growth; that was the height of Milton Friedman’s influence. Barack Obama appointed Summers to be Chairman of his Economic Council despite the fact that his policies were partly at fault for the current economic crisis. Why do all of these Presidents, from Reagan on the right to Obama on the left, put so much faith in these economists? Keynes, in The General Theory of Employment History and Money (1935), addressed this question. He wrote that:
“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.”
The economic policies of the United States have become more and more complex since Keynes’ time. Over the decades, as the United States left the Gold standard, and created a dynamic economy reliant on the growth of consumption and continuous expansion, we have relied and trusted economists to make it all work. Most Americans who do not work on Wall Street have trouble understanding even some of the basic terminology and concepts used in finance today. Many of us learned what a Collateralized Debt Obligation was last year, and discovered how debt was securitized in such complex ways that even some of the old hands in charge of major firms didn’t really understand. Americans trusted economists to drive our growth, and while many don’t understand the problems we face, they expect economists to create a deus ex machina to miraculously get us out of the recession and onward to unending growth.