Sunday 1 February 2009

After Davos: Consumerism and affluence

In the light of the prognostications of the great and the good in Davos, I wonder if this is just a holding operation, or can we really expect governments, with their horizons ever circumscribed by the date of the next election, to contemplate change?

My feeling that change, and radical change, is necessary, is based on an analysis which is no doubt extremely suspect, based as it is on following international news, and only one year of college economics a very long time ago.

As a general comment on the nature of Tangentville, I should say here that I put my thoughts out there largely to expose them to scrutiny by those with other ideas, and particularly those better informed than I. Please never confuse the way in which I express my opinions in an attempt to be clear, with any pretensions to their authority.

Since the mysterious convergence of circumstances which produced the Industrial Revolution here in the UK around the middle of the 1700s, the means by which international trade is financed have become ever more complex over time. Not even nations with a vast land mass, natural resources, and/or population, such as the USA, Canada, Russia, China or Australia, can be entirely self-sufficient. There will always be something they need to import, and this will have to be paid for. At the same time, the whole thing is predicated on growth, which means producing more than your home market can consume. Thus, you have to create export markets for your manufactured goods or raw materials.

As one nation after another has hit the trail to industrialisation, we have all hitched our wagons to growth as the most obvious source of motive power. Naturally, we have concentrated our output on those who can afford to pay for it. Once the basics have been purchased, you need to start persuading people they need things they didn't know they needed. Ploys such as planned obsolescence and fashion can also be employed to create space for the ever growing expansion of manufactured output.

Even if the target market is drawn from the relatively affluent of the world, there will surely come a time when the third TV required to keep the TV industry going cannot be afforded. That's OK; you don't need to have money, because some kind institution will lend it to you at a rate of interest determined by the market, skewed by intereventions from industry or government.
The system, if so it may be described, would continue to work as long as the amount of stuff people needed was limitless, and the amount of money available to finance consumer debt was equally limitless.

Naturally, neither of these propositions can be true.
The fact that we have all continued to act as if they were true strikes me as extraordinary. Could we all have been guilty of such a monumental feat of wishful thinking? I suspect that those with much better financial brains than mine knew very well that those wagons would hit the buffers eventually. I think they just hoped their terminal bonus would be in the bank before that happened.

So now what? Are we simply hoping for a new and better conjurer to come along and find new ways of helping the affluent to acquire ever more stuff? I think not. My feeling is that this particular party is almost over, and I've heard that said by financial experts who are certainly not hysterical apocalyptics. In its final throws, the whole edifice has been sustained on money which either does not exist, or does not belong to the people spending it.

As I already suggested, industrialisation made globalisation inevitable. Producers of goods and services, raw materials, and consumers are all totally inter-dependent. China and India, the new power houses of this century, could not exist without the markets of the old industrialised world to sell to, and we need them as markets for our technology and expertise. In that sense, any ideas of retrenchment and protectionism are doomed to failure, because they would simply prompt retaliation, and everyone would lose in the end.

So far, globalisation has meant selective selling to those with money or access to it in the illusory form of credit.

Fondly idealistic or not, moving the economic base of the world to include people who really need things seems to me to be the only truly global way forward. Rather than sustaining the unsustainable, we need a way of diverting the world's massive productive power into doing something useful, so that more people can get a decent crack of the whip. This means reallocating resources, which inevitably means less superfluity for those of us who have grown accustomed to it. That's the reason for my pessimism about politicians' preparedness to grasp this particular nettle. Their problem is that I think this is the only real nettle worth grasping when it comes to providing the whole world rather than a portion of it with some kind of future, which allows access to health and opportunity for its citizens, and allows people of good conscience to sleep at night.


Reg

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