China Must Not Embrace Consumerism

June 2009

Consumerism is the equation of personal happiness with consumption and the purchase of material possessions. With the arrival of the Industrial Revolution consumer goods were for the first time available in outstanding quantities and at outstandingly low prices, and so began the era of Mass Consumption.

The sociologist and economist Thorstein Veblen wrote an impassioned criticism of Consumerism in 1899. Veblen argued that consumption is used as a way to gain and signal status, and he argued that through conspicuous consumption often came conspicuous waste (do we really need a new TV every year?).

Veblen developed an evolutionary economic model based upon Darwinian principles and new ideas emerging from anthropology, sociology, and psychology. Unlike the neoclassical economics that was emerging at the same time, Veblen described economic behavior as both socially and individually determined and saw economic organization as a process of ongoing evolution. He considered the era of Mass Consumption a product of this evolutionary process, but he despised it and longed for a new era in which scientific thinking would overcome the wasteful era of consumerism and lead to a more productive society. Veblen looked for this possible evolutionary change to take place at the end of the First World War.

In fact consumer spending peaked in 1932 by which time it represented 83% of US GDP. During the Second World War consumer spending dropped to 50% of GDP due to large expenditures by the government and lack of consumer products. In 1967 it began to rise, in 1983 the pace accelerated, and in 2007 it accounted for 71% of US GDP.

As well as the equating of personal happiness with the purchasing of material possessions and consumption, Consumerism is the belief that the free choice of consumers should dictate the economic structure of a society.

Libertarian criticisms of the anti-consumerist movement are largely based on the perception that it leads to elitism. Namely, libertarians believe that no person should have the right to decide for others what goods are necessary for living and which aren't, or that luxuries are necessarily wasteful, and thus argue that anti-consumerism is a precursor to central planning or a totalitarian society.

Opponents of consumerism not only criticize it as wasteful, many also believe it has engendered a shift away from values of community, spirituality, and integrity, and toward competition, materialism and disconnection. Environmentalists often advocate an alternative lifestyle, such as the "simple living", "eco-conscious", and "buy local" movements.

Personally, I am closer to Veblen. I see a scientific intelligence eventually evolving which will transcend the primitive urge for status. "Simple Living" is to my mind a regression. It reminds me of Mephisto’s hollow advice to Faust:

Pack up your things and get back to the land
And there begin to dig and ditch;
Keep to the marrow round, confine your mind,
And live on fodder of the simplest kind,
A beast among the bees; and don’t forget
To use your own dung on the crops you set!

Today China is at a crossroads. The huge macroeconomic imbalances between the current account surplus of China and the current account deficit of the US demands action. Western Economists are consequently encouraging China to stimulate consumer spending. I believe, however, that overemphasis on consumer spending would be a huge mistake. Instead China should embrace a more 19th economic model in which huge infrastructure investments are the key driver of internally based economic growth which mops up excess savings and absorbs resources from abroad.

Such investment, often by the government, need not drive taxes higher because the end result is an asset. Examples? Most obviously China can begin by mass producing nuclear and hydroelectric power eventually bringing the price so low it can end the use of fossil fuels not just for electricity production but across the economy generally. Chinese cites can be completely rebuilt and as long as the government owns the land the end result is profitable. State Owned Enterprise in the West is often seen as an unmitigated failure. But I argue that the collapse of the the Soviet Economic model was not due to the widespread ownership by government of the means of production, but rather the failure to incentivise the workforce and promote competition between and inside government organisations. To my mind the private sector is a wasteful way to promote creativity and incentive, and a new more efficient structure is possible. I see a depersonalised scientific authoritarian governmental system dedicated to the advancement of it's people as offering the enlightened post consumerist society Veblen wished for.

Consumer spending delivered high growth rates in the US, but replacing one's television and mobile phone every year ultimately leads nowhere. Compare the achievements of old, such as the building of Paris, to the shallow consumerist societies today. Visiting the emerging world I am often struck by the contrast between the widespread use of Western consumer good and the appalling state of the environment, education etc. An Aston Martin in ones life is worth a lot less than a beautiful home town - no wonder Europeans are happier than Americans.

The debate between the liberals and conservatives in China still rages. Should China head towards Western Capitalism and democracy? Or should China build something more cohesive, more idealistic, less materialistic?

I am firmly on the side of the traditionalists and pray China will not follow Japan's example and emulate the West. If they do, we will eventually see another out of control consumer boom and in years to come China will be another Japan. Emerging countries, unused to wealth, are especially offensive when embracing consumerism - nouveau riche gold taps and diamond mobiles etc. In China the “little emperor” mentality of single children will add to the woes.

It’s been more than 100 years since Veblen’s predictions that society would transcend consumerism, perhaps the moment is finally at hand, but it all rests on the decisions of the Chinese elite. Dear god I wish they would read this blog!