Citizen Action Monitor

Insatiable consumer desire aside, people are capable of restraining spending in times of economic crisis

But no escaping the growth dilemma — spending restraint during a crisis deepens and lengthens the recession.

No 2086 Posted by fw, October 29, 2017

To access all other synopses from Prosperity without Growth, click on the Tab titled “Prosperity without Growth” — Links to All Posts in the top left margin. 

In the closing paragraph of Chapter 6, “The ‘Iron Cage’ of Consumerism”, Tim Jackson asked:

“Is the system still serving us, or is it rather that we are now serving the system? Escaping the iron cage of consumerism demands that we address this crucial question.”

In this, Section 1, his introduction to Chapter 7, “Flourishing – Within Limits”, Jackson reviews empirical evidence to suggest that circumstances periodically arise where ordinary people will act in their own best interests, rejecting capitalism’s seductive siren call for economic growth at all costs.

Perhaps we can escape from the iron cage of consumerism after all?

(For my own purposes, I label this synopsis Section 1, and title it “Introduction”, neither of which is used by the author).

Tim Jackson is a British ecological economist and professor of sustainable development at the University of Surrey.

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Introduction, a synopsis, from Chapter 7, “Flourishing — Within Limits” of Tim Jackson’s book, Prosperity without Growth, Routledge, 2nd edition, 2016-17

As with all the chapters in his book, Tim Jackson begins Chapter 7, with a quote, part of which reads:

“The consumption society has made us feel that happiness lies in having things, and has failed to teach us the happiness of not having things” [Elise Boulding, a US Quaker sociologist].

To illustrate the sudden and dramatic impact on consumer behaviour of the 2008 global financial crisis, Jackson compares UK household savings ratios shortly before and after the crisis.

In mid-2008, the savings ratio* of the UK household, which had been falling continually since the early 1990s, “reached an unprecedented low point. … By the first quarter of 2008, household debt had almost surpassed the GDP of the entire nation and consumption exceeded real disposable income by almost 7 percent.” [*Savings ratio is defined as the ratio of personal savings to disposable income, using the difference between national figures for disposable income and consumer spending as a measure of savings.]

The low savings ratio was the same in other advanced economies. Jackson puts the significance of the falling savings ratio from the 1990s through to mid-2008 this way:

“The story seemed to underline every harsh conclusion from the previous chapter: a story of ordinary people spending money they don’t have, on things they don’t need, to create impressions that won’t last on people they don’t care about.”

But here’s the kicker — Surprisingly, at the height of the crisis, the savings ratio turned sharply in the other direction. Within a year, the benchmark ratio had regained lost ground: by 2015, savings were back down where they were prior to the crisis, renewing fears for the global economy.

The take away lesson is this: Recession fears cause ordinary consumers to save, suspend spending on “short-term pleasures” and redirect their attention to basic needs and their future security.  

This sharp swing in economic behaviour is interesting for two reasons, says Jackson:

The first is that it happens at all. Given the previous chapter’s portrayal of consumers as “voracious novelty-seeking hedonists who serve so well in boom times to keep the economy growing, how would they ever find it in themselves to exercise restraint in times of crisis?

The second illustrates what economist John Maynard Keynes called the ‘paradox of thrift’ – increased saving during a crisis is bad for economic growth because it “deepens and lengthens the recession.

The capitalist system demands non-stop economic expansion. Jackson quotes marketing guru Victor Lebow’s 1955 pronouncement:

“Our enormously productive economy demands that we make consumption our way of life. … that we convert the buying and use of goods into rituals, that we seek our spiritual satisfactions, our ego satisfactions, in consumption. … [we] need things consumed, burned up, worn out, replaced, and discarded at an ever increasing pace.”

However, recent evidence suggests humans are quite capable of resisting politicians’ exhortation to “go shopping.” For instance, during the 2008 crisis, consumers had to be enticed to spend: in October 2008, London Mayor Boris Johnson – ignoring the fact that over-extended credit had contributed to the global financial crisis — had to wave a credit card at the TV cameras to coax Londoners to turn out for the opening of a huge new shopping centre.

Similarly, George Bush, in a post 9/11 TV appearance, echoing the capitalist mantra — “Keep ‘em spending” — rallied “Americans everywhere to go out shopping,

So, what’s the point? The point is this, says Jackson: “… this degree of exhortation should [not] be necessary at all, if the economy were so perfectly aligned with the needs of human beings.”

The fact is, circumstances arise where ordinary people are capable of acting in their own best interests, rejecting capitalism’s seductive siren call for economic growth at all costs.

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