Every month, one of the most anxiously anticipated pieces of economic information is the Commerce Department’s spending data. Are people in the malls? How deep are discounts? Spending is cheered; frugality causes concern. In the drama that is the U.S. economy, consumers have been cast as the hero, expected to provide the growth that avoids a double-dip recession and rebalances the labor market.
It’s an increasingly quixotic hope. Consumers, burned by predatory financial institutions and labor market insecurity, are in no position to play the Little Engine That Could. But even if they were, is what ails the country really a shortage of cars, cell phones and Cuisinarts?
(PHOTOS: Black Friday: Shop Til You Drop)
In the decade leading up to the collapse, the country went on a consumer binge. This won’t be news to anyone. But what might be surprising is the sheer volume of commodities that were acquired, many of them imported. (That’s one reason that the spend our way out of unemployment approach no longer works.)
According to my estimates, the number of new items of clothing bought by the average American rose from 41 to 67 items per year. Furniture purchases rose 150%. Consumer electronics — from coffee makers to laptops to cell phones — rose between 100 and 1000% depending on the item, and it wasn’t just the cool gadgets. We bought 180% more vacuum cleaners. By both weight and volume, material acquisition hit all-time highs.
All this spending occurred as consumers were supposedly less concerned about the “material” properties of goods, and more attuned to brand value, symbolic meanings, and the virtual world. The assumption was that the shift to a service, experience-based and digital economy would reduce the country’s material footprint. Yet the reverse occurred. Acquisition of products sped up. That’s because symbolic consumption relies heavily on fashion and novelty, and this model spread from clothing and shoes to furniture, electronics, ceramics and household goods. I call this the materiality paradox: people buy more products and they discard them more quickly. The rates at which consumers divest themselves of yesterday’s must-have purchase has also soared, as disposal sites such as landfills, thrift shops and container ships full of used consumer goods bound for Africa attest. It seem unlikely we’ll revert to this pre-recession pattern anytime soon, but that’s a good thing: it’s economically and environmentally unsustainable.
So if consumer spending isn’t the answer to what ails the U.S. economy, what is? The alternative to consumer spending is investment — by businesses, government, and households. We desperately need to wean the country off fossil fuels, for economic and ecological reasons. We need to transform agriculture from the current chemical intensive, factory-farm model to one that is capable of keeping consumers and ecosystems healthy. We need investment in education, mass transit, and urban infrastructures. We need more research and development, especially for green production methods that minimize the use of natural materials. We need more household saving and more acquisition of useful skills and education.
In dollar terms, the U.S. economy is actually smaller today than it was in 2007, an indication of how profoundly the last four years’ reliance on consumer spending has failed. It’s time to try another way.