New York Times: Global Growth, American Thrift
September 24, 2009
by Juliet Schor
Expecting the U.S. consumer to be the locomotive for global or even domestic economic growth is foolhardy for two reasons. First, as is now well understood, much of the robust consumer growth of the past two decades was underpinned, not by income growth, but by the expansion of debt and unsustainable growth in family labor hours.
Hourly wage rates have stagnated since the 1970s. Especially recently, workers have been unable to capture their productivity gains. Parents aged 25-54 added a whopping 358 hours of work to their annual schedules between 1979 and 2000. Questionable credit practices and a now-popped housing bubble allowed consumption demand to grow, but before the crash, debt to income and asset ratios were stratospheric.
Furthermore, consumers have been burned and chastened — many are articulating that they’ve changed for good, rejecting the happy-go-lucky spending of the boom for a more cautious, grounded and sustainable consumer attitude. Consumer sentiment is in sync with a growing mountain of research that shows relatively small gains in well-being from additional consumption above threshold income levels. The wallets that snapped shut last year will be far harder to open than the post-WWII recession experience would suggest.
But relying on a consumer boom is foolhardly for a much deeper reason. Our problem is not a shortage of walk-in closets, cell phones or calories. We’re up against climate de-stabilization, and we can no longer deny that business-as-usual growth has brought us to the brink of catastrophe. We have about five years to get serious about a low-carbon economy, and start expeditiously transforming our dirty energy, food and transport systems. In standard economic terms, what this means is that we need to ramp up investment, rather than consumption.
But instead of thinking about traditional investment, which merely changes the production methods of firms, there are many opportunities for investment that protect the climate and directly generate value for people. These include residential conservation measures and alternative energy technologies that reduce energy expenditures for households and businesses, local food systems that offer healthier, unpolluting food than what’s produced by industrialized agricultural systems, and affordable, clean mass transit.
These innovations yield double dividends — the create value for households and improve the productivity and efficiency of the economy. By contrast, a consumer boom is more likely to be a double negative, adding to both debt and ecological degradation, without commensurate gains in welfare for consumers.
New York Times, September 24, 2009