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Pity the patriotic consumer Samuel Brittan: Financial Times 20/12/02 Any citizen who stands back from his or her Christmas shopping and wonders whether it is a patriotic duty to spend or to save will receive conflicting messages. Immediately after the destruction of the Twin Towers in New York, President George W. Bush urged US citizens to carry on spending. The Bank of England has voiced loudly its concern that the bubble in the housing market may burst, leading to a sudden check to consumption, which would be bad for the economy. These official pronouncements only reinforce the spending incitements on the hoardings. On the other hand, we are told that savings are required to finance more investment and to boost productivity. Moreover, those concerned with the adequacy and affordability of future pensions talk of a "savings gap", which has put at risk many people's expectations of income in retirement. Does the patriotic citizen save for all these worthy purposes? Or does he or she spend vigorously to avert a double-dip recession? But that is not the end of the matter. There has long been a cultural critique of capitalism, which has nothing to do with official savings propaganda, but which has focused on the alleged evils of the "consumer society". The earliest attacks of a post-Marxist kind on modern capitalism came a century ago from Thorstein Veblen, an American economist. He satirised the role of "conspicuous consumption" on useless products that had no intrinsic value apart from emulation and personal ambition. The attack was continued in the second half of the 20th century by Kenneth Galbraith in The Affluent Society, which argued that rich societies such as the US had quite enough private consumption, although there was still a great deficiency in publicly provided goods. Indeed, attacks on the consumer society preceded by many decades current attacks on global capitalism. Quite a long time ago I defended competitive markets not just on efficiency grounds but because of the scope they allowed for free choice. Their cultural features could be whatever people wanted them to be. In contrast to totalitarian societies such as ancient Sparta or Stalin's Russia, there was no collective goal to which the individual was subordinated. There may be all sorts of cultural pressures to consume more. But media and peer pressures are not the same as edicts enforced by the police. Consumers need not be plastic clay on which the advertisers can impose any shape they like. We can, if we prefer, give priority to acts of charity, personal relations, cultivating the arts or - as with many of us - a mixture of all of these. A century and a half ago John Stuart Mill analysed the properties of a stationary state in which profitable investment opportunities had all been exhausted. While for some classical economists this was a nightmare, for Mill it was a feasible utopia where people would no longer need to be "trampling, crushing, elbowing and treading on each other's heels" to get in front. In the 1930s Keynes had a similar vision. In Economic Possibilities for our Grandchildren, which I discussed in this column on January 3, he hoped that the economic problem - by which he meant scarcity of goods - would be over in two generations after which people would be free to concentrate on higher things. How does one reconcile the vision of these great men of a market system without the imperative to consume more and more, with Mr Bush's urgings to do just that? The answer is in the familiar distinction between the short and the long term. If there were a gradual shift in people's tastes towards more leisure and the relaxed tempo of work, market institutions could cope. There would be less investment, less saving and a static or slowly growing output of consumer goods. But there is all the difference in the world between a gradual change in people's tastes and a slump brought about by a shock such as terrorist attacks or a widespread failure of financial institutions as in the US in 1931. If we had had a prolonged slump after the destruction of the Twin Towers, it would not have reflected a genuine and deep-seated change of tastes. It would have been a business depression, with idle hands existing side by side with unsatisfied needs. Some jaw-boning is surely justified to prevent such a breakdown in the economic machine. This rhetoric cannot replace, but can reinforce, the effect of monetary and fiscal stimulation. The move to a more relaxed society of voluntarily low growth will come about, if it does, through a long series of changes over several business cycles. Employers will find it easier to recruit workers if they offer shorter hours and more congenial conditions even at the expense of lower take-home pay. Investment institutions will gradually adjust to turning over a given stock of capital rather than seeking ever increasing expansion. The more interesting question, to be discussed on another occasion, is why, despite advances in technology, the static-consumption utopia has been so slow to arrive. Some will attribute this failure to the commercial ethos of our age. We need to dig deeper if we are dissatisfied with such clichés.
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