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That Which Is Too Fearful To Speak: The Demise of the Consumer Economy (August 1, 2011) The consumer-debt-based economy is doomed; good riddance. It was nothing more than an elaborate cargo cult based on marketable anxiety. The consumer-debt-based economy is toast, but everyone's too terrified by its demise to acknowledge this reality, never mind consider a new model. The entire creaking economy is based on a few ideas which no longer work: 1) Create "aggregate demand" (i.e. consumer demand, which then creates business demand) and the economy "grows," people are hired and get paid, and that's good. 2) When consumer demand slumps because people are over-indebted and can't afford to buy more of anything, then "stimulate" demand with massive Central State spending to replace the vanished private demand. 3) Demand is endless. You can never have enough stuff, food, vacations, education, healthcare and toys. Give people free money, or the ability to borrow nearly-free money, and they will spend, spend, spend. This creates "growth" which is always good. A funny thing happened on the way to the infinite demand/consumption model--or actually, two things: A. People borrowed all they could afford, and then borrowed more. Now they can't borrow any more, even if the interest rate is low. By some estimates, American consumers need to pay down $4 trillion in debt just to restore the income-to-debt ratios of the early 1980s, never mind the early 1960s. B. Infinite demand met marginal return in a dark alley, and infinite demand is in the gutter, whoozy and bleeding profusely. That horrendously costly master's degree has only a marginal return in the real world--or perhaps a negative return. That expensive McMansion provided no better shelter than a much more modest home, and its investment return is atrociously negative. That $120,000 5-day stay in the hospital paid by Medicare didn't fix the health problem; it made it worse, because the patient didn't need hospitalization or the procedure, and the previously moderately-ill patient caught a drug-resistant bug in the hospital and is now very ill--and therefore needs more treatment at $120,000 a week (this was the actual bill for my friend's father's 5-day stay in a hospital, a stay he was forced into accepting lest he be a "bad patient." He could have easily been treated in an out-patient clinic.) Nice return on a $120,000 "investment" to meet the "infinite demand" for sickcare. You see the point: "investing" disposable income in debt service to borrow more money to blow satisfying "infinite demand" has left consumers over-leveraged and insolvent, crushed under impossible-to-pay debt loads, while all that debt-fueled spending has yielded increasingly marginal returns. The amount of debt that can be leveraged has diminished to near-zero, and so has the return on that spending. There's another deeply pernicious facet to a consumer-based economy: our identity and meaning now flow from consumption, not from production or inner resources. I spent a considerable amount of Survival+ explaining how marketing and consumption are two side of the same coin. The marketing complex has hijacked our sense of identity by engendering a deep, soul-destroying anxiety that only buying more stuff can assuage: since we are judged and valued solely by our purchased externalities, we are constantly in danger of being rendered worthless if we fail to measure up to the current metric of brand-group identity (wearing all black and a tattoo for one "brand," a BMW and designer clothing for another, reading the New Yorker and claiming to only wear vintage clothing for another, etc.) What we do in the real world is simply part of the "brand" which we must project, or cloak, to sooth the gnawing anxiety that is the bedrock of a consumer society. The iconography and totems of consumerism define our identity, our strivings, our sense of purpose and our experience of meaning: what I call the politics of experience, a phrase coined by R.D. Laing. Consumption is our god, our faith and our religion. Like a cargo cult dependent on a magical connection to prosperity, we are terrified by the prospect that our religion is based on a false god--that is, that consumption and consumption alone leads to prosperity and happiness. Like a cargo cult that we mock in our infinite industrious superiority, we worship the equivalent of rocks painted to look like radios that we can use to "call" the gods of endless prosperity. This rock that's painted to look like a radio is called "debt," and we call upon it to magically provide us with prosperity from over the seas. This other rock that's painted to look like a radio is called "aggregate demand," and it's carefully worshipped by a special troop of voodoo-wielding witch doctors called Keynesians. We are chanting magical phrases to these rock-painted "radios," pleading for a return to easy prosperity, but nothing's happening. We fear the magic no longer works, and that possibility terrifies us so much we can't even bear to speak of this loss. The consumer economy is expiring for two good reasons: we borrowed too much and will never be able to pay it back, never mind borrow even more, and we have too much crap and useless services as it is. Instead of paying people to dig a hole and then fill it, we give millions of tests that serve no real function other than to bill Medicare or the provider. An economy can only sustainably spend what it generates in surplus. The U.S. has been exchanging paper with funny green ink on it for real stuff, far in excess of the surplus generated by our own labor and production. That is our trade deficit. To extend "aggregate demand" to the moon, we borrow trillions of dollars via Federal deficits to fill the gap left by imploding consumer borrowing. This is not spending a surplus we have earned, it is borrowing against future surpluses, surpluses of national income which we are now committing to debt service. Future generations won't get to spend their surplus; they will have to devote it to servicing the debts we have gaily borrowed and blown on digging holes and refilling them, part of our worship of the magical painted rocks of our false and hollow religion, Consumerism. By degrading ourselves from producers to consumers, we have not only lost our identity and our meaning, we have lost the ability to create surpluses and invest those surpluses wisely. My new book An Unconventional Guide to Investing in Troubled Times is an attempt to chart a path from the anxious, unhappy dead-end of consumerism back to a decentralized, self-reliant productive economy. That is the transformation that terrifies the Status Quo, for it is a transformation for which there is no model of control and exploitation: the demise of the consumer economy and the rise of a productive economy with no need for Wall Street or rocks painted to look like magic radios.
Recommended reading on this topic:
The Cultural Contradictions of Capitalism.
Order Survival+: Structuring Prosperity for Yourself and the Nation (free bits) (Mobi ebook) (Kindle) or Survival+ The Primer (Kindle) or Weblogs & New Media: Marketing in Crisis (free bits) (Kindle) or from your local bookseller. Of Two Minds Kindle edition: Of Two Minds blog-Kindle
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