The great fallacy of most economists today is that they believe that
economic growth as presently figured is the natural state of affairs.
It is assumed that, somehow, somewhere, there is a great swathe of
consumer goods lying ahead of us that will cause masses of people to
save hard for them. For the savings to be invested in the production
equipment to make the goods. For the goods to be finally available in
the shops (or, these days, via the Internet).
But that pretty well ceased at around 1980. By then, most people in
the advanced countries had bought all the 'big ticket' consumer goods
that had come into existence -- television, cars, central heating,
for example. Hitherto only affordable by the rich, even the poor
could afford these goods by 1980/90. There are still many big ticket
consumer goods that the rich can afford which the masses may only
fondly wish to have. For example, second homes in beautiful
locations, personal planes or helicopters, sea-going luxury yachts.
But, as the economist Fred Hirsch pointed out 40 years ago, the
necessary space is limited. The goods themselves may, in theory, be
mass-producible, but the space they need -- beautiful locations,
(commutable) airspace and (berthable) sea coast space -- is already
taken up by the super rich.
By 1980, the real steam had gone out of the economic machine that had
spluttered into life at around 1680 (for the rich), had got going by
1780 (for the middle-classes) and was going full-pelt (for the
masses) by about 1880. By 1980, what is now known as the 'financial
sector' was unconsciously aware of this and, starting with personal
credit cards, had to invent all sorts of wonderful and weird
financial scehemes by which hard saving was not necessary any longer.
Live now, pay later. By now, the total of private and governmental
debt is so huge that, to be realistic, it will never be paid off in
the usual way, whatever the politicians may pretend. Instead, by one
means or another (inflation or deflation), all conventional assets
will have to be down-priced in the coming years and most debts written-off.
So what is the solution for the West today (and perhaps China, India
and Brazil in 30/40 years' time)? Since about 1980 the masses, too,
have been having their say in the economic scheme of things. Because
the cost of raising children has been going up like a rocket, they
have been reducing the size of their families steeply in order to
afford both the big ticket items that they're accustomed to and also
the plethora of low-priced gadgets which entertain them today. Of
course, it's possible that they may change their minds in future
years and have more than the two children per female that is
necessary to replenish their country's population. But it's hardly
likely that the present parental trade-off between goods and children
will change much.
The rich, and their retinue of professionals and scientifics which is
necessary to understand and administer the increasingly complex
economic machine will survive, of course. Steadily and gradually,
mass production and mass sales will no longer be necessary in the
coming decades. More automation and more flexible (and customizable)
production methods will require less and less muscular and mental
attention by the masses. And then, as populations of advanced
countries decline, the huge volume of circular personal services that
go on within them will diminish. We are not moving into a new
post-industrial, 'services' economy as many economists proclaim. As
regards the mix between food, consumer goods and personal services we
have much the same sort of economy today as occurred within the high
clay walls of Uruk in Mesopotamia 5,500 years ago.
The only objection to this modern scenario -- and it is a big one --
is that substantial immigration into the advanced countries will be
allowed to continue by governments and thus maintain high
populations, or even grow them for the sake of maintaining their
taxable base. At the present time and for the foreseeable future,
fierce resistance to immigration is swelling and it is difficult to
say whether the masses or governments (mainly impelled by their civil
servant departments) will win. But even if governments win in the
coming years (which is doubtful given the likely powerful social
repercussions) then second and third generations of immigrants
inevitably adopt the culture of the indigenous populations. They,
too, will have less-than-replacement sized families in order to stock
up with the standard range of consumer goods. It only means that the
whole procedure of population reduction in the West will take place
over a longer period.
Of course, I've ignored the fact that world population is already
decelerating and that it's likely to start declining anyway by 2050
at the latest. The scenario described above is only a more
sophisticated addendum to the main trend. However, it still means
that today's and tomorrow's economists had better come up with a more
realistic notion of what is actually happening in the advanced
countries already. Economic growth in terms of GDP figures no longer
makes any sense at all. By all means -- given our amazing innovative
abilities -- there is no reason why man should not make 'progress'
but this doesn't necessarily mean the increasing production of consumer goods.
Keith
Keith Hudson, Saltford, England http://allisstatus.wordpress.com/2011/07/
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