There are a lot of criticisms about capitalism – about how it is destroying the natural environment, and how it is causing psychological harm to people and societies. There are criticisms of the giant corporations that are homogenising the world and destroying cultures, while a few people at the top of these corporations obtain a huge majority of the benefits.
All of the statements laid out above are very true. There can be debates about the specific degree of impact, but there is agreement that there is impact.
Many assumptions drive the consumerist society. The few ones that usually come to mind are that material goods are the main ways for people to show their social status, and that people are psychologically insecure and need material goods to assuage anxiety. After all, the best advertisements are ones that seem to offer psychological gains to the user/owner of the product. A car isn’t just a means of transportation, but about offering “freedom” – a family car is about “safety, assurances, convenience”. A watch becomes a signifier of taste and sophistication; a laptop becomes attached with action or efficiency. These symbols are all around us, and to ignore their power is a mistake.
These assumptions create demand. I find it curious how economists often talk about supply and demand as if they were abstract things in themselves. In clothing themselves in the economics-lingo, what’s often obscured are the psychological things of demand and desire. What people want, leads to what companies want. People wanting computing power becomes companies finding means to procure the resources to get them, which creates demand for other companies to supply other things to them. Financial systems develop to facilitate these demands – financial instruments were invented to reduce risks for farmers supplying products to the markets. They served real needs to protect their income and to supply appropriate goods to the markets. Reducing uncertainty remains the primary task some segments of the financial markets done in albeit complicated ways.
Can firms create demand? I find that demand is ultimately a psychological trait – one that’s always there and manifested in terms of the products that are acquired and owned.
So what is the economy? The economy is the activity and structure of firms and resources to meet people’s desires. The substantive content of the desires shows up in the goods that are produced and exchanged. The global economy is thus the economy on a global level, as firms and resources circulate to meet the demands of people around the world. Capital facilitates these flows with the creation of credit and debt; capital is given now with the belief that it will be repaid. As capital systems become an important part of the economy, one could suggest that the economy is a way of creating credit with the belief that it will be repaid sometime in the future – the economy is a way of satisfying today’s desire by borrowing from the future in the belief that it will be repaid sometime later on.
There really are two very deep assumptions that operate in the economy – the belief that material goods are required for psychological satisfaction, and that the future will be better than the best (for people to repay their debts). The two assumptions could work like this: because people will keep wanting to buy things, and some of them could be big expensive things, that people would incur debt to buy them. And the cycle continues, as people continue to buy things in a consumerist arms-race, furthering incurring debt, and so on. Only the bankers win, it seems.
If economic issues are framed like this, then the biggest threat to any economy, or to the global economy is simply that, people will stop wanting things beyond necessity/sustenance items. If people stopped wanting to be rich for its own sake, the global economy would not exist in the current state. Non-intuitively, people might actually be better off when they didn’t have to compare their material wealth with another.
I admit that this way of thinking about the economy is far from satisfactory, and leaves out many other things, such as where’s the place for community life, or what about non-market or non-economic activities. What about art? What about religion, or helping the poor? What about the marginalised, and culture?
I’ve heard about a cynical perspective about where culture comes from, in line with the consumerist perspective here. There’s at least a train of thought suggesting that culture is merely what the rich do to compare against another. The ostentatious products created as rich families compete against one another for prestige and status inadvertently creates cultural artefacts. That’s just one view, and there are surely are more benign views of where culture comes from.
There’s a line from Marx that says, “All that is solid melts into air.” I thought that applied very well during financial crisis, when the digits supposed to represent billions of dollars become zero – as expectations are inflated and then, deflated.
That’s what the “economy” is – our own expectations projected onto the real world, be they digital or physical.