I have loads of other work to attend to, but I could not pass up writing about this topic: the burden of the consumer. This is based loosely around one of the underlying principles of Adam Smith's invisible hand concept from the Wealth of Nations, and it has just recently been brought to my attention a few times in the past couple of weeks.
The Invisible Hand
I must admit up front that I am not a trained economist, and I have not read the Wealth of Nations. However, the general concept is all that I'm after right now, and it has been brought up in a variety of my courses recently. To summarize, even though no individual person is necessarily acting to promote the best interests of society, each individual will do so by pursuing their own perceived best interests (as though they are being guided by an invisible hand). It is my understanding that this has been construed to apply primarily in an economic system of consumers and producers, and it that it works on the following principles (along with a few others) that: 1) producers will always attempt to maximize their profits within the constraints of their production process, and 2) consumers will always attempt to maximize the utility they receive within the constraints of their budget.
The Slap in the Face
My curiosity lies in the second principle above. That is, the system is built around the expectation that consumers will always demand as much as possible, and not settle for less (or if they do settle for less, they can be persuaded by sufficient marketing). While my guess is that this was not the original intent of Adam Smith, the burden of the consumer to demand more has become common place. In fact it has been so deeply woven into the fabric of economic institutions that it has become an expectation. Two cases in point:
The first case arose during a lecture in my sustainable consumption course. The lecturer was explaining the concept of communities or groups transitioning to sharing common spaces and items. In particular, rather than every house (or family) in England owning a hammer, which may be used a few times per year, it would be beneficial for several families to store tools in a common storage area and only have to buy one hammer total. The example was also extended to other items such as the potential for sharing kitchen space and/or washing machines. However, one of the students raised the point that if every family in England started sharing tools rather than buying new ones, what would happen to the people in the developing countries who were making the tools? The student seemed indignant about the fact that these jobs would no longer be available, as though it were the burden of the consumer to continue consuming for the sake of the producer regardless of whether or not it was to the consumer's benefit.
I can see some limited merit in the fact that some populations in developing countries may have been institutionalized (perhaps forcibly or unwittingly) into relying upon these jobs. As such it would seem cruel and/or immoral to simply abandon them suddenly, leaving them with no job and a likely degraded environment. Yet I have a hard time believing that this could truly be a mainstream view in developing nations. Is it?
This brings me to my second case in point, a recent New York Times article entitled "Saudis Seek Payments for Any Drop in Oil Revenues". The article explains that Saudi Arabia is encouraging other OPEC nations to demand compensation for any planned cuts in greenhouse gas emissions agreed upon at the upcoming UN Climate Change Conference in Copenhagen, as those cuts will certainly impact oil revenues. Essentially, the article points out, that large cuts in greenhouse gas emissions could impact the Saudi Arabian government's budget, which is largely based on revenues raised from selling oil, by 16% over the next couple of decades. The article also offers expert opinions explaining that this is primarily a stalling and disrupting tactic that Saudi Arabia has been using since the 1992 summit in Rio de Janiero.
While at this scale it seems somewhat ludicrous (considering the $23 trillion Saudi Arabia is expected to make in oil revenues over the coming decades regardless of any progress at Copenhagen), it boils down to the same concept as the first case. That is, any reduction in consumption on the part of the consumer will damage the producer. Therefore, it should be considered morally reprehensible and/or require compensation. This premise, of course, flies directly in the face of the invisible hand concept and would not be likely to be accepted by those practicing sustainable consumption.
The Conclusion
Insofar as I have found some agreement between two such oppositional concepts as allowing the invisible hand to guide the markets and the tenants of sustainable consumption, I am confident in asserting that the premise of consumer burden is faulty! However, I must concede that countries (and corporations) who have worked diligently to institutionalize a cheap workforce in developing countries do have some moral obligation to at least ease the burden of transition away from ingrained practices. Lest the developing countries suffer the fate similar to (though much more abruptly than) the residents of Pittsburgh following the decline of the steel industry.
I am extremely curious about this point of view, which I have stumbled upon. Is this a typical reaction despite the expectation that continued or accelerated consumption will have the greatest impact upon developing nations?
Also if you are looking for the article, search for:
Saudis Seek Payments for Any Drop in Oil Revenues
Sincerely,
Sean Diamond
Really interesting post, Sean, I especially like the way you're bringing together ideas from different courses/readings to bring to bear on common subjects.
ReplyDeleteIt does seem odd that when producers don't want to change their ways, they often claim they're just responding to consumer demand, but as you suggest, the maintenance of that demand is quite an artificial - or at least deliberately manufactured - factor. I was also thinking about the question about putting people out of jobs if we cut consumption. The thing is, it does seem to be a (short-term) problem if looked at from the current worldview. But in a more sustainable world, would there not be more employment opportunities in green type service industries? (so it's just a matter of restructuring). Or, if we consume less, would we all work less, because we have less need for money to drive our consumer demand... and so work could be more evenly distributed among populations, perhaps with everyone working 3 days a week?
Well, I think another alternative to everyone working less could be that everyone simply works on different (and/or more useful) projects. For example, people in developing countries could produce products and services that could be used in their own country rather than on the other side of the world.
ReplyDeleteI agree - and James Robertson, an influential 'new economist' in his book 'Future Work' advocates an approach to work involving a portfolio of different options - some paid employment, some unpaid community work, some unpaid reciprocal exchange, and some unpaid domestic work. This would enable us to fulfill our needs for income, social contact, feeling useful, social reproduction and community activity, while equitably sharing out the paid emnployment more evenly across society (avoiding the present situation of people with no employment and others with too much).
ReplyDelete