America Beyond Consumerism

Has capitalist growth outlived its purpose?

By Thad Williamson | May/June 2008

This article is from the May/June 2008 issue of Dollars & Sense: The Magazine of Economic Justice available at

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This article is from the May/June 2008 issue of Dollars & Sense magazine.

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One of the great benefits of studying the history of economic ideas is coming to the recognition that the founding figures of capitalist economics, and in particular Adam Smith, author of the pivotal Wealth of Nations, were often deeply ambivalent about the acquisitive way of life. Consider the famous parable of the poor man 's son, presented by Smith in his Theory of Moral Sentiments:

The poor man's son, whom heaven in its anger has visited with ambition, when he begins to look around him, admires the condition of the rich. He finds the cottage of his father too small for his accommodation, and fancies he should be lodged more at his ease in a palace. He is displeased with being obliged to walk a-foot, or to endure the fatigue of riding on horseback. He sees his superiors carried about in machines, and imagines that in one of these he could travel with less inconveniency.... He thinks if he had attained all these, he would sit still contentedly, and be quiet, enjoying himself in the thought of the happiness and tranquility of his situation. He is enchanted with the distant idea of this felicity. It appears in his fancy like the life of some superior rank of beings, and, in order to arrive at it, he devotes himself forever to the pursuit of wealth and greatness. To obtain the conveniencies which these afford, he submits in the first year, nay in the first month of his application, to more fatigue of body and more uneasiness of mind than he could have suffered through the whole of his life from want of them. He studies to distinguish himself in some laborious profession. With the most unrelenting industry he labours night and day to acquire talents superior to all his competitors. He endeavours next to bring those talents into public view, and with equal assiduity solicits every opportunity of employment. For this purpose he makes his court to all mankind; he serves those whom he hates, and is obsequious to those whom he despises. Through the whole of his life he pursues the idea of a certain artificial and elegant repose which he may never arrive at, for which he sacrifices a real tranquility that is at all times in his power, and which if in the extremity of old age, he should at last attain to it, he will find to be in no respect preferable to that humble security and contentment which he had abandoned for it. It is then ... that he begins at last to find that wealth and greatness are mere trinkets of frivolous utility, no more adapted for procuring ease of body or tranquility of mind than the tweezer-cases of the lover of toys; and like them too, more troublesome to the person who carries them about with him than all the advantages they can afford him...

In his heart he curses ambition, and vainly regrets the ease and the indolence of youth, pleasures which are fled for ever, and which he has foolishly sacrificed for what, when he has got it, can afford him no real satisfaction. Adam Smith, traditionally regarded as the patron saint of capitalist economics, here avers that the fundamental engines of the market economy—ambition and acquisitiveness—rest on what he terms a “deception,“ the illusion that all the objects we spend our days striving for will make us happy.

Fast forward over 200 years. Here is how a contemporary economist, Juliet Schor of Boston College, describes “Greg,“ a sixth grader in a Boston suburb, in her 2004 book Born to Buy: The Commercialized Child and the New Consumer Culture:

Greg is an avid consumer. He loves professional wrestling, Gameboy, Nintendo, television, movies, junk food, and CDs (especially those with parental advisories(. Since he came to live with his [father and step-mother], they've had a succession of incidents, most of which resulted in Greg's losing privileges to one or another of these things. He isn't allowed to do wrestling moves on his younger sister, but he does, and he loses the right to watch wrestling. He's supposed to do his homework, but he has lied and said he doesn't have any so he can spend his time playing a new Gameboy. He's supposed to tell the truth, but he stole [his stepmom's] Snickers bar and denied it. He knows he's not allowed to have CDs with parental advisories, but he went behind [his parents]' back and asked his [biological] mother to buy them for him... Another couple described their son Doug as “the ultimate consumer.” He wanted to buy every product he saw advertised on television. Doug was now in sixth grade, and they were fighting constant battles. He would stay on the computer all day if they let him. He has a weakness for fast food. He has a lot of trouble holding on to money. His mother even described trying to sneak out to the store without him to avoid conflicts about buying stuff.

Schor was stunned to find that persistent parent-child conflicts over money and goods were widespread, not confined to a few severe cases like Greg and Doug. In a survey of some 300 Boston-area fifth and sixth graders, Schor found strong evidence of a causal relationship between heavier involvement in consumer culture and strained relationships with parents, greater feelings of boredom and physical pain, higher levels of depression and anxiety, and lower self-esteem.

This finding is troubling precisely because corporate advertisers, as Schor and others have amply documented, have become increasingly brazen in the past 10 to 15 years about marketing directly to children, with the explicit purpose of establishing brand identifications and consumer loyalty as early as possible. By age ten, the average American kid is aware of over 300 specific brand names. A particular goal of this marketing is to persuade children to nag their parents to buy them things. A recent study reveals that the average American child aged three to eight now nags his or her parents nearly five times a day for material goods. Furthermore, research shows that over 80% of parents respond positively to such nagging at least some of the time, and marketers have estimated that up to one-half of sales of popular products for kids are a direct result of children nagging their parents. Probably not coincidentally, since the 1970s, as the impact of commercial culture on childhood has increased, the observed mental and physical health outcomes of American children, including levels of depression, obesity, and attention deficit disorder, have worsened.

So maybe it's not good to be obsessed with consumer goods, or to be, consciously or subconsciously, the slave of some advertising executive who knows how to play on your insecurities, self-image, and aspirations. But isn't money, at some level, necessary to make us happy?

Here the answer is slightly more complicated, but a large body of research—much of it usefully summarized by political scientist Robert Lane in his 2000 book The Loss of Happiness in Market Democracies— suggests it is not at all inconsistent with the view Aristotle expressed over 2,000 years ago: we need some material goods to be happy, but not an excess of them. Consider evidence from the Social Capital Community Benchmark Survey, a survey of some 33,050 Americans conducted by the Saguaro Center for Civic Engagement at Harvard in 2000. Among many other topics, this survey asked people how happy they are, allowing researchers to assess the most important predictors of greater happiness. How does income stack up in importance compared to having friends, confidantes, and close family relationships, and to being an active member of the community?

The survey data suggest that holding other demographic factors equal, an individual who earns $30,000 to $50,000 a year, visits with relatives three times a month, has at least ten “close friends” and at least three people he or she can confide in, and belongs to a religious congregation as well as three other organizations has a 47.5% likelihood of self-reporting as “very happy.” [Note ] In contrast, consider someone demographically alike in all other respects who earns over $100,000 a year, but visits with relatives just one time a month, has only one to two “close friends,” has only one person to confide in, is not part of a religious congregation, and belongs to only one organization. That person—richer in income but poorer in social connections—is estimated to have just a 28.6% chance of feeling “very happy.”

Now, it's true that higher income, while not connected at all to family visits, is somewhat correlated with having more friends and confidantes and even more strongly associated with increased group memberships. Nor can anyone deny that economic circumstances influence well-being: controlling for other factors, moving from $30,000-$50,000 to over $100,000 a year in income is associated with a substantial rise in the likelihood of being “very happy”—from 34.4% to 45.3%. But the projected increase in the likelihood of being “very happy” associated with moving from having just three to five friends and two confidantes to over ten friends and at least three confidantes is even more substantial (from 32.2% to 44.2%). For most people, making five new friends and developing one or two especially close friendships are more realistic goals than doubling their income. The evidence suggests that expanding social ties is also a better strategy for finding happiness—especially if the alternative, chasing after more income, comes at the cost of fewer friends and weaker social connections. Income matters in shaping subjective well-being, but social connections matter more.

It would be misleading to leave the story at that, however. So far we have only been discussing raw income figures. But a closer look reveals that what people value more than their raw income is a sense of being satisfied with their economic circumstances. When we include both measures in statistical models predicting individual happiness, economic satisfaction predominates; it's a far more powerful predictor of well-being than absolute income. Controlling for income level, individuals who are “very satisfied,” “somewhat satisfied,” or “not at all satisfied” with their economic circumstances have sharply divergent chances of being very happy: 48.7%, 33.3%, and 20.8% respectively. In contrast, if we control for people's level of economic satisfaction, more income does relatively little to promote happiness: a leap from the $30,000–$50,000 income bracket to the over-$100,000 bracket implies an increase of just four percentage points in the predicted likelihood of being “very happy,” from 34.8% to 38.9%. Put another way, a person earning $30,000 to $50,000 who reports being “very satisfied” with her financial condition has, controlling for other factors, a 48.8% likelihood of being “very happy,” whereas a person earning over $100,000 who is only “somewhat satisfied” with her financial condition has just a 37.5% likelihood of being “very happy.” How much money one earns is, in itself, not an overwhelmingly decisive factor driving individual well-being, but being satisfied with what one has certainly is.

What is it that allows people to be happy with what they have? It could be that people who are psychologically disposed to be happier also tend to look more positively on whatever economic circumstances they find themselves in. But it's equally if not more plausible to think that two other factors drive economic satisfaction: a sense of economic security—in other words, knowing that you will be able to sustain your current lifestyle in the future—and freedom from the compulsion to compare your own versus others' income and consumption. But as scholars like Jacob Hacker and Robert Frank have pointed out, recent political- economic trends in the United States have had precisely the effect of weakening economic security and encouraging social comparisons. In his recent book Falling Behind, Frank insightfully discusses how the explosion in consumption by the super-rich in the last 20 years has shaped the behavior of middle- and upper-middle-class households, who feel that they too should have a bigger house or, to take Frank's favorite illustration, a more expensive barbecue grill.

If Consuming More Doesn't Make Us Happier, What's the Point of Capitalism?

This brings us back to Adam Smith, who anticipated much of this body of evidence when he described the poor man's son who forsakes enjoyment of life for a life of industry and self-advancement as suffering from a fundamental delusion. Yet this insight did not lead Smith to reject capitalism. On the contrary, he thought this deception had a socially productive purpose: namely, helping to fuel economic progress, the advancement of industry, and the gradual rise of living standards—not just the living standards of the rich, but the living standards of average working people as well.

Indeed, in the subsequent 200 years, capitalism—or more accurately, capitalism modified by a range of state interventions, public spending, social welfare programs, and labor laws—has been remarkably successful in lifting overall living standards in places like the United Kingdom and the United States (albeit with often enormous social costs borne by millions of nameless workers who labored for capitalist employers under horrific conditions, enforced by the threat of hunger, and in some cases literally at gunpoint). In the 20th century alone, per capita income in the United States increased eightfold and life expectancy rose from 49 to 77 years.

That's the good news. The bad news is, median wage growth has stalled in the United States in the last 30 years, and has gone backwards for the least educated Americans. Total hours worked per household have risen as women work longer hours without a corresponding reduction in men's work hours. The hope of a secure, stable job has all but disappeared—hence today's widespread feelings of economic insecurity and dissatisfaction across income brackets. More to the point, there is good reason to doubt that simply continuing to “grow the economy” is going to address any of these concerns—or make most people any happier.

Consider just how rich a society this is. The U.S. Gross Domestic Product now stands at $13.8 trillion. If it were divided equally, that would come to over $180,000 for a family of four, or about $125,000 in take-home pay assuming an effective tax rate of 30%. In other words, the U.S. economy is large enough to provide a very comfortable life for each and every American.

But it doesn't. Why not?

A skyrocketing degree of economic inequality is one reason. The median income for married couple households in 2006 was $70,000, with of course many families making far, far less. While the income and wealth of the top 1% spike to unimaginable levels, many Americans simply do not have enough money to get by. With inequality comes not just poverty, but also widening disparities in status which themselves help fuel ever-greater levels of consumption as peo- ple spend more and more to try to keep up with the (ever-richer) Joneses.

The second reason is the widespread fact of economic insecurity. People whose jobs, health coverage, wage levels, and pensions are fragile naturally feel pressure to accumulate and advance as far as they can, lest they fall behind and lose what they now have. And, every week, we read about workers and communities who do in fact lose what they have as layoffs and plant shutdowns are announced. As we have seen, survey data (as well Adam Smith's intuitions) suggest that what matters most for well-being is the sense that one has enough and can feel comfortable about the future—that is, the very thing that the American economy fails to provide to the vast majority of families.

This insecurity is most potent in blue-collar America, but the middle class does not escape it either. Consider the life pattern of the average white-collar American. To go to college and get ahead, you have to borrow money and incur debt; to pay off the debt, you're under pressure to land a high-paying job; when you start a family, financial responsibilities multiply: you take on a mortgage, begin paying for child care or else accept a drop in household income, and within a few years face the stark realization that unless you make enough to either pay for private education or live in a neighborhood with good public schools, your children's education will suffer; and by the time you are finally done paying your children's college costs, it's already past time to begin building a nest egg for retirement and a cushion against illness. At no point does it seem to most people prudent— or even possible—simply to get off the treadmill.

Little wonder, then, that the Harvard social capital survey found just 26% of Americans to be “very satisfied” with their economic status (including just 54% of those making over $100,000 a year). It is impossible to address the issue of runaway consumerism without also addressing the issue of economic security. Indeed, as Knox College psychologist Tim Kasser, author of The High Price of Materialism, notes, a host of studies by psychologists and others demonstrate a strong relationship between numerous kinds of insecurity, especially economic insecurity, and the development of a materialist outlook on life.

This brings us to the third major reason the U.S. economy fails to foster a comfortable life for most Americans: long hours and overwork. Stress, fatigue, and sleep deprivation have become hallmarks of the American way of life. Over three-quarters of Americans report feeling stressed at least “sometimes,” with a full one-third saying they experience stress “frequently.” (The figures are higher still for persons holding jobs and for parents.) Likewise, roughly one-half of all Americans—including three-fifths of employed workers, parents, and persons aged 18 to 49—say they do not have enough time to do what they would like to in daily life, such as spend time with friends. Harvard political scientist Robert Putnam reports that the percentage of Americans regularly eating dinner together declined by one-third between 1977 and 1999. Research by the Families and Work Institute indicates that almost two-thirds (63%) would like to work fewer hours. On average those questioned said they would reduce their work week by more than ten hours if they could. But what people want and what the political economy provides are two different things: in the past generation, the centuries-long trend towards reducing the length of the work week has come to a screeching halt.

So the U.S. economy, as presently constituted, produces tremendous inequality, insecurity, and overwork. Nor is there reason to think that growing from a $14 trillion to, say, a $20 or $25 trillion economy will change these destructive trends.

It doesn't have to be this way. There is no inherent reason why we could not cease to regard more income as a good in itself, but instead alter our political economy so that it provides what Americans really need and want: greater employment security, stronger protection against the pitfalls of poverty, and more free time. We could choose to have the public guarantee employment opportunities for every willing worker, to put a floor on income, to decommodify health care and education, to reduce the gross inequalities of income and status which themselves help fuel consumerism, and to take future productivity growth in the form of more time, not more stuff.

To be sure, doing so would not be easy, and would require substantial institutional changes, possibly even a shift to a system that, as economist Gar Alperovitz puts it, lies “beyond capitalism.” Many careful analysts, including Alperovitz and Schor, have thought long and hard about just how that could happen; indeed, there has been a rich debate in the past 15 years about the long-term possibilities of alternative political-economic frameworks that would reshape the logic of our current system.

It would be very easy to dismiss these ideas as “crazy” or “utopian.” But, I submit, the moral task Adam Smith set for capitalism—that of making it economically possible for each and every person to live a materially comfortable life— has been achieved, at least in the advanced industrial ized countries. The acquisitive life that goes with capitalism Smith never endorsed as good in itself. Neither should we, especially given the unhealthy consequences of an excessive consumerism that is now warping children's lives from their earliest years, and given the potentially planet-melting consequences of a way of life based on continual increases in consumption and economic activity.

That wasn't what Adam Smith wanted. Nor was it what the most influential and pragmatic of 20th-century economists, John Maynard Keynes, the man many credit with saving capitalism from itself, wanted. In a famous but too often neglected essay called “Economic Possibilities for Our Grandchildren,” Keynes looked to a time when at last it would be possible for humanity (at least in the affluent nations) to turn its attention away from acquisition and toward broader moral concerns—such as “how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.”

That time has not yet come. But the remaining barriers to it are political, not economic; and the great task of this century is to assure that our prodigious economic capacities are directed towards supplying the real goods of human life: material security, meaningful work, and plentiful time for the friends and family who are the most lasting source of human happiness.

a Dollars & Sense associate, is assistant professor of leadership studies at the University of Richmond. He is the author of four books, including Sprawl, Justice, and Citizenship, forthcoming from Oxford University Press.

Adam Smith, The Theory of Moral Sentiments (1759) (Liberty Fund, 1984); Juliet Schor, Born to Buy: The Commercialized Child and the New Consumer Culture (Scribner, 2004); Tim Kasser, The High Price of Materialism (MIT Press, 2002); “Half of Americans are Pressed for Time; A Third Are Stressed Out,” Gallup News Svc, May 3, 2004; “No time for R&R,” Gallup News Svc, May 11, 2004; “Who Dreams, Perchance to Sleep?” Gallup News Svc, Jan. 25, 2005; Robert Putnam, Bowling Alone: The Collapse and Revival of American Community (Simon & Schuster, 2000); J. Bond, E. Galinsky, and J. Swanberg, The 1997 National Study of the Changing Workforce, Families and Work Institute, 1998; Gar Alperovitz, America Beyond Capitalism: Reclaiming Our Wealth, Our Liberty, and Our Democracy (Wiley, 2004); Jerome Segal, Graceful Simplicity: Towards a Philosophy and Politics of Simple Living (Henry Holt, 1999); Juliet Schor, A Sustainable Economy for the 21st Century (Open Media, 1995); John Maynard Keynes, Essays in Persuasion (W.W. Norton, 1963); Jacob S. Hacker, The Great Risk Shift (Oxford Univ. Press, 2006); Robert H. Frank, Falling Behind: How Rising Inequality Harms the Middle Class (Univ. of Calif. Press, 2007); Robert E. Lane, The Loss of Happiness in Market Democracies (Yale Univ. Press, 2000); Robert M. Biswas-Diener, “Material Wealth and Subjective Well-Being,” in M. Eid and R. J. Larsen, eds., The Science of Subjective Well-Being (Guilford Press, 2008).

Note In this analysis, I control for citizenship status, the language the survey was conducted in, years lived in the community, marital status, number of children at home, gender, age, race, educational attainment, employment status, commuting time, and region of the country. I deliberately exclude from the analysis several factors which predict happiness but which are themselves closely related to economic levels, so as not to underestimate the influence of income: these include personal health, satisfaction with the oneีs neighborhood, homeownership status, and other “neighborhood effects.”

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