Co-authored with Edward Skidelsky
Until fairly recently economists envisaged three stages of economic development.
First, there was the stage of capital accumulation started by the industrial revolution. The Marxist historian Eric Hobsbawm called it the age of capital. Society saved a large part of its income to invest in capital equipment. The world gradually filled up with capital goods.
This stage, economists thought, would be followed by the age of consumption, in which people began realising the fruits of their previous frugality. They would save less and consume more, as the returns to new investment fell and the possibilities of consumption expanded.
Then would come the third and final stage, the age of abundance. With a surfeit of consumption goods, people would start swapping greater consumption for greater leisure. The world of work would recede. This was supposed to be the end point of the economic phase of history.
Much of the world has not yet reached the age of consumption. The Chinese, for example, still save and invest on a colossal scale. Our problem is that western societies remain stuck in the age of consumption. We are much, much richer than we were 100 years ago, but hours of work have not fallen nearly as much as productivity has risen, and we go on consuming more than ever. We seem unable to say “enough is enough”. Why not?
One starting point to answering this question might be Keynes’ futuristic essay Economic Possibilities for our Grandchildren, published in 1930. In this essay he predicted that by now we would only need to work 15 hours a week “to satisfy the old Adam in us”. The rest would be leisure time. What did he get wrong?
We can concede straight away that the earlier economists, taking their cue from the privations around them, suffered from a certain poverty of imagination. They thought in terms of quantities: you can eat only so much food, have so many pairs of shoes, live in so many houses, drive so many cars. They failed to allow for continued improvement in the quality of goods, which stimulates the appetite for serial consumption, and so keeps up the hours of work.
But we must not concede too much under this head. Many improvements are negligible and, even when positive, consumers are constantly seduced by advertisers into over-estimating their benefits – as with the wonderful effects of all those innovative financial products.
A more serious charge is that many of the older generation of economists underestimated insatiability. Having more seems to make us want more, or different. This is partly because we are by nature restless and easily bored. But it is mainly because wants are relative, not absolute: the grass is always greener on the other side. The richer we become, the more we feel our relative poverty.
There is a third factor, however, for which the earlier economists can’t really be blamed. They were not egalitarians, but they did think that growing prosperity would lift up all boats. They did not foresee that the rich would race ahead of everyone else, capturing most of the fruits of increased productivity. (Karl Marx is the main exception here.)
The result has been to leave big holes in our consumption society. A lot of people still do not have enough for a good life. In Britain, 13m households, 21 per cent of the total, live below the official poverty line. There is a lot of underconsumption going on relative to what society is producing. Earlier socialists called it “poverty in the midst of plenty”.
This partly explains the huge rise in debt, as people aim to compensate for stagnating incomes by borrowing.
So what is to be done? First, we must convince ourselves that there is something called the good life, and that money is simply a means to it. To say that my purpose in life is to make more and more money is as insane as saying my purpose in eating is to get fatter and fatter. But second, there are measures we can take collectively to nudge us off the consumption treadmill.
One is to improve job security. Government should restore the full employment guarantee. This does not mean guaranteeing everyone a 40-hour a week job. Government should gradually reduce the maximum allowable hours of work for most occupations, guaranteeing a job for everyone who wants to work that amount of time.
At the same time it should institute an unconditional basic income for all citizens. This would aim to improve the choice between work and leisure. Critics say this would be a disincentive to work. That is precisely its merit in a society which should be working less and enjoying life more.
Third, government should reduce the pressure to consume by curbs on advertising. We already have curbs to guard against specific harms: it would not be a big jump to recognise that excessive consumption is itself harmful – to the environment, to contentment, to any mature conception of the good life.
Underpinning these measures would be a steeply progressive consumption tax, with a top bracket of, say, 75 per cent. This would be a tax on what is spent, not on earnings. It would reducethe pressure to consume, finance basic income, and encourage private saving for old age and infirmity.
All these proposals are open to criticism. However, unless we take a collective decision to get off the consumption treadmill we will never get to the point of saying “enough is enough”. And if we don’t do that, we will go on wondering what all that extra money was for.