As pandemic restrictions come down, growth projections are looking up. Thanks to its high vaccination rates, the UK’s outlook has been especially favourable, with growth now estimated by the OECD at 7.2 per cent for 2021. These numbers will continue to be tweaked, but one thing is certain: the recovery, when it comes, will be driven by consumer spending.
It has long been so: ours is an economy fuelled by private domestic consumption, which represents about 65 per cent of the UK economy, and a greater portion still of the US one. As in all affluent societies, the greater part of this spending no longer serves to procure the basics of life, such as food and shelter and physical comfort. Instead, it is directed at a range of social functions, from gaining the esteem and consideration of others to expressing one’s own identity. Even the organic watercress bought at the farmers’ market serves more as signal than salad.
That is why, when the social aspect of our lives was suddenly relegated to square images on our computer screens, private consumption fell as sharply as it did. It is also why the category of goods that will have the greatest surge of demand this year, after the greatest plunge in the past 18 months, is apparel and beauty products.
Looking beyond the coming bout of post-pandemic euphoria, however, it is unclear whether consumer spending will remain the engine of growth it has been since at least the industrial revolution. A number of clues suggest it will not. The implication is that post-industrial nations such as the UK may be headed for much lower rates of growth for the foreseeable future.
Yet such a slowdown need not spell doom. It might be, instead, the byproduct of social progress: a plateau of high economic achievement where people can afford to devote themselves more to activities not primarily designed to contribute to increased output.
It was by adopting growth as our shared objective that we achieved such unprecedented prosperity in the first place. Even in the middle of a devastating pandemic, our societies remain the wealthiest, healthiest and safest that have ever existed on Earth. It is becoming more apparent, however, that further advances in wellbeing will not be gained by creating more output.
Unexpectedly, this evolution is already reflected in changing tastes. In a trend that the pandemic has only accelerated, the conspicuous consumer is now looked down on by a rising entrepreneurial class which cuts across traditional income divides.
In its place, we are witnessing the rise of what marketing scholars call inconspicuous consumption: a spurning of loud labels or transparent attempts to impress, matched by an embrace of “sustainability”, “purpose” and “wellness” as the new markers of distinction.
Surveys show that consumers are most eager to resume spending on services such as restaurant meals and travel, rather than goods. This is part of a generalised trend in developed economies and it, too, has well-known effects: unlike manufactured goods, service industries are less susceptible to productivity improvements.
Lest these seem like superficial matters of affluent consumers’ taste, they constitute one part of a package of preferences affecting all realms of life. Take workers. It has become a trope to say that millennials value “purpose over pay cheque” when choosing careers, but they seem willing to act on it: a 2019 Deloitte survey found that 49 per cent of millennials planned to quit their job in the next two years.
Political attitudes are evolving in tandem. Whether from fear of the proverbial pitchforks or from a recognition that they are themselves negatively affected by inequality, some of the wealthy and many of the highly educated are shifting their views on redistribution, giving rise to what Thomas Piketty has dubbed the “Brahmin left”.
The past decade has demonstrated that there is a limit to people’s tolerance of the social and environmental costs that are now often seen as the corollaries of maximising aggregate wealth. Past that point, increases in average income no longer produce equal welfare improvements. There is reason to think that in affluent economies on both sides of the Atlantic, we may have reached that limit.
What is new is that a growing number of people are realising it and adjusting their behaviour accordingly — as consumers, workers and voters. We may be at a breaking point in a two-century-long period of high growth. And we may also emerge much the better for it.
Krzysztof Pelc is an associate professor of political science at McGill University in Montreal, Canada, and a winner of the Political Economy Club essay prize
Source: Economy - ft.com
