Traditional economic theories are losing relevance. It starts with the very Definition of economics.
I came across a video from Richard Murphy that put into words something I had wrestled with for a while. Check it out HERE. It made me think.
He points out the description of what ecomics is from Investopedia:
“Economics is a social science concerned with the production, distribution, and consumption of goods and services. It’s comprised of broader macroeconomics and consumer-centric microeconomics.”
He went on to discuss how all modern economics is based on scarcity. Without scarcity, most of the theories lose a lot of their meaning. He highlights how we can certainly produce enough now to essentially eliminate scarcity, but instead, manufacture it.
Manufacturing scarcity isn’t actually creating scarcity; it is creating barriers. Creating barriers to producing and acquiring things that are needed by consumers. Furthermore, our entire system is built around generating demand as specifically as possible. You don’t just need a bag, you need a Gucci bag, and here are tons of reasons why. You see, if you just need a bag, the supply for them is not in short supply; Gucci, on the other hand, can only make so many, thus there is scarcity.
This manufacturing of scarcity is fueled by a curated desire for
“more.” Sometimes that desire for more is simply that: more stuff. The real driver, though, is more than others. The things that symbolize more wealth, more security, more competence, more desirability, more success. We aim to manufacture our own type of scarcity and become something rare and a better alternative to our peers. However, wherever there is more, there must be less in comparison. The game of scarcity and “more” is zero-sum, and we have to be honest, we prefer it that way. If everyone actually had the same buying power, how would we show that we are superior?
Scarcity and The Zero-Sum Legend
When many of the great economic minds were documenting the ideas and theories that are taught in schools of economics, scarcity was a reality. Technology, up until very recent history, could not produce abundance reliably and sustainably. That bag required people to make it, local people. Local, because shipping was not available for a scale that could serve the entire population.
Transportation was typically reserved for things that could not be obtained locally. Food, raw materials, or exotic items that were not producible in the local economy. If my town has cotton fields locally, gins to process it, and tailors to make clothes, it will be drastically cheaper to get my shirt here than shipping it on a small ship from the other side of the ocean. This elevated shipped goods as something that could not be done locally. This also ensured, more or less, self-sustaining local economies.
With our advances in manufacturing, logistics, and global trade, scarcity has been nearly eliminated. We can easily produce enough food to feed everyone. Americans alone waste enough food to feed medium-sized countries today. There is more than enough land and materials for everyone to have lodging. We have also developed the technology to produce more than enough energy for everyone to have their own abundance of it. Most of the issues we have with all these things are not the extraction of resources or producing goods; it is making them economically viable. Let me restate that:
The issue we have isn’t having enough; it is making enough money from what we have.
The Infinite Growth Problem
Show me your metrics and I will show you how to succeed. The driving metric for most economies is their Gross Domestic Product (GDP) growth. GDP is the total market value of all final goods and services produced within a country’s borders over a specific period. You can get this by adding things like the value of goods you produced, income generated, and spending. We have set the goal to have this number constantly increase. If GDP growth slows, we see it as a symbol of falling behind and aim to increase it more to make up for lost revenue in future periods.
So why, if we have established that we are wasting food, have enough energy, and could realistically meet the needs of the population, are we so obsessed with growth? Creating scarcity with the “more” mentality. We can’t say that we are the best if we are not producing, consuming, and exchanging more than others. It has nothing to do with efficiency, sustainability, quality of life, or actual progress; it is all to do with achieving the arbitrary goal of more. Again, whatever the most important metric is, that is what gets the attention.
Infinite growth is a primary contributor to inequality. Like compound interest, more begets more, growing the gap between the top and the bottom more every day and stretching the middle along the way. The capacity for growth in our system has officially now favored the upper echelons to an impossible level, nearly eliminating class mobility. The excuses and reasoning are no longer coherent. The gap has become too extreme to support meritocracy. It is hard to ignore that cheating is the only way to get ahead. Cheating that robs many others in pursuit of success.
This thought process is so deeply rooted in American thinking that I don’t know that we can separate it from our very identity, though. This obsession with “more” goes hand-in-hand with our obsession with the self. Much of the world today, but especially America, is obsessed with individualism. One of the worst things you can be in this society is, like everyone else, unoriginal, unextraordinary, or unsuccessful. Such normalcy haunts us. After all, we have spent generations with meritocratic narratives and were told that we can be anything we want, up to the person in charge. That is what we were told to be: useful, better, worthy of power. Just like more requires less, better requires worse, and power requires weakness.
Intuitive growth is healthy and necessary for a population to survive and thrive. New needs will arise, and new needs should be pursued. Growth should follow to meet the new needs; it makes sense. What it is in service to is where things can become misaligned. Creating new needs when it comes to bettering the lives of a large swath of the population is admirable. Creating needs to extract more resources from those people, not so much. That is where we are today, though, stimulating growth for growth’s sake. As that continues to become more difficult, as we manufacture false needs that no longer serve people, that growth must cannibalize the market. Consuming parts that work to feed the desire for more.
The Incoming Correction
The system is strained. The old economic models are not built for the economy we have created in the last century. They are too simple, too rigid, too slow, and ultimately misaligned with the needs of society today. All modern economics serve today is to distribute resources. Resources are closer to infinite than in all human history, and yet, they feel as if they are being doled out in ways that only match one’s level of greed and the depth of their pockets. People see this, experts and laymen alike. We know the current situation is not sustainable, and there is no agreed-upon solution, so we will be forced to live through the experiments of those at the top.
The reality is that, though they are intertwined, economics at the national level and economics on the personal level are diverging more every day. Just like the stock market does not accurately represent the economy, the national debt does not dictate personal debt… Unless you want to use one as an excuse for the other.
The metrics define the outcomes. On a national level, it is certainly time to introduce new metrics. In a world where scarcity is no longer the problem, distribution is. If we continue to allow the manufactured scarcity of true needs like food, housing, transportation, and basic medical care, we allow the creation of a system with pre-defined winners and losers. In a world without scarcity, we should be able to almost eliminate losers and still have winners. It is time to ditch GDP as the end-all be-all metric and move to something more like a happiness index. Still measurable, still capable of growth, but something understood by the population. We can vote on your policies to increase the happiness index. Jobs, economic growth, military strength, and municipal services all play vital roles in that. You aren’t changing the system; you are changing the metrics and thus the goals. At the end of the day, happy people don’t revolt; hungry people do.
On a personal level, you have the freedom to set your own metrics. It doesn’t have to be endless growth, or more than your neighbor. It can be fulfillment, purpose, and intentionality. “More” is getting harder to achieve in many ways, and seeing those with less is getting much easier, especially if you look under the hood of their possessions. It starts with really assessing your needs. Do you need more stuff, or do you need more savings? No matter how you slice it, more today means less tomorrow. I can’t tell you what you are sacrificing, but there is something you are giving up to have more now. I like to think of life not as zero-sum, but finite. You can extract more out of life, but each of us has limits. Like any ecosystem, extracting some of one element is normally fine and necessary. Extracting too much causes disruptions throughout the entire environment. You can never tell what is too much until it is too late. Mind what is important to you and how much you extract.
No one can predict the economy, and it is easier to see problems than solutions. The problems are becoming bigger and faster. As we rapidly approach the limits of infinite economic growth, we have to do our best to predict what is next to start taking action. For me, it is shifting my “more” mentality to “enough.” In self-preservation and protest, I am fighting my desire to consume needlessly. Like I would like to see the government do, I am moving away from my per capita contribution to GDP as my metric and paying attention to my happiness index. The stuff isn’t as nice as it used to be anyway.