Capitalism / Consumerism ?
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There's been plenty of comments lately that capitalism as an economic model is broken (naturally enough given the present state of the world's economy). However a recent comment by one economist set me thinking - as he stated, "capitalism is about the acquiring of capital". What this meant to me is that the present dominant economic model in the world is not actually capitalism, but consumerism. The two look very similar, but have fundamentally different objectives. If that's the case, then I'd actually agree that the present economic model (of consumerism) is broken. Following that the economic stimulus packages that promote spending (including those that advocate tax breaks) are nothing more than trying to reinflate a bubble that has already burst. Has anyone seen any good descriptions that distinguish between consumerism and capitalism, or that has seen sensible well-reasoned alternate arguments as to what the likely impacts of the "let's get them spending" ecomoronic stimulust packages will be, as opposed to current "just make things better" line. Please note I'm all for economic stimulus - studying the Great Depression makes you realise that doing nothing, doing too little or doing it too late are the most moronic ideas of all. And I realise I'm not going to change governmental policy on this one. Instead I just want to improve my understanding of what these attempts at economic stimilus will really result in.
I just love Koalas - they go great with Bacon.
Lee Humphries wrote:
There's been plenty of comments lately that capitalism as an economic model is broken (naturally enough given the present state of the world's economy). However a recent comment by one economist set me thinking - as he stated, "capitalism is about the acquiring of capital". What this meant to me is that the present dominant economic model in the world is not actually capitalism, but consumerism. The two look very similar, but have fundamentally different objectives.
This is bollocks. What defines capitalism is having industry predominantly privately owned and having most economic activity coordinated by markets. Within capitalism, everyone consumes and some people accumulate capital. They do the latter for various reasons: 1. for their retirement or to leave to their children, 2. to own their own home (which is a capital asset), 3. as savings for a large purchase (a car or college education or...). A minority seeks to accumulate wealth way beyond anything they (or their children) can consume, because they can and because accumulating wealth and all that goes with it is a fun thing for them to do.
Lee Humphries wrote:
If that's the case, then I'd actually agree that the present economic model (of consumerism) is broken. Following that the economic stimulus packages that promote spending (including those that advocate tax breaks) are nothing more than trying to reinflate a bubble that has already burst.
Both bubbles and the crash that follows a bubble represent overshooting. Trying to moderate a crash is not the same thing as re-inflating a bubble.
Lee Humphries wrote:
Has anyone seen any good descriptions that distinguish between consumerism and capitalism
They are not alternatives. Consumerism is an aspect of capitalism, but consumerism can also exist under, for example, socialism.
John Carson
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Lee Humphries wrote:
There's been plenty of comments lately that capitalism as an economic model is broken (naturally enough given the present state of the world's economy). However a recent comment by one economist set me thinking - as he stated, "capitalism is about the acquiring of capital". What this meant to me is that the present dominant economic model in the world is not actually capitalism, but consumerism. The two look very similar, but have fundamentally different objectives.
This is bollocks. What defines capitalism is having industry predominantly privately owned and having most economic activity coordinated by markets. Within capitalism, everyone consumes and some people accumulate capital. They do the latter for various reasons: 1. for their retirement or to leave to their children, 2. to own their own home (which is a capital asset), 3. as savings for a large purchase (a car or college education or...). A minority seeks to accumulate wealth way beyond anything they (or their children) can consume, because they can and because accumulating wealth and all that goes with it is a fun thing for them to do.
Lee Humphries wrote:
If that's the case, then I'd actually agree that the present economic model (of consumerism) is broken. Following that the economic stimulus packages that promote spending (including those that advocate tax breaks) are nothing more than trying to reinflate a bubble that has already burst.
Both bubbles and the crash that follows a bubble represent overshooting. Trying to moderate a crash is not the same thing as re-inflating a bubble.
Lee Humphries wrote:
Has anyone seen any good descriptions that distinguish between consumerism and capitalism
They are not alternatives. Consumerism is an aspect of capitalism, but consumerism can also exist under, for example, socialism.
John Carson
But there is a difference between capitalism and pathological consumerism, John. While I don't disagree that capital accumulation is a good thing, there is a problem when, as I said in my post above, goods with little social utility exceed the value of goods with high social utility. So while consumerism is an aspect of capitalism, capitalism should not be secondary to consumerism. Also, wealth accumulation is fine, but wealth hoarding is not.
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Lee Humphries wrote:
There's been plenty of comments lately that capitalism as an economic model is broken (naturally enough given the present state of the world's economy). However a recent comment by one economist set me thinking - as he stated, "capitalism is about the acquiring of capital". What this meant to me is that the present dominant economic model in the world is not actually capitalism, but consumerism. The two look very similar, but have fundamentally different objectives.
This is bollocks. What defines capitalism is having industry predominantly privately owned and having most economic activity coordinated by markets. Within capitalism, everyone consumes and some people accumulate capital. They do the latter for various reasons: 1. for their retirement or to leave to their children, 2. to own their own home (which is a capital asset), 3. as savings for a large purchase (a car or college education or...). A minority seeks to accumulate wealth way beyond anything they (or their children) can consume, because they can and because accumulating wealth and all that goes with it is a fun thing for them to do.
Lee Humphries wrote:
If that's the case, then I'd actually agree that the present economic model (of consumerism) is broken. Following that the economic stimulus packages that promote spending (including those that advocate tax breaks) are nothing more than trying to reinflate a bubble that has already burst.
Both bubbles and the crash that follows a bubble represent overshooting. Trying to moderate a crash is not the same thing as re-inflating a bubble.
Lee Humphries wrote:
Has anyone seen any good descriptions that distinguish between consumerism and capitalism
They are not alternatives. Consumerism is an aspect of capitalism, but consumerism can also exist under, for example, socialism.
John Carson
John Carson wrote:
Consumerism is an aspect of capitalism
This is a good simple start at what I was after, thanks. I actually wasn't stating that consumerism and capitalism are alternates, but just simply that they are not the same thing. It seems that much of the world has had a consumerism driven model (or depends directly on another country that does) for some time now, probably since the time that 'consumer credit' in the form of credit cards began to be heavily promoted. For so many it seems that the acquiring of consumer items exceeds in priority the building up of capital - That's why I was wondering whether its more appropriate to call it consumerism as an economic model, rather than capitalism.
I just love Koalas - they go great with Bacon.
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But there is a difference between capitalism and pathological consumerism, John. While I don't disagree that capital accumulation is a good thing, there is a problem when, as I said in my post above, goods with little social utility exceed the value of goods with high social utility. So while consumerism is an aspect of capitalism, capitalism should not be secondary to consumerism. Also, wealth accumulation is fine, but wealth hoarding is not.
73Zeppelin wrote:
Also, wealth accumulation is fine, but wealth hoarding is not.
Where would you draw the line that distinguishes the two. Or is it a case of different horses for different courses as it could easily mean differing things to differing people. Consumerism is a lifestyle choice. Those with large disposable incomes can and do spend their funds on high value low volume production goods thus the concept of luxury comes into play. Yet, both large and small income persons/families still need to eat, still need a roof over their heads. But the quality of the food and roof can vary in remarkable ways.
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73Zeppelin wrote:
Also, wealth accumulation is fine, but wealth hoarding is not.
Where would you draw the line that distinguishes the two. Or is it a case of different horses for different courses as it could easily mean differing things to differing people. Consumerism is a lifestyle choice. Those with large disposable incomes can and do spend their funds on high value low volume production goods thus the concept of luxury comes into play. Yet, both large and small income persons/families still need to eat, still need a roof over their heads. But the quality of the food and roof can vary in remarkable ways.
I'd probably draw the line at the limit where savings exceeds investment. That's wealth hoarding and is usually associated with economic downturns. You are right - consumerism is a lifestyle choice, but that lifestyle is facilitated by things like easy credit. Easy credit is not what I would call a fundamental good; it's a frivolous good.
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There's been plenty of comments lately that capitalism as an economic model is broken (naturally enough given the present state of the world's economy). However a recent comment by one economist set me thinking - as he stated, "capitalism is about the acquiring of capital". What this meant to me is that the present dominant economic model in the world is not actually capitalism, but consumerism. The two look very similar, but have fundamentally different objectives. If that's the case, then I'd actually agree that the present economic model (of consumerism) is broken. Following that the economic stimulus packages that promote spending (including those that advocate tax breaks) are nothing more than trying to reinflate a bubble that has already burst. Has anyone seen any good descriptions that distinguish between consumerism and capitalism, or that has seen sensible well-reasoned alternate arguments as to what the likely impacts of the "let's get them spending" ecomoronic stimulust packages will be, as opposed to current "just make things better" line. Please note I'm all for economic stimulus - studying the Great Depression makes you realise that doing nothing, doing too little or doing it too late are the most moronic ideas of all. And I realise I'm not going to change governmental policy on this one. Instead I just want to improve my understanding of what these attempts at economic stimilus will really result in.
I just love Koalas - they go great with Bacon.
At least to my understanding consumerism and capitalism are not at all the same thing. Capital is persistent: buildings, infrastructure, and capability. Consumer goods are consumed - they are one time use and have no persistent value. Capitalism is all about the acquisition/creation of capital, not the consumption of goods. The production of consumer goods is a means to the creation of capital (and may require capital itself). but consumer goods are not themselves capital, nor are consumers necessarily capitalists.
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John Carson wrote:
Consumerism is an aspect of capitalism
This is a good simple start at what I was after, thanks. I actually wasn't stating that consumerism and capitalism are alternates, but just simply that they are not the same thing. It seems that much of the world has had a consumerism driven model (or depends directly on another country that does) for some time now, probably since the time that 'consumer credit' in the form of credit cards began to be heavily promoted. For so many it seems that the acquiring of consumer items exceeds in priority the building up of capital - That's why I was wondering whether its more appropriate to call it consumerism as an economic model, rather than capitalism.
I just love Koalas - they go great with Bacon.
Lee Humphries wrote:
It seems that much of the world has had a consumerism driven model (or depends directly on another country that does) for some time now, probably since the time that 'consumer credit' in the form of credit cards began to be heavily promoted. For so many it seems that the acquiring of consumer items exceeds in priority the building up of capital - That's why I was wondering whether its more appropriate to call it consumerism as an economic model, rather than capitalism.
Consumerism is not a precisely defined term. Often it is used to suggest excess, e.g., that people give too much priority to buying consumer goods versus, say, focussing on family. You seem to be using "consumerism" to suggest an excess of consumption spending relative to income, fueled by debt. This certainly doesn't define an economic model. Capitalist societies have historically shown substantial variation in savings rates, just as they have shown substantial variation in hours of work, level of international trade and much else besides. The economic system is still capitalist, regardless of the levels of any of these things, just as a computer is still a computer regardless of its hard disk size or CPU speed. Consumer borrowing is not automatically a problem. However, along with any sort of borrowing, it is a problem if those doing the borrowing are unable to repay the loan. Such situations are a failure on the part of both borrowers (for financially over-committing) and lenders (for not accurately assessing the risk of the loan). To the extent that such failures are a problem, their occurrence can be lessened by appropriate regulation of lending institutions. Consumer borrowing or, more generally, a lack of saving can also be a problem if it means that society is not investing enough in enhancing the productivity of the economy. Whatever may be possible in general, to the extent that the current economic crisis is the result of indebtedness, the problem is not so much a lack of saving and investment (the productive capacity of the economy now is much the same as it was a year ago when there was no crisis), it is that people borrowed more than they could repay and lenders have been harbouring false beliefs about the likelihood of repayment. When people realise the truth, you get a financial crisis as people react to the bad news.
John Carson
modified on Wednesday, March 4, 2009 8:01 AM
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At least to my understanding consumerism and capitalism are not at all the same thing. Capital is persistent: buildings, infrastructure, and capability. Consumer goods are consumed - they are one time use and have no persistent value. Capitalism is all about the acquisition/creation of capital, not the consumption of goods. The production of consumer goods is a means to the creation of capital (and may require capital itself). but consumer goods are not themselves capital, nor are consumers necessarily capitalists.
Rob Graham wrote:
At least to my understanding consumerism and capitalism are not at all the same thing. Capital is persistent: buildings, infrastructure, and capability. Consumer goods are consumed - they are one time use and have no persistent value.
True.
Rob Graham wrote:
Capitalism is all about the acquisition/creation of capital, not the consumption of goods.
The Soviet Union in the 1930s was also all about capital accumulation and consumption was cut to starvation levels. Capital accumulation is not uniquely associated with, nor does it define, capitalism. Capitalism is defined by private ownership of capital and the use of the market. Certainly capitalists typically seek to accumulate capital, but (ongoing) capital accumulation is neither necessary nor sufficient for capitalism. The driving force of capitalism is the pursuit of profit. That profit may in principle be used either for capital accumulation or for capitalist consumption.
John Carson
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Rob Graham wrote:
At least to my understanding consumerism and capitalism are not at all the same thing. Capital is persistent: buildings, infrastructure, and capability. Consumer goods are consumed - they are one time use and have no persistent value.
True.
Rob Graham wrote:
Capitalism is all about the acquisition/creation of capital, not the consumption of goods.
The Soviet Union in the 1930s was also all about capital accumulation and consumption was cut to starvation levels. Capital accumulation is not uniquely associated with, nor does it define, capitalism. Capitalism is defined by private ownership of capital and the use of the market. Certainly capitalists typically seek to accumulate capital, but (ongoing) capital accumulation is neither necessary nor sufficient for capitalism. The driving force of capitalism is the pursuit of profit. That profit may in principle be used either for capital accumulation or for capitalist consumption.
John Carson
That sounds right to me. So the OP is confused a bit, what is out of joint is that the current capitalism as exhibited by several markets (equities, commodities, and real estate) have become distorted toward excess pursuit of profit for consumerism to the detriment of real capital formation, accompanied by excessive leveraging of existing capital.
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I think one of the key differences between capitalism and pathologic consumerism is as follows. Under "healthy" capitalism, producers produce goods that are bought by consumers. Producers profit and consumers have the freedom to purchase goods. This is good for producers and for consumers, as long as all consumers have equal access to the good - producers generate wealth and consumers benefit by having access to important, let's call them fundamental, goods. Under pathologic consumerism, what we can observe is the emergence of two separate classes - a wealthy class who have too few needs (i.e. insufficiently needy) and a poorer class that are overly needy as a result of having too little wealth. It almost sounds like socialism, but it's not. Capitalism should provide for real human needs, not excessive needs or, put another way, frivolous goods. One possible way to differentiate consumerism from capitalism then, is when the market for frivolous goods exceeds the market for essential goods in the presence of a substantial demographic that has insufficient access to fundamental goods. Equvalently, a priveleged subclass of economic agents begin to dictate what the "free market" provides, resulting in an asymmetric goods market that favours frivolous over core goods. EDIT: As an example, mortgages would be a fundamental good, securitized mortgages would be a frivolous good.
modified on Wednesday, March 4, 2009 3:54 AM
73Zeppelin wrote:
Producers profit and consumers have the freedom to purchase goods.
I would not quarrel with that, but I would add "and both have the ability to accumulate capital, the producer by pricing his good correctly, the consumer by being a saver as well." One of the primary results of the mess we have created, it seems to me, is that consumers and producers both have seen their capital disappear. Obama tells us not to worry about what the stock market is doing, but anyone who had placed their savings, i.e. capital, in a 401K (and investing one's capital in money-making organizations is exactly what one is supposed to do, or so I have been told) can hardly not worry.
Jon Smith & Wesson: The original point and click interface Algoraphobia: An exaggerated fear of the outside world rooted in the belief that one might spontaneously combust due to global warming.
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I'd probably draw the line at the limit where savings exceeds investment. That's wealth hoarding and is usually associated with economic downturns. You are right - consumerism is a lifestyle choice, but that lifestyle is facilitated by things like easy credit. Easy credit is not what I would call a fundamental good; it's a frivolous good.
Easy credit or not, yet without this consumerism, capitalism is doomed to failure. Leslie Sklair (London School of Economics) claims (in books and articles of 2001 and 2002), in relation to cultural-ideological transnational practices, that consumerism contributes to the survival of capitalism as it seeks to convince people that such a lifestyle offers them some degree of fulfillment and without consumerism, the rationale for continuous capitalism dissolves. This downloadable RTF document TRANSNATIONAL PRACTICES AND CAPITALIST GLOBAL GLOBALIZATION - Leslie Sklair [^] is an interesting read.
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Rob Graham wrote:
At least to my understanding consumerism and capitalism are not at all the same thing. Capital is persistent: buildings, infrastructure, and capability. Consumer goods are consumed - they are one time use and have no persistent value.
True.
Rob Graham wrote:
Capitalism is all about the acquisition/creation of capital, not the consumption of goods.
The Soviet Union in the 1930s was also all about capital accumulation and consumption was cut to starvation levels. Capital accumulation is not uniquely associated with, nor does it define, capitalism. Capitalism is defined by private ownership of capital and the use of the market. Certainly capitalists typically seek to accumulate capital, but (ongoing) capital accumulation is neither necessary nor sufficient for capitalism. The driving force of capitalism is the pursuit of profit. That profit may in principle be used either for capital accumulation or for capitalist consumption.
John Carson
John Carson wrote:
The driving force of capitalism is the pursuit of profit.
But isn't it fair to define profit as the excess of earned income over expenses? A worker - say an economist or a game programmer - who usually spends less than he takes in is accumulating capital, while a congressman or a banker who has amassed a great deal of easily obtainable credit and is using it to supplement his earnings in order to support a lifestyle the cost of which exceeds his earned income is a consumer, nothing else. Of course, there's always the day when the credit cards max out. . .
Jon Smith & Wesson: The original point and click interface Algoraphobia: An exaggerated fear of the outside world rooted in the belief that one might spontaneously combust due to global warming.
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Easy credit or not, yet without this consumerism, capitalism is doomed to failure. Leslie Sklair (London School of Economics) claims (in books and articles of 2001 and 2002), in relation to cultural-ideological transnational practices, that consumerism contributes to the survival of capitalism as it seeks to convince people that such a lifestyle offers them some degree of fulfillment and without consumerism, the rationale for continuous capitalism dissolves. This downloadable RTF document TRANSNATIONAL PRACTICES AND CAPITALIST GLOBAL GLOBALIZATION - Leslie Sklair [^] is an interesting read.
Richard A. Abbott wrote:
that consumerism contributes to the survival of capitalism as it seeks to convince people that such a lifestyle offers them some degree of fulfillment and without consumerism, the rationale for continuous capitalism dissolves.
Which explains the motivation of how we got where we are today, living beyond your means. What happens then if your replace that motivation with something a bit more altruistic like bettering ones self for the sake of that fulfillment?
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Richard A. Abbott wrote:
that consumerism contributes to the survival of capitalism as it seeks to convince people that such a lifestyle offers them some degree of fulfillment and without consumerism, the rationale for continuous capitalism dissolves.
Which explains the motivation of how we got where we are today, living beyond your means. What happens then if your replace that motivation with something a bit more altruistic like bettering ones self for the sake of that fulfillment?
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John Carson wrote:
The driving force of capitalism is the pursuit of profit.
But isn't it fair to define profit as the excess of earned income over expenses? A worker - say an economist or a game programmer - who usually spends less than he takes in is accumulating capital, while a congressman or a banker who has amassed a great deal of easily obtainable credit and is using it to supplement his earnings in order to support a lifestyle the cost of which exceeds his earned income is a consumer, nothing else. Of course, there's always the day when the credit cards max out. . .
Jon Smith & Wesson: The original point and click interface Algoraphobia: An exaggerated fear of the outside world rooted in the belief that one might spontaneously combust due to global warming.
Oakman wrote:
But isn't it fair to define profit as the excess of earned income over expenses? A worker - say an economist or a game programmer - who usually spends less than he takes in is accumulating capital, while a congressman or a banker who has amassed a great deal of easily obtainable credit and is using it to supplement his earnings in order to support a lifestyle the cost of which exceeds his earned income is a consumer, nothing else.
You seem to want to define profit as savings. I think we already have a perfectly good word for savings and that word is savings. By convention, profit only refers to the income of firms. If, however, you wanted to generalise it to cover all incomes (a bad idea in my opinion --- we use different words for different things so we can tell them apart), then you would need to treat those incomes consistently. With firms, we generally only treat as "expenses" those expenditures necessary for the earning of income. Consumption out of profits is a way of spending profits; it does not reduce the figure for profits. Therefore we should do the same for workers. Accordingly, we would not deduct all expenses from a worker's wage in order to arrive at a figure for the worker's "profit", only some of them. By virtue of the smaller deduction, the figure for "profit" would thus be greater than the figure for savings.
John Carson
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wolfbinary wrote:
altruistic like bettering ones self for the sake of that fulfillment?
Would you be referencing the beneficial aspects of Human Rights in terms of well being of all?
I'm referring to doing something for the enjoyment of it, much like hobbies and other things are.
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Oakman wrote:
But isn't it fair to define profit as the excess of earned income over expenses? A worker - say an economist or a game programmer - who usually spends less than he takes in is accumulating capital, while a congressman or a banker who has amassed a great deal of easily obtainable credit and is using it to supplement his earnings in order to support a lifestyle the cost of which exceeds his earned income is a consumer, nothing else.
You seem to want to define profit as savings. I think we already have a perfectly good word for savings and that word is savings. By convention, profit only refers to the income of firms. If, however, you wanted to generalise it to cover all incomes (a bad idea in my opinion --- we use different words for different things so we can tell them apart), then you would need to treat those incomes consistently. With firms, we generally only treat as "expenses" those expenditures necessary for the earning of income. Consumption out of profits is a way of spending profits; it does not reduce the figure for profits. Therefore we should do the same for workers. Accordingly, we would not deduct all expenses from a worker's wage in order to arrive at a figure for the worker's "profit", only some of them. By virtue of the smaller deduction, the figure for "profit" would thus be greater than the figure for savings.
John Carson
John Carson wrote:
By convention, profit only refers to the income of firms.
I believe you meant to say the difference from the income and expense of firms, didn't you? We have a very good word for income and that word is income. ;)
John Carson wrote:
then you would need to treat those incomes consistently.
An excellent point. And one you are right to bring up. Be that as it may, I was actually trying to define savings as a method of accumulating capital - which, it seemed to me was the definition of profit that was being offered. I have no trouble accepting someone else's definitions of terms, as long as those definitions don't change as the discussion progresses.
Jon Smith & Wesson: The original point and click interface Algoraphobia: An exaggerated fear of the outside world rooted in the belief that one might spontaneously combust due to global warming.
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I'm referring to doing something for the enjoyment of it, much like hobbies and other things are.
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I'd probably draw the line at the limit where savings exceeds investment. That's wealth hoarding and is usually associated with economic downturns. You are right - consumerism is a lifestyle choice, but that lifestyle is facilitated by things like easy credit. Easy credit is not what I would call a fundamental good; it's a frivolous good.
73Zeppelin wrote:
I'd probably draw the line at the limit where savings exceeds investment
That is pretty broad. How would you define investment? Does it have to be in the market at large? Would you consider purchasing fixed income assets as investing? How about acquiring capitol and sitting on it to build equity outside of stocks and bonds?
73Zeppelin wrote:
That's wealth hoarding and is usually associated with economic downturns.
Are you saying that Joe Worker who budgets 45% of his income for expenses and investments and places the remainder in a "safe place" is part of the problem?
Sovereign ingredient for a happy marriage: Pay cash or do without. Interest charges not only eat up a household budget; awareness of debt eats up domestic felicity. --Lazarus Long Avoid the crowd. Do your own thinking independently. Be the chess player, not the chess piece. --?
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Hobbies no doubt has the "feel good factor", but the psychology of shopping should never be underestimated, especially if you are of the gentler sex. It has enormous therapeutic value albeit at the potential cost of overextending the family budget.
Richard A. Abbott wrote:
but the psychology of shopping should never be underestimated, especially if you are of the gentler sex. It has enormous therapeutic value albeit at the potential cost of overextending the family budget.
I've never understood this. Maybe I am just not wired the like a lot of other people. Luckily, my wife is a saver as well.
Sovereign ingredient for a happy marriage: Pay cash or do without. Interest charges not only eat up a household budget; awareness of debt eats up domestic felicity. --Lazarus Long Avoid the crowd. Do your own thinking independently. Be the chess player, not the chess piece. --?