Modern Economies: Benefits and Breakdowns

Editors' Note: This article is part of the Patheos Public Square on Consumerism Gone Wild. Read other perspectives here.

Conspicuous consumption and hopelessness are real and important concerns in our modern society. Assertions, however, about the bifurcation of our modern world into two groups, one whose members suffer from the idolatry of materialism (mostly the rich) and those who struggle with hopelessness (mostly the poor) are not well grounded in history or economics. Furthermore, seeing the world through that lens doesn't serve well in dealing with the problems of materialism and lack of purpose in life.

Having just returned from visits to the numerous Roman ruins in western Turkey, it is hard for me to imagine a society with more ostentatious consumption than what I saw in the remnants of the various cities we visited. Also, given that the typical life span of a Roman slave was eighteen years, it is likely that a certain sense of hopelessness existed among many.

There is a substantial difference, however, between the economic activity of the Roman Empire and our present world. Until 1800 there was no sustained economic growth anywhere in the world. Some people in some societies would improve their economic well-being for a period of time, but nowhere did the material well-being of the average person increase in any substantial way. England and the Netherlands were the first countries to break out of this world of no growth, and much of the world has followed. It is, of course, a human tragedy that a large portion of the world is still mired in poverty, but one of the incredible accomplishments of the last two hundred years is the dramatic reduction in the number of people who suffer material deprivation.

The world of economic growth is different in many ways from the world of no growth. The first is that the world is no longer zero sum, and the wealth of some is not necessarily at the expense of others. This means that focusing on the consumption of the rich can mislead us into thinking that evidence of wealth is evidence of exploitation. Concern about conspicuous consumption is appropriate in the sense that idolizing material well-being isn't good for the soul. It is inappropriate, however, to think that such consumption necessarily comes at the expense of the poor, and that the unfortunate economic circumstances of some would be automatically improved if only others limited their consumption. In fact, a strong case can be made that conspicuous consumption today is much less harmful to others than it has been for most of history. In a world of voluntary exchange under the rule of law, increases in wealth are a measure of how many material benefits the wealth holder has generated for others.

Two other aspects of modern economies that rely on markets and prices (notice that I don't use the term capitalism) are important. First, modern market economies don't require continual increases in consumption to function well. Some have argued that conspicuous consumption, while problematic at one level, is a necessary condition for a successful economic order. Not so. If people reduced their level of consumption, accepted lower incomes and lower levels of spending on goods and services, the market order would coordinate human activity just as well as one where consumption levels are continually increasing.

Second, the fact that the income gap between different members of society is increasing tells us little about the well-being of those at the bottom. There are real economic difficulties for some in modern societies, and those difficulties certainly can lead to a sense of hopelessness. Those difficulties are rooted, however, in social dysfunctions, not in the income gaps between the rich and the poor. Attempts to remedy those problems through cash transfers have exacerbated rather than ameliorated the hopelessness of the poor.

In fact, it is self-centered behavior that causes problems at both the top and the bottom of the income distribution. Those at the top may engage in wasteful consumption because of their lack of purpose in work or family life. Likewise, at the bottom, the breakdown of commitments to others, particularly in a long-term marriage relationship, is the cause of much of the economic and social problems we observe there. The restoration of right relationships through an understanding of the moral dimensions of life must be at the heart of any efforts to deal with conspicuous consumption and hopelessness.