Economic Volatility, Hyper Consumption, and the “Wealth of Nations”
By Louis René Beres
Adam Smith published his Inquiry into the Nature and Causes of the Wealth of Nations in 1776. A revolutionary book, Wealth did not aim to support the interests of any one particular class, but rather the overall well-being of an entire nation. He sought, as every American high-school student learns, “an invisible hand,” whereby “the private interests and passions of men” will lead to “that which is most agreeable to the interest of a whole society.”
Still, this system of “perfect liberty,” as he called it, could never be based upon encouragements of needless consumption. Instead, argued Smith, the laws of the market, driven by competition and a consequent “self-regulation,” actually demanded explicit disdain for any gratuitous or vanity-driven consumption.
What does this all mean for better understanding current economic dislocations and volatility? Above all, it suggests that modern commentators and pundits often speak in blithe disregard for Smith’s true beliefs, ignoring that his primary concern for consumption was always tempered and bounded by a genuine hatred for “conspicuous consumption” (a phrase to be used more pointedly by Thorsten Veblen in a later century).
For Adam Smith, it was only proper that the market regulate both the price and quantity of goods according to the final arbiter of public demand, yet, he continued, this market ought never to be manipulated by any avaricious interferers. In fact, Smith plainly excoriated all those who would artificially create or encourage any such contrived demand as mischievously vain meddlers of “mean rapacity.”
Today, of course, where engineered demand and hyper consumption are permanent and allegedly purposeful features of the market, especially here in the United States, we have lost all sight of Smith’s “natural liberty.” As a result, we try, foolishly and interminably, to build our economic recovery and vitality upon sand. Below the surface, we still fail to recognize, lurks a core problem that is not at all economic, fiscal or financial. Rather, as Adam Smith would have understood, it is a starkly psychological and deeply human dilemma.
Wall Street’s persisting fragility is largely a mirror image of Main Street’s insatiable drive toward hyper consumption. This manipulated drive, so utterly execrable to Adam Smith, has already become so overwhelming that many learned economists warn us sternly against saving too much.
If only we could all buy just a little more, they argue, life in America would be better. Retail sales are the authentic barometer of the “good life.”
Collectively, our national economic effort is always oriented, breathlessly, toward buying more. Many of our country’s troubling and troubled economic policies are a more-or-less direct consequence of this sorely misdirected effort. Until we can get an effective reversal of the frenetic public need for more and more things, any “recovery” will remain transient and partial.
Not from the start has contrived demand been a basic driving force of our economy. Obviously, before television and before our newer surrenders to an avalanche of high-tech gadgets, such demand would not have had any such compelling power. Nonetheless, for the foreseeable future, it will take herculean efforts to detach healthy patterns of consumption from a distressingly ceaseless barrage of advertisement.
At the recently-played Super Bowl, millions (perhaps, billions?) of viewers watched the proceedings not for the gridiron activity, but for the commercials. In a society that has now come to loathe any genuine hint of intellect or serious thought, even in universities, television commercials are hailed unashamedly as a discrete and “clever” genre.
What kind of an economy must rely on engineered consumption for both its buoyancy and its survival? Writing during the middle of the nineteenth century, the American Transcendentalist philosopher, Ralph Waldo Emerson, spoke presciently of “self-reliance.” Foolish “reliance upon property,” Emerson had understood, is the unwanted result of “a want of self reliance.”
Today, still living apprehensively amid urgings of imitation and a delirious collectivism (“rugged individualism” is a plainly silly myth still dutifully recorded in primary school textbooks), the always-fearful American wants more or less desperately to project a “successful” image. This projection, in turn, remains founded upon material acquisition; upon a cornucopia that is recognizably laden with “all the right things.”
The relentlessly conformist call of American mass society insidiously undermines our core economy. This deafening cry, one that would have scandalized Adam Smith, is proclaimed throughout the land as gospel truth. Everywhere, it reigns triumphal.
To create a robust economy and a stable stock market, we Americans will first have to reorient our society from its corrupted ambience of mass taste. Surely, there is still great beauty in the world, but it is best for us not to search for it exclusively on television, at the movies, or on Facebook.
In that large part of America that knows very little of Wall Street, there is often great fragility, restless anxiety and palpable unhappiness. Taught again and again that respect and success will lie comfortingly in high salaries, and in corollary patterns of high consumption, the dutiful American mass now celebrates “fitting in.” At the same time, it generally abhors real literature, serious learning, and any tilt toward “self reliance.”
Ritualistically, in yet another stupefying pretense of democracy, we Americans will turn again and again to elections. Stubbornly patriotic, these transient diversions will certainly offer us a more or less pleasing amalgam of searing anger, hackneyed gossip and reassuring clichés. But as a convenient activity that serves to obscure an otherwise-evident plutocracy, these cheerfully-prescribed excursions into politics will have little meaningful or enduring effect upon the sustainability of our economic markets.
As with hyper-consumption and engineered demand, no politics can ever rescue our economy. Adam Smith would have agreed.
Louis René Beres is Professor of International Law at Purdue University. The author of ten major books and several hundred scholarly articles on world affairs, his columns appear in many major American and European newspapers and magazines. For further reading, we also suggest The Life of Adam Smith.