In the last few posts, I’ve laid out what I speculate may be three big differences between this recession and prior ones.
- 1. Globalization. Although globalization has been going on since well before David Ricardo was potty-trained, we have had some pretty dramatic shifts in production and wealth over the last decade.
- 2. Digitalization. Although technology has been allowing us to abstract concepts and ideas from the real world and share them in an immaterial way for millennia (the alphabet? the scroll?), information and communications technology advances of the last decade are changing the way that we relate to the physical world in unprecedented ways.
- 3. Green Consumerism. Although Rachel Carson was already preaching to an eco-conscious choir in the 1960s, we’ve seen a mass diffusion of awareness in the last few years that is just beginning to manifest in a questioning of consumption habits, alongside some small changes, alongside a few bold government initiatives. Those changes could get a lot bigger fast.
As well, these changes all work together. Each one has the potential to accelerate the others.
So what do we have with these three trends in terms of their effect on “growth”–which is what the recession and depression terms are supposed to be capturing?
First, we have a world where the capital flows, the currency prices, and the employment rates are still in flux, still reflecting massive changes that have taken place at the level of vital services and things being produced and moved around, controlled and available.
If we have less production in high wage countries like the USA, Canada, and France, and more in low wage countries like China and India, it makes sense that, on the global stage, support services would, as a total number, be lower. The guy who is working in the plant in China, making less, is going to be spending less on his food, clothes, entertainment, escargot, cologne, and so on than the guy working in the plant in France. And all those support services are going to suffer. In Windsor Ontario, where the auto plants used to pump out cars, the people who used to work on the assembly lines can no longer afford to eat in restaurants, shop in the malls, or go to the movies the way they once did. Job losses aren’t isolated. It all trickles down.
That bespeaks continuing trouble and challenge for North America and Western Europe.
Next, we have the shift towards information technology increasing consumer power, reducing prices, and changing different types of consumption from physical to lower-cost virtual. That means lower prices at the cash register (which may be increasingly a disintermediating virtual cash register), and subsequent lower revenues. It means more opportunities for peer-to-peer “sharing,” of films, music, TV shows, books, and magazines too. It means less material needed to produce things. And all the service jobs associated with those material things start to disappear. All of this can lead (particularly if the industry required to support these immaterial forms of consumption is lower cost than the one required to support the former more matter-based form, and also if it, too is being globalized, see point #1 above) to reduced financial growth.
Finally, we have consumers questioning and potentially reducing consumption because of environmental concerns. Less stuff bought, smaller cars, more bikes on the road, more efficient light bulbs, less energy consumed–these have their economic ramification, and those ramification ramify (sorry) the more this green “movement” gathers momentum. Green means leaner living. And leaner living means lower revenues as well. In the aggregate, it means reduced financial growth.
Does anyone remember the book “Green Is Gold/Business Talking to Business About The Environmental Revolution“? For particular companies and individuals, maybe, but in aggregate? I really don’t think so. Not real green. Real green means less. Less consumption, less production, less for everyone. Sorry.
Doom and gloom? I don’t think so. I think we need to question the entire enterprise of measuring recession and depression and think in more subtle terms about what we’re doing and where we need to go and, in particular, what we define and gloss to ourselves as a civilization as “progress.”
No, I’m not done with this yet. Is anybody out there? Halloooo?