The Myth of Accelerating Technological Progress and the Reality of Financialization and Excessive Consumption
The year 2023 is gaining momentum. Many people make New Year’s resolutions and commit themselves to achieving certain goals. Given what has been recently happening around us – a pandemic, supply chain disruptions, an inflation storm, and a geopolitical crisis – it would be logical to assume that our best wishes for this year might be saving the planet, maintaining peace on Earth, and achieving our own financial liberation.
These wishes may seem too ambitious to achieve for any individual on his or her own. However, there is a very simple and effective way of doing exactly that: just consume less!
Everything that is happening to us now stems from the fact that the current growth rates of our technological advancements and labor productivity cannot support the current growth rate of our consumption. I am sure many will say that this is just another conspiracy theory. Unfortunately, this is not the case. Just check out the passages below published by mainstream international organizations, leading consultancies, popular science magazines, and academic journals:
The Organization for Economic Co-operation and Development: “On average in the 11 OECD countries analysed, weekly hours actually worked per worker have decreased by 8 hours since 1970, but at a slowing pace (from 0.9% annually in the 1970s to 0.2% in the 2010s). Over the same period, hourly productivity has grown, also at a decreasing rate, from 3.7% annually in the 1970s to 0.7% in the 2010s. Comparing average trends in hours worked, leisure and productivity suggests that productivity growth has not led to extra leisure time for full-time employees.” (see Reference 1 below).
McKinsey: “1939-1973: Age of renewed economic progress in Europe and US post-World War II with the average per capita GDP growth of 3.1% per year… 2007-2019: Low growth and/or great divide in US post-global financial crisis with the average per capita GDP growth of 1.0%.” (see Reference 2 and Picture 1 below).
The Scientific American: “In our century, for better or worse, progress isn’t what it used to be. Northwestern University economist Robert Gordon argues that by 1970, all the key technologies of modern life were in place: sanitation, electricity, mechanized agriculture, highways, air travel, telecommunications, and the like. After that, innovation and economic growth simply couldn’t keep going at the breakneck pace set over the preceding 100 years—a period Gordon calls ‘the special century’… Since 1970 the only notable outlier has been the exponential increase in computing power, which has trickled down to consumers in the form of the Internet and our ever present mobile devices. But in most other ways, Gordon argues, the lives of people in developed nations look and feel the same in 2019 as they did in 1979 or 1989.” (see Reference 3 and Picture 2 below).
Intereconomics: Review of European Economic Policy: “Productivity growth has always been a key indicator for the possible long-term prosperity and growth opportunities of societies. Changing trends in labour productivity growth have been factors for stabilising or destabilising distributional conflicts between capital and labour: as long as capitalism produced higher incomes for the majority of working people around the globe – as in the decades after the Second World War – the legitimacy of income and wealth inequality was a less pressing social question due to the diminished distributional conflict between capital and labour. For long periods, capitalism seemed to deliver what it promised, i.e. to make everyone better off. However, if, on the contrary, labour productivity growth should ever slow down in comparison to capital growth, as it has from the 1970s and onwards, social tensions stemming from grossly unequal income distribution would be sure to rise… A look at labour productivity trends in recent decades reveals that – with the exception of a short productivity miracle in some countries in the second half of the 1990s and early 2000s – the overall trend in measured productivity growth is declining. After the financial crisis, the productivity growth trends of most countries stabilised closely to a growth rate of slightly above zero.” (see Reference 4, Picture 3 and 4 below).
The fact is that the growth rate of real (inflation-adjusted) wages directly depends on the growth rate of labor productivity. That is why the growth rate of real incomes for many categories of population has been stagnating for several decades (see Reference 5 and Picture 5 below).
To support consumption the process of financialization was launched in the 1980s by easing access to borrowed funds for both individuals and companies. We are still witnessing the consequences of financialization today, despite the fact that the acute phase of the global financial crisis took place back in 2007-2009 (see Picture 6 and 7 below).
The declining pace of technological progress since the 1970s is the major reason why the topic of “green investments” has become so central. However, the topic of “green investments” should be discussed together with the topic of consumption restriction. It is a tricky political issue. But inflation is already doing just that: it is reducing consumption right now.
My Human Progress Manifesto: Capitalists, Socialists, and Ordinary Citizens of the World, Consume Less!
If you are a staunch capitalist, then cut back on your consumption. Invest your savings in your own innovative projects or in companies that can generate some new ideas. If you eventually get rich off these investments, no one in their right mind will feel jealous of your success.
If you are a convinced socialist, then cut back on your consumption. Deprive capitalists of easy profits. Make them think harder. Make them invent genuinely innovative products. Fight for public funding of education, science, medicine, public transportation, and other infrastructure. If you manage to achieve higher taxes on luxury goods and services, no one in their right mind will accuse you of doing something wrong.
If you are just an ordinary citizen, then cut back on your consumption. Liberate yourself from psychological and financial dependence. Don’t borrow the money you can’t afford to buy the stuff you don’t need. Instead, invest your hard-earned cash in your health, education, professional development, and networking skills. This is the most sustainable way to raise your income. And no one in their right mind will blame you if you achieve a higher level of consumption by pursuing this strategy.
Consumption has never been the genuine engine of growth. Consuming the same old slightly repackaged and rebranded stuff under the influence of a lethal dose of advertising does not help in the long run. Progress is facilitated only by our striving to create truly innovative, interesting, and useful things. It is our human desire to get pleasure from the creative use of our brains that makes us different from other animals, where the priority is the biological struggle for food, sex, and dominance.
Progress cannot be achieved without investing into new technologies. But new investments cannot produce results in accordance with some strict schedule. At the same time, you can curb your consumption today, this very minute, instantly. Therefore, act now: cut back on consumption, if you really want to save the planet, maintain peace on Earth, and liberate yourselves!
References:
1. “OECD Employment Outlook 2021: Navigating the COVID-19 Crisis and Recovery”, 7 July 2021.
2. “Will Productivity and Growth Return After the COVID-19 Crisis?”, Jan Mischke, Jonathan Woetzel, Sven Smit, James Manyika, Michael Birshan, Eckart Windhagen, Jörg Schubert, Solveigh Hieronimus, Guillaume Dagorret, and Marc Canal Noguer, McKinsey Global Institute, 30 March 2021.
3. “Despite What You Might Think, Major Technological Changes Are Coming More Slowly Than They Once Did”, Wade Roush, The Scientific American, 1 August 2019.
4. “The Global Productivity Slowdown: Diagnosis, Causes and Remedies”, Georg Erber, Ulrich Fritsche, Patrick Christian Harms, Intereconomics: Review of European Economic Policy, Volume 52, Number 1, pp. 45-50, 2017.
5. “For Most U.S. Workers, Real Wages Have Barely Budged in Decades”, Drew Desilver, Pew Research Center, 7 August 2018.
