Friday, March 23, 2007

Consumption v/s jobs

As an amateur economist, I can't resist but think of world's problems such as poverty and uneven distribution of wealth. While we were chatting on IM, as we often do, my friend Iggy made this observation:

: i also have a theory
: it is a mistake to say that by not consuming luxury goods people will lose their jobs
: it is just a question of where we spend our time
: e.g. if we wanted to spend our time in making the planet green again then that's where the jobs would get created
: if we wanted to spend our time educating our children right then that's where the jobs would get created
: but if we want to bully the world then the jobs will get created in bomb making factories

I thought that was a brilliant observation. Capitalists often make a case for conspicuous consumption. I do believe that rich people need to spend money and often so that the rest of us can have gainful employment. The secret of American success has been the domestic market. Americans like to spend money and acquire goods. It is precisely for this reason that one gets the best value for money for almost any product in the United States. Europe is way too expensive, not just because of high taxation., but I am digressing....

However, the gap between the rich and the poor in the United States, has only widened in the recent decades. In terms of global distribution of wealth, there is certainly a welcome development in the last couple of decades. More Asian countries have seen certain economic success, the latest being China and India. But for the rest of the underdeveloped world, the picture is not rosy. Africa and the Middle East have taken especially a severe beating. By spending more money, Americans have certainly helped a lot of people in the world. For example, when they buy clothes, they are helping the poor chinese find gainful employment. When they consume IT products, they are helping aspiring engineers from India, Israel and Ireland. Their apetite has created the biggest market ever seen on the face of the earth, and there is no doubt in my mind that without the current globalization, the people in many parts of the world, would continue to languish in the same hopeless existence.

And yet, all consumption is not made equal. For example, the mass weapons consumed by the American juggernaut couldn't possibly do any good. No doubt the military industrial complex provides jobs to millions of people worldwide, but to what end? Similarly one could argue that the jobs provided by tobacco industry, illicit drugs and many others are undesirable and not in the best interest of the humanity as a whole. Less obvious are the industries such as automobiles, oil companies and other industries which contribute tremendous damage to the world ecology and perhaps increase poverty and ill health.

So how do we increase wealth distribution while ensuring that the resultant consumption is of the "right" kind? How to make sure that my consumption of a good or a service doesn't harm a poor soul in the Amazon forests or my great grand children? So we need a guidence to tell us what is the impact of our consumption. When I buy an item, I could like to know, what went to making that product. Under what conditions was it produced? How many miles has it traversed, and how many unnecessary calories has it consumed? I would like to call it an index of humanity. This index will tell us if it is a positive or the negative for the world. Manufacturers are not obliged to provide this metric along with their products, but conscientious consumers will pay a premium to buy products that have this label, just as they do for organic products today. In the long run, one hopes that this will result in a consumption pattern that results in the greater good.

Thanks to Iggy for the stimulus.