Sufficiency. Optimisation. Sustainability
Analysis / 2019.08.05
The Need for a Fundamental Ideological Shift.
The advent of 2019 marked the beginning of an imminent recession predicted to hit the international economy hard in the coming decade. Economists, corporates and administrators around the world are already up in arms against it by taking ‘serious’ measures to reduce production inputs, increase consumer spending and thereby ‘save the world’ form having a major economic ‘meltdown’. Rising production costs and lower overall spending by the now major earning population, the millennials, are primarily ‘blamed’ for the situation. However, other factors including significant rise in global non-financial debts, cyber security issues, separatist nationalist movements and the related policy uncertainties in various parts of the world and most importantly climate change and the resulting extreme weather instability play a much more important, but much less discussed role in the upcoming crisis.
The current economic system that was established post-industrialisation is based on maximising consumption to achieve growth and has thus lead to severe social and environmental crises that are now hitting back the economy hard. It assumed that individuals and institutions works solely on the principle of maximising income, hence placing Gross Domestic Product as the ultimate measure for defining development. The ‘Net GDP’ and ‘GDP Growth’ determined how good an economy or rather a country and its people are performing. A higher GDP was every institutions’ goal for success. However, recent surveys reveal huge income gaps and wealth inequality around the world while national debts are skyrocketing beyond control, posing an important question on the theoretical base of this idea of development and even the ‘value’ of ‘money’ printed on mere assurance of bonds. It is getting harder to agree with John Maurice Clerk’s ‘definition’ that “An economist is a man with an irrational passion for dispassionate rationality”, or with it’s “rationality” part at least, since modern economics is so much based on speculation which is hardly truly “rational”. Valuation based on ‘speculated demand’, even for currencies, and not on any hard physical bases, makes it ‘rationally’ a matter of no real value but only ‘assumed’ value.
What this system has achieved in one and a half century was creating a consumerist society that spends not for needs but for wants. Barely used consumer and lifestyle products, empty real estate ‘investments’ and a highly volatile trading market became the leftovers. Consumerism always relied on emotional fragility and inherent irrationality of human beings for its growth while, ironically, the economics behind it has been rooted in the idea of perfect human rationality. People buy the most expensive, the most needless, and the most extravagant artefacts for its emotional associations, of which history and tradition is only but one, rather than for its functional value. Festivals were remodelled to be events for spending. Consumer products show a huge spike in the sales chart during festive seasons irrespective of its irrelevance in the actual concept behind the celebrations. Traditions have been manipulated and new ones often invented to increase consumer spending and keep the industry running, for no sensible reason. To get people to buy more needless things a whole host of influencer industries like media and movies do function in addition.
However, within this system, stable, burst-proof economies with sharp focus on “self-sufficiency” that maintains a strong internal economic cycle and a governance system committed to the overall health and well being of its people than mere GDP growth emerged in parallel. A sustainable approach based on sufficiency clears out risks involved in excessively relying on exports to gain wealth as well as imports on meeting essential public needs. A strong, self-sufficient system also stabilises the political condition and thereby reduces chances of economy being affected by unforeseen political movements. Such economies might be way below in Net GDP ‘rankings’ but the purchasing power, general standard of living and its almost even wealth distribution is unmatched even in the world’s biggest economies. This was made possible by optimising distribution of income over a larger population by controlling wealth accumulation and maintaining just enough public moderation over basic services like health and education that in turn help in creating social equity.
In uncontrolled capitalist economies, however, huge income inequalities has paved way for inaccessibility to even basic needs like housing for a majority of the population while large clusters of luxury housing units remain unoccupied or under occupied. Most new urban developments aim only at the investment market and not on real consumers who need shelters. It is alarming that even activities like construction and real estate which has the greatest of environmental impacts has become a mere playground for pushing economic growth.
The system’s flawed design focusing only on growth without any serious thought about its state during the period of maturity is quite evident in the property market. The ‘Real Estate Bubble Effect’ that now affects many large economies is a prime example of how short-sighted it was. The need for housing, primarily in cities, drove the increase in property prices. This gave an economic opportunity for investors to buy large numbers of housing units quickly as assets to be sold at a higher rate assuming an ever increasing value, thus creating an artificial boom in housing demand. This artificial boom further increased property prices and continued the cycle. However, they had failed (and are still failing in many parts of the world) to foresee a situation where this continued cycle makes property prices so high that it become inaccessible to anyone but big investors. This forces the investors who have already invested in property to sell it for lower prices, sometimes even lower than their initial investment, to buyers who couldn’t afford the speculative price the investor envisioned at the time of purchase, if at all they have to monetise the asset. This phenomenon had broken down many real estate investors and companies in major markets who had opted for this business model for its relative ease of making big money in a short period.
The current economic system, and the valuation of ‘growth’ based only on GDP, is thus becoming a major threat for sustainable development. Sustainable growth can only be achieved if there is reasonable income parity (not communism where everybody has the ideal equal income; that takes out the very humane ideas of skill, caliber, talent and commitment from the equation) made possible by allowing equal access to opportunities and services, for those who seek it. The amount of production is not to be its measure of success but the reach of products and services among the widest spread of population is. A sustainable economy should be the one based on real, tangible needs and not based on improving the number charts per se.
It seems to be high time to make a fundamental shift from the post cold war idea of pure economic growth as development to a more holistic, life centric idea of growth which emphasise on the overall wellbeing of humans as well as habitats that sustains human life. Managing space is one key aspect in improving the environmental conditions to optimise it for human habitation. The consumerist valuation of quantity over quality have deeply influenced real estate ownership and our general approach in valuing space and environment. People aspire for larger houses and working spaces while channel much less energy on improving the quality of the built spaces as well as the natural environment. Optimising the built-up area to suit the absolute necessities for living and improving the quality of the outdoor private as well as shared environments could drastically reduce spatial degradation and pollution and hence the occurrence of many health issues associated with it. Usable shared spaces, which currently shows a gradual reduction in human habitats, can also provide much needed social as well as psychological support to people.
Understanding the fact that money is not the end but only the means to achieve whatever ‘end’ we wish to achieve would make it extremely easy to dismiss the idea of equating money with actual ‘wealth’. A well developed society should be the one where every individual have equal opportunity to access basic needs and services while consumption remain optimal and specifically needful. The vision of a healthy, sustainable future can only be achieved by embracing a socio-economic system rooted on quality, sufficiency and optimisation of resources and not on the idea of quantity of wealth accumulated.
References
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