- Politicians and business leaders are obsessed with economic recovery, largely driven by consumer spending.
- And Americans are answering the call, buying clothes and furniture, and booking vacations.
- But the key to happiness, and the next step in the evolution of our economy, could be buying less stuff.
- See more stories on Insider’s business page.
If you’ve spent any time thinking about post-pandemic fashion, you may know that the social media skirmishes over skinny jeans, side parts, cargo shorts, and Crocs, all add up to one thing: nothing is universally cool anymore.
The decline of “cool,” as mapped out by Vox’s Safy-Hallan Farah, is another economic trend that the pandemic appears to have accelerated. Monoculture has been in decline for decades as the Internet facilitated diffuse subcultures, all with their own definition. Now, a year in quarantine has exploded the cultural consensus.
That’s a bigger deal than it sounds like.
Modern consumers often signal class standing through what we wear, carry, and drive – and that’s long been a source of economic growth. Consumer spending accounts for 70% of the American economy, and half of that is from the top 10% of American households, per estimates from Goldman Sachs and Deutsche Bank, respectively.
“Modern growth is largely driven by these individual efforts to manage the impression we make on one another,” Canadian political scientist, professor, and author Krzysztof Pelc wrote in a recent essay in the Financial Times. But Pelc argues that it may not be good for us.
Pelc is one of many anthropologists, economists, and political scientists who argue that if we limit how much stuff we want to buy, we’d be happier, work fewer hours, and have a more equitable society. His essay won the first prize given out by the Political Economy Club, a 200-year-old London-based private dining club with economics at its heart.
Now that we have reached the stage in the recovery where spending, after recovering from its pandemic slump, has begun to shift from goods to services, it could be the perfect time to change our ways. A modern wave of more discreet spending by the wealthiest citizens, a macro shift from buying goods to buying services, and the social epiphanies of the pandemic could mean we’ll be less “cool,” buy less stuff, and maybe be happier.
We buy things to show off our social standing, but a new class of wealthy consumer is spending more discreetly to signal status
Americans will never stop wanting a way to signal their social status, but these days many elite consumers are solidifying their class standing through more discreet means.
Instead of name brands and flashy jewelry, they’re investing in healthy food, childcare, and education, which are increasingly unaffordable for lower-income people. In the FT, Pelc writes of this shift in Western consumption, defined by “a spurning of loud labels or transparent attempts to impress” and instead emphasizing sustainability, purpose, and wellness as the status symbols. It’s more about signalling values and knowledge, than access to products that are mass-produced for anyone to buy.
This group is “defined, more than anything else, through its shared cultural capital,” writes Elizabeth Currid-Halkett about what she calls “inconspicuous consumption” in her book “The Sum of Small Things: A Theory of an Aspirational Class.” “They speak the same language, acquire similar bodies of knowledge, and share the same values, all of which embody their collective consciousness.”
In the US particularly, the top 1% have been spending less on material goods since 2007, Currid-Halkett wrote, citing data from the US Consumer Expenditure Survey.
Certain types of “inconspicuous consumption,” particularly education and health, have likely surged during the pandemic, she told Insider back in March. “It has exposed enormous inequities, and it reproduces certain forms of privilege,” she said. Inflation data from that month showed exactly those categories have become the most expensive goods over the first two decades of the 21st century.
If we bought less, we’d be happier, work fewer hours – and the economy would be more mature
The pandemic has made many of us rethink our values and how we want our lives to look.
People are quitting their jobs in record numbers, citing a desire for a new experience with higher wages and more lifestyle perks. In a recent episode of the Ezra Klein podcast, anthropologist James Suzman says that even if people do get higher wages, the key to happiness could be limiting the desire to purchase. But the peer pressure can be tough to fight.
“We have that gut instinct to say, ‘Well, if they have that, maybe I want to have that, too,'” Suzman said. “We just want to have as much as the next guy.”
A study from earlier this year found that financial happiness starts at $US85,000 ($AU115,579) a year. But that’s only if you’re spending it right. Further research finds that money buys an “opportunity” for happiness when people spend more on things like experiences and less on things like big material purchases.
That transition from a goods-based economy to a service-based one is the natural next step in our country’s economic journey.
The data backs it up. In April, Americans spent $US112.6 ($AU153) billion on services, more than making up for a $US32.3 ($AU44) billion decrease in goods consumption, according to the Bureau of Economic Analysis. Personal spending is supposed to increase by 7.6% this year, per a Deloitte study, and spending on durable goods is expected to fall as service spending will lead the surge, with a projected expansion of 6.2% in 2021.
As Pelc explains, a shift toward service spending is a hallmark of developed economies, with effects on growth.
Advanced societies may come to view high growth, spurred by goods consumption, not as progress, but a “necessary stage” of it. “The challenge is then to recognise when the moment has come for a shift in social purpose,” he wrote.
So, American consumer, spend wisely. The happiness of your future economy may depend on it.