Friday, 25 January 2008

Economic Growth: Where next when we are already sated with luxury?

Yet iPods were launched as long ago as 2001, and I now read that Apple has sold more than 100 million of them and fears the market has reached saturation. I had thought I was part of an exclusive world club of those who would spend a considerable sum on something that was pure luxury. But this is not the case at all. In the years since its invention it has become part of competitive consumerism: "I have one... he has one... oh, you mean you don't have one?"

Every parent will be familiar with the pattern, just as every advertiser will know how to prompt and tease people into feeling socially inferior simply because they haven't acquired something that basically they don't need but have been pressured into wanting.

Faced with a saturated market for iPods, Apple is worried. iPod sales in the US have been no higher than they were last year. Eager to keep people wanting new ones they have fiddled with the design and added more so-called "features". Being up to date is a key part of marketing psychology: the sense of being left behind threatens people's self-confidence and is a powerful blackmailing tool especially effective for use against parents. It is a totally pernicious trend encouraged by a market that puts the need for growth as its first priority. Apple's latest version, the iPod Touch, has touch-screen technology capable of playing videos and of downloading from computers without a cable connection. Who needs it?

I am not saying it isn't fun to have these things. But to seek to build industrial growth and marketing strategies around ever-diminishing returns of fancy refinements to objects that are not really needed in the first place, must surely get the whole balance of economic effort wrong.

It is all fine and dandy when world economies are favourable, but we are not in such times. We are bombarded daily by doom-merchants hanging in there with malicious glee in expectation of a slump. By midweek we were being told of a growth rate of 4 per cent in the last quarter, and "significant risk" of a downturn in the economy. George Soros declared that we are heading for recession, and business gurus were on hand to analyse the latest trends in the FTSE and movements in the housing market.

A corporation that doesn't declare perpetual growth is seen to be in trouble, and in need of attention. Step forward private equity to help turn round enterprises that aren't meeting the norms of economic expectations. We are on a treadmill of economic behaviour that is failing to answer what the world needs, which is to satisfy the needs of its peoples rather than the wants of the already affluent. Does it have to be like that? Indeed, I would say that the imperatives of the planet – finite resources, pressures on the environment – are such that now is the very time to conceive of other economic patterns.

China has proudly announced an 11 per cent growth in the past year, but at what cost, not only to its citizens but also in pollution of the atmosphere. The gadgets we so enjoy are being manufactured by working populations whose conditions and outlook are shaped by the need for growth. When I was in China in early 1980 the country's economy seemed to be focused on meeting the needs of its people: not just reasonable housing, fresh water and subsistence living, but literacy and social cohesion. The policy of the one-child family was merely the most ruthless strategy to deal with its internal problems. Globalisation – the international movement of capital and business – has served to extend the problems worldwide.

There are plenty of places where people's needs are not being met. But all too often their economic effort goes to supplying the luxury wants of the rest of us. Yes, yes, I know all about trade, and investment, overseas aid and companies based in the developed world bringing employment to the undeveloped. But it all serves the goddess of growth. Surely it's time for a radically new approach to the planet's resources and how to deploy them.

Global shortages have already given us wars over oil. We are on the brink of wars over water. I bet they have plenty of iPods in Davos, but how many in Darfur? Competitive consumerism doesn't seem to be the answer. Is asking, "How can we restore growth" the right question?

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