How the U.S. Economy Was Overrun by Monsters
Posted on Harvard Business Review: July 28, 2011 2:36 PM
The monsters, they say, come out at night. And right now, we’re in a long, dark night of the economy.
So to a stage crammed with the now familiar-pantheon of modern-day monsters—the clueless chairman of the board, the narcissistic chief executive, the proudly sociopathic investor, the servile, principle-less politician—let me introduce a minor new setpiece: the playhouse for the super-rich (which can easily cost more than the average income of the people formerly known as "the middle class"), as described in an eyebrow-raising New York Times piece, beginning:
Apart from the open bar by the swimming pool, the main attraction at parties held at the Houston home of John Schiller, an oil company executive, and his wife, Kristi, a Playboy model turned blogger, is the $50,000 playhouse the couple had custom-built two years ago for their daughter, Sinclair, now 4.
If $50,000 seems a bit off for that kind of purchase, don’t worry—other playhouses in the piece went for as much as a cool $250k.
Call me a heretic, fire up the kindling and ready the stake, but I’d say this particular item — which I’ll readily hold up my hands and admit hit a nerve—is a peculiarly apt metaphor for what’s gone wrong with the economy today: the super-rich, whose gains reflect little social value creation, have gotten richer — and are hyperconsuming the stuff of idle, yawning luxury with an appetite that makes Caligula look like a blushing bride.
There’s something wrong with this picture: the neatly-groomed children of the super-rich cavort in designer playhouses while right under their patrician noses, the poverty rate for the children of the not-so-rich has spiked to its highest level in half a century. Perhaps those kids without designer playhouses are part of the 44 million using food stamps to try and make increasingly threadbare ends meet, or one of the 41% of all American children whose families don’t have enough income to meet their basic needs. Throw in a broken education system that’s not just unaffordable, but slightly pointless, a frightening tax bill for their parents and grandparents’ profligacy, and a global youth unemployment crisis, and it becomes clear why economists are increasingly dubbing today’s young a "lost generation."
If you ask me, let alone those participating in the wave of dissatisfaction and dissent rippling across the globe from Cairo, to Tunis, to Madrid, to Athens: it’s a heartless, cruel divide that’s the accelerant for revolution, whether social, cultural, economic, or political.
And yet, before we throw a match on that fuel, consider this possibility: our monsters are reflections of us.
The economy is a social construction, built and re-built every day, with every tiny decision we make. No, the average Joe and Jane don’t demand designer playhouses—but they do demand the stuff that make the super-rich, well, super-rich. J-Lo perfume, fast-fashion, oil—lots and lots of oil—and all the mass-made "product" lining the shelves of exurban big-box stores. The inevitable ultimate consequences of demand that fails to weigh human, social, natural, and personal costs of such so-called "goods" are public "bads": unemployment, inequality,
pollution, isolation—and capital flowing upwards faster and faster. Designer playhouses aren’t a first-order consequence of our preferences, but they probably are a last-order consequence, an ultimate result.
How can we slay our modern-day monsters? Whether as consumers, investors, voters, or citizens it might just be that if not the lion’s share, then at least the cub’s share of responsibility for this Great Stagnation lies with us and our predilection for more, bigger, cheaper, faster, nastier—an industrial-age, mass-produced approach to prosperity I call opulence.
Michael Porter’s landmark diamond model of national advantage — backed by mountains of macroeconomic research — suggests that one of the most critical factors for the enduring prosperity of a nation isn’t just what resources it’s lucky enough to be endowed with, or how fiercely its companies are encouraged to compete: but also how complex, nuanced, and ultimately sophisticated its demand is. Once, American consumers were among the world’s most sophisticated. They demanded nothing less than the latest technological wizardry, married to state of the art design, coupled with bleeding edge service. But that’s no longer enough. Today, sophisticated, nuanced, careful, worthwhile demand is that in which the people formerly known as "consumers" carefully weigh the social, natural, and personal costs of the economic decisions they make, becoming fundamentally more demanding of politicians, beancounters, and marketroids alike.
If we’re disgusted by ex-defense contractors erecting gazillion dollar playhouses (complete with zip line, rock wall, firefighers’ pole, and slide!), we’ve got to up our own game. Instead of merely demanding more, bigger, faster, cheaper, nastier, we—people, communities, and finally entire societies—must begin to make fundamentally wiser decisions. We’re begin to demand not mere opulence, but an approach to 21st century prosperity I call eudaimonia—lives that are meaningfully well lived, instead of merely more faux-designer mass-luxe junk to shove endlessly into the back of the closet.
Our monsters are reflections of us. And our modern-day monsters are a reflection of our own monstrous appetites. They might just be shadows on the wall, reflections of our insatiable thirst for self-destructive stuff. But that just means that the power to vanquish them is already resting gently in our hands.
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