As economist Tyler Cowen discusses in his book Create Your Own Economy, today’s digital media are causing society to develop in what he characterizes as a more autistic direction. Instead of passively consuming information and the arts as packaged by monolithic corporate producers, the average person can now choose from a multitude of free and low-cost snippets of cultural data, individually arranging them to suit his or her own preferences. We have far more access to entertainment and information than at any time in the past, while also having more ability to make our own cultural contributions by way of blogs, videos, and other creative works.
That leaves room to speculate on this question: What changes can we expect in the economy, which is now fueled to a great extent by consumer spending, as we make the transition to a future where information and creative works are freely shared and are a much more significant part of our lives? Will corporate production come to a screeching halt for lack of consumers to buy mass-market goods, causing the modern economy to go into an irreversible collapse?
I don’t foresee such an apocalyptic scenario, in part because consumer spending really isn’t as essential as many people believe it to be. To keep an economy going, two things are needed: Production and buyers. It’s irrelevant, from the perspective of corporations and their workers, who buys what sort of products and what happens after they’re sold. As history shows, corporations can stay in business and even make hefty profits in time of war, selling bombs and grenades and other stuff that’s shipped off to get blown up on the other side of the world. The economy doesn’t depend on having enough sales of consumer goods specifically. It just depends on having enough sales, period.
That is why, in talking about how to get the economy going again after the recession, some politicians such as President Obama have mentioned replacing the burst real estate bubble with a new focus on green technology. The idea there isn’t to create a new speculative bubble, but to make the economy less vulnerable to slowdowns in consumer sales while also improving the environment and reducing the cost of energy.
Major changes in technology and social structure that displace large segments of the economy can be scary, but they always have been an inevitable part of progress. Over the past century or so, as the workforce went from the family farm to the manufacturing plant and then to the office cubicle, many people worried that there wouldn’t be enough jobs for the displaced workers and that the economy would fall apart. When motor vehicles replaced horses and mules, that put all the blacksmiths and carriage-makers out of work, but they soon learned new skills and found other jobs.
Many of the consumer goods and services that are now seen as essential to keeping the economy going weren’t even in existence a century ago, and they will have long since become obsolete by the end of this century. Corporations will adjust to changing times, as they always do, finding something different to sell. Those that are too poorly managed to make an effective transition will end up in that socially useful institution known as the bankruptcy court, where their lenders will pick their bones clean and then look around for other smarter companies to finance. Capitalism can get along just fine regardless of whether the end user of a company’s products is a spoiled suburbanite on a credit card binge at the mall or an equatorial rainforest that’s being carefully restored by nonprofit groups; and if the latter becomes a more significant part of the economy, we’ll be creating a more beautiful and sustainable world.