There was a time when people thought the leisure society was upon us. It was in the decade of the Nineteen Sixties that a dream was born to the effect that people will work not because they have to but because they want to. And when they do, they will engage in their preferred hobby under the guise of doing work, and will get paid for their effort. And all this will happen while robots will do the work that no human being will touch with their dainty fingers. Mind you, this was the age that paved the way for a song called: "Take that job and shove it" to be made. And the times were such that the song made it on the air and became popular.
The idea of the dream was carried over to the decade of the Seventies and then started to wane with the advent of the Eighties and the Nineties. It seemed at last that people -- from the ordinary to the sophisticated and from the politicians to the pundits -- were beginning to understand how an economy works and were becoming more realistic in their expectations. The result was that the dream of a leisure society was altered to become that of "Freedom 55". It is that the people thought they could retire by the age of 55 and go on to lead a wonderful life of leisure, travel, sports and relaxation for the rest of their lives.
To the disappointment of the diehard dreamers, however, this is not what happened. Worse, the exact opposite happened as people were forced to work past the age of 65 which was the age of retirement until such time it was raised in some places thus demonstrating that our collective wisdom regarding the way that the economy works still remains deficient. We realize, therefore, that we need a new model to explain how the economy works, a model that will help us maintain our prosperity as a society and plan our retirement as individuals.
I believe I have the outline of such a model and I am happy to share it with you. The brush I use to paint a picture of the inner workings of the economy is that of growth and it is the one I am using here. So let me begin with the definition of a stagnant economy; simply put, it is one where no growth is taking place. Otherwise, economies tend to grow which they do most of the time or they shrink which they do some of the time.
Whether they are growing or they are shrinking, economies change in two ways: horizontally and vertically. Like stretching the dough of a pie lying flat on a table, an economy can be made to grow in all horizontal directions by adding new businesses to it or by increasing the capacity of existing ones. These additions cause the economic activity to increase and they result in more wealth being added to the nation. Think of it as horizontal growth.
But the economy can also grow and add to the wealth of the nation without the addition of new businesses or the increase in the capacity of existing ones. It can grow by improving on the products it makes such as when black and white television became color television. The economy can also make improvements on the method it uses to run the assembly line such as when it upgrades from electromechanical systems of automation to solid state systems. These are called innovations, and the growth they bring to the economy can be thought of as vertical growth.
In theory there are two authentic types of innovation plus a number of phony ones. The first authentic type consists of making the improvements discussed in the previous paragraph. The second consists of developing entirely new products such as the air conditioners when they first appeared. But hidden from view and rarely discussed is a third type of innovation that should only be regarded as the semblance of one. It is to make "everything old new again." This type of innovation consists of recycling or repackaging old ideas to make them look like new products. Their value to the growth of the economy is dubious because they inflate the money supply yet do little to improve on the quality of life. For example, just before the crash of 1987 there was so much money in the system that people exchanged it for anything; and so they bought things like pet rocks and other useless products advertised as must-have objects.
This brings us to ask the question: What is it that we want from life anyway? Well, we want to live and function like a society and for this, we need an economy that produces goods and services. But the nature and quality of the services we produce can only depend on the degree to which the underlying economy is geared to produce hard goods such as food, clothing, shelter, chemical products, the means of communication, those of transportation and so on. These are basic needs because they represent the necessities of life; and you know they are important because someone hungry, naked or homeless does not go look for services like a facial or a manicure. In fact, in every economy, be it primitive or advanced, nearly 80% of the household spending goes to pay for the basic needs of life. What is left of the middle class incomes goes to pay for leisure or goes into savings.
So then, to take an example, let us take food which is one of the basic necessities of life, and ask the question: What is the difference between having 100 people living in a primitive economy each consuming 3 000 calories per day, and 100 people living in an advanced economy each consuming that same 3 000 calories per day? The answer is that in the first instance 50 people will be working directly on the land to produce the food while in the second instance only 7 people will be working directly on the land to produce the same amount of food. But what happens to the other 43 people? The answer is that they will be working away from the land to manufacture the farm machines, make the fuel and produce the fertilizers that will make it possible for the 7 people on the land to grow enough food to feed all 100 people.
And this is the reality that turned out to be at variance with the lessons we took in the related humanities courses at school. We learned in these courses that the mechanization of the farm created a surplus of manpower that went on to produce other things, a development that multiplied the wealth of nations by several folds. And it was this kind of thinking that made the young folks of the Sixties believe that the leisure society was upon us. But such society never materialized because of what we did not realize then. What was not apparent to us was that the things produced by the surplus manpower away from the farm were absolutely necessary things without which the 7 people on the farm could not produce the food that fed 100 people. The reality, therefore, was that while 43 people left the farm to work in the factories, a good number of them worked for the farm inside those factories.
Undoubtedly, this complex and layered approach to producing goods was an innovation in its own right and could be considered a fourth type. But we must not ignore the fact that it only creates a vertical growth that is more illusional than it is real. Yet this apparent growth cannot be dropped from the records because the value of the machinery, the fuel and the fertilizers produced for use on the farm must be reflected in the GDP figures. And while these inventions save on labor, they do not increase the quantity nor do they improve on the quality of the end products we call necessities of life.
Some pundits look at all this and conclude that as a civilization, humanity is running around complicating things only to produce the same amount of the same thing with the same number of people, be that food or clothes or shelter. The pundits then question if what we are doing deserves to be called progress. Moreover, they say that to run around as we do, we use an abundance of natural resources and we burn huge quantities of fuel to keep in perpetual motion a vicious cycle of humans and machines that achieve little in the end, get us nowhere and harm the environment.
Depressing to be sure but is it really like that or are these people missing something? To be fair to ourselves we have accomplished more than some people are willing to admit. Look at it this way, those who make farm machines also make refrigerators to preserve the food that would otherwise go to waste. Those who produce fuel to power the farm machinery also produce home heating oil to keep warm the people who live and work in cold climates. The chemical workers who manufacture fertilizers also manufacture the pharmaceuticals that alleviate pain and save lives. And the list goes on. More important, we live longer and healthier lives which is the main reason why the age of retirement needs to be raised.
In essence then, what we did as a civilization was that we abandoned the idea of a leisure society and replaced it with a complex way of life. In so doing, we used energy and other natural resources to discover the laws of science and develop the technologies that led to such things as brain surgery, instant communication, space exploration and many more good things. To paraphrase the old wise man: This is more than chopped liver.
On balance, some people will say we did well and some will say they are not so sure. But given that we can only go forward from here on and never go backward, that debate shall remain academic. And the question to which we must find an answer is this: Can we steer our civilization in a direction where we could develop a way of life that will approximate the leisure society we used to dream about without wasting too much resources? In short, can we achieve the kind of sustainable growth that will absorb the number of new people who enter the labor market every year without straining the planet?
Many good people are working hard to find the answer to this question knowing that the effort they make is part of a project carrying a wonderful dream for all of humanity.