Sunday, March 08, 2009

Real consumption vs Consumption vs population

Stimulus bills, stimulus bills and more stimulus bills to revive the collapsed economies all over the world.

What do these stimulus bills do? Try and increase the economy by increasing the money flow in the economy and make people CONSUME more.

So, it's all about consumption. Oh, I forgot that the world over which tries to imitate the US style follows the Keynesian pattern, where consumption is the most crucial thing.

So, more consumption and hence better growth rates. Without Keynesian way system India would never have clocked the rates because much of its growth is bellowed by the internal consumption. For that matter US will not retain its status as the world's economic power but for the mammoth per capita consumption that its population have.

But this consumption, which most of us should/would have realized by now should be the real cause of worry because we have limited resources or limited access to them. Hence in the long run consumption has to be reduced.

I do not want to attach negative adjectives to "consumption", but it is the real consumption which matters to me much more when it comes to sustainability.

What is "Real consumption"? I do not know if this term exists, but I'd like to say it as the consumption of natural resources to produce finished goods. If "Real consumption" of a society increases then it should be a cause of worry. And yes, the consumption that we have now is largely real in nature i.e. we are increasingly consuming more natural resources.

If only recyclable materials are developed and used for finished products, the "real consumption" will go down. Say, if recyclable materials are used for electronic goods, it will reduce the plastic consumption by a huge percentage and hence the consumption of natural resources will also go down. So, "Real consumption" which is the variable that defines the way our natural resources are being consumed can be reduced in two ways:
a) Reduce the per capita consumption-Real
b) Reduce the overall population

I want to understand the "population" aspect much more than the per capita levels. Since much of the human population aspires to grow up the value chain ladder their consumption levels are going to increase, hence it becomes imperative and Utopian that the population levels have to go down.

On the contrary businesses believe that the high population in countries like India and China have helped them lately. I agree to that because we are still relying on "Keynesian economics" with emphasis on services and consumption levels. Even with very low per capita consumption levels, with such huge population businesses can make merry with huge volume driven sales.

So, the huge population and the population growth are one of the major problems. However, we may think that it has helped us, the huge population has actually deprived the earth and the future generations of so many resources that it is hard to understand that population is a boon.

And in no manifesto of any political party is an emphasis on family planning or population growth control. I used to and still say that economics will make sure that family planning is implemented. Nowadays, how many nuclear families can afford three children. So, as the inflation levels increase people will automatically shift to smaller families. But, this would be true in a free market scenario.

But, in the protective environments that are prevalent during these recession times, people who get the subsidies and other benefits without effort will never appreciate the fruits of family planning. I'd not be surprised if the population growth during the recession times in protected economies is more than the boom times.

It'd be good to have the access to resources to every one, but let's ensure that we make this statement truth for the futuer generations, by reducing the overall real consumption.