Capitalism, Consumerism, and Innovation

Is consumerism Capitalism’s dead end? The words are often used interchangeably in day to day use and so I wouldn’t be surprised if that was the common man’s perception. However this was not always the case. Capitalism began as the economic extension of Classical Liberalism where the old liberals believed that a society’s happiness was the sum total of individual happiness. When Classical Liberal thought was applied to economic theory, Capitalism was born. This was to be a system where the prosperity of society would be measured as the sum total of every individual’s prosperity. Consumerism wasn’t birthed by Capitalism, but rather from mass production which originated in the Industrial revolution.

Our consumerist economy is classified as “Monopolistic competition” by economists. This generally means that the economy produces various products (technically services are products also) that are differentiated by branding and advertizing. While these products may not be perfect substitutes for each other, they are very similar. Advertizing generally conveys the false impression that consumers have a great deal of choice when seeking out products to satisfy their needs. This isn’t necessarily so. While products may vary superficially by boutique features, the vast majority of them do not differ significantly in terms of utility. So while consumer A may prefer a certain brand of laundry detergent whereas consumer B prefers another, the two brands probably do not differ significantly from one another. Products are differentiated artificially through advertizing which stimulates brand loyalty amoung consumers.

Consumerism plays upon our atavistic desire for variety, but scratch the surface of consumerist “variety” and one will unearth homogeneity. Ironically enough, in this regard consumerism isn’t very different from communism. If I were to apply Hegelian dialectic to modern consumerism it would run as follows:

  • Freedom to consume, gratify desires without restraint, and define one’s self image via consumption —> Individualism –> Thesis
  • Consuming mass manufactured products that most other individuals have access to –> homogeneity –> Anti-thesis
  • Product differentiation via advertizing and marketing –> Synthesis

Capitalism, despite the abomination it has spawned, is not without merit. It is still the most effective engine of economic growth and aids in not just improving the economy, but molding better individuals in society. It is a system that assists young men in channeling their risk taking behaviour in a manner that is beneficial to themselves as well as society. It teaches young men responsibility, accountability, and most importantly, self reliance.

Yet while Capitalism does indeed reward initiative, it fails to spur innovation. This assertion almost reads like heresy but it is true. Businesses aren’t interested in innovation, their goal is to generate profit. Let us not fall prey to the fallacy of confusing product differentiation with innovation. Innovation costs resources and businesses would rather spend those resources selling products that have mass appeal. This is why the vast majority of pharmaceutical companies aren’t interested in discovering cures for ailments such as HIV, but would rather manufacture and distribute fast selling cough syrups.

Most of the paradigm shifting inventions over the past 100 years have been innovated by private inventors such as Bell, Watt, Edison, and Tesla. Businesses generally buy patents and convert them to mass produced goods for the benefit of society. Inventors and businessmen both have a place in society, but it is unwise to give the latter undue credit for the labours of the former. I was considering adding environmental degradation as a major fault of Capitalism but decided against it as Soviet Russia and Red China (which is a lot less Red today) have far worse records.

 

 

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One Response to Capitalism, Consumerism, and Innovation

  1. Beatrix says:

    “Consumerism plays upon our atavistic desire for variety, but scratch the surface of consumerist “variety” and one will unearth homogeneity.”
    “Consuming mass manufactured products that most other individuals have access to –> homogeneity –> Anti-thesis”
    Ummmmm………..yes, but don’t underestimate human beings’ penchant for tribalism or as in Maslow’s hierarchy of needs “belongingness” & acceptance among their social groups.
    I would suggest-
    “Consuming mass manufactured products that most other individuals have access to –> homogeneity = “belongingness” or identifying themselves as part of a social group or movement.
    I think we’ve all seen the informal but ‘elitist’ cliques of say BMW owners or wearers of certain brands sunglasses or Abercrombie & Snitch clothing.
    “Yet while Capitalism does indeed reward initiative, it fails to spur innovation.”
    And that’s why capitalism does not belong in sectors where spurring innovation is foremost & profits derived thereof are not monetary, ie healthcare & education.

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