Sunday, February 22, 2009

When Consumers Cut Back: A Lesson From Japan

"As recession-wary Americans adapt to a new frugality,
Japan offers a peek at how thrift can take lasting hold of a consumer society, to disastrous effect," writes Hiroko Tabuchi in yesterday's New York Times. The article offers examples of how the Japanese are cutting consumption:
Today, years after the recovery, even well-off Japanese households use old bath water to do laundry, a popular way to save on utility bills. Sales of whiskey, the favorite drink among moneyed Tokyoites in the booming ’80s, have fallen to a fifth of their peak. And the nation is losing interest in cars; sales have fallen by half since 1990. . . . a survey last year by the business daily Nikkei found that only 25 percent of Japanese men in their 20s wanted a car, down from 48 percent in 2000, contributing to the slump in sales. Young Japanese women even seem to be losing their once- insatiable thirst for foreign fashion. Louis Vuitton, for example, reported a 10 percent drop in its sales in Japan in 2008.
The premise is that all this thrift is hurting Japan's ability to weather the global recession. "Japan’s economy is in free-fall because it cannot rely on domestic consumption to pick up the slack," Tabuchi writes. Saving instead of spending could lead to deflation, the author warns.

Yet the article, published in the Business section, does little to explain exactly what "disastrous effect" this frugality might have other than to spur deflation. Deflation, in which the prices of goods and services drop, and the value of a dollar (or yen) increases, can be self-reinforcing, possibly leading to what economists call a deflationary spiral, in which production and demand fall together. It is this potential for shrinking GDP--and the accompanying loss of jobs--that worries economists.

While deflation's potential to negatively impact individuals, especially those who haven't saved, is very real, let's look at it in a different way. Given what we now know about the earth's limited ability to provide the raw materials and energy for human consumption (and absorb its wastes), it is very likely that we will have no choice but to curb our consumption in the future, especially since there will be more and more people vying for limited resources. In other words, whether we like it or not (and there is much not to like), consumption cannot expand exponentially forever. Perhaps a shift from borrowing and spending to saving is a rational, sometimes even a desirable trend.

“As the world becomes full of us and our stuff, it becomes empty of what was here before," writes economist Herman Daly. In other words, "When the economy’s expansion encroaches too much on its surrounding ecosystem, we will begin to sacrifice natural capital (such as fish, minerals and fossil fuels) that is worth more than the man-made capital (such as roads, factories and appliances) added by the growth"

The result is
uneconomic growth. The question is not if we will reach that state if we keep growing, but when. Not surprisingly, the answer is subjective and depends on the value we place on “what was here before”—all those fish, minerals, and fossil fuels, not to mention ecosystems, familiar weather patterns, forests, biodiversity, and so on.

While we're used to measuring the well-being of a nation by how fast its economy grows, it is becoming apparent that at least some of this growth in GDP--which depends largely on rising consumption--is uneconomic in nature. That is, after we balance the benefits of our consumption with its deletrious effects, our quality of life may actually be diminished.

is telling that the goods Tabuchi reports the Japanese are giving up are largely luxury items--designer handbags, expensive whiskey, personal automobiles, and the like. That highlights how dependent the world economic system is on what might be considered superfluous consumption. We make every effort to direct our economies to grow not merely to meet our needs, but for the sake of growth itself, doing so because we worry about the "disastrous" effects if we don't: mainly that the economy will contract.

But rarely do we consider the truly disastrous effects if we
do continue to measure success only by growth. In a world running out of cheap energy and filling up with heat-trapping greenhouse gasses, the more sensible approach would be to strive for a more sustainable level of consumption. That's not to suggest that we should embrace the deflationary spiral. Rather, we must redefine the way we measure success--not by more Louis Vuitton handbags and cars but by quality of life and intact ecosystems.

My bet is that the future is going to be defined by limits, and the sooner we can start figuring out how to live comfortably and happily within them, the better chance we have at avoiding real disaster. So instead of brashly calling the reduced consumption in Japan, or anywhere else, "disastrous," we'd do better to keep an open mind and try to learn about how they're adapting. In the wake of our own big bubble popping and the collapse of the financial system as we know it, the spending and saving habits of disenchanted Americans may start to look a lot like those of the Japanese.

In the Times article, Tabuchi quotes a twenty-year-old Tokyo college student: “I’m not interested in big spending. . . . I just want a humble life.” It's an attitude that's certainly not as sexy as that of our recent pre-recession, high-rolling, ultra-leveraged past, but it's one that's much more grounded in reality.

Thursday, February 19, 2009

Car-less in Kaua’i

By guest contributor Pamela Salmon

“I like your Bike Friday,” chimed a middle-aged woman with vibrant eyes, a broad smile and a pink Terry Bicycles tank top. I thought with excitement, she is the first person in six days of being on Kauai who noticed my unique mode of transportation. I was riding a new-fangled folding bicycle that I had purchased for two reasons: I wanted to see if a tourist could navigate Kaua’i without having a car, and on my vacation, I wanted to maintain my training for endurance rides that I do in my home state of New Mexico.

My husband Rick says my bike looks like a cross between a BMX and a road bike. It is truly an engineering marvel, foldable and easily packed into a 30-inch, hard-sided Samsonite suitcase.

“My daughter has traveled all over the world with a Bike Friday,” added Cookie Kiacz from Norman, OK, when I asked how she recognized my bike. Then as fate would have it in chance encounters, Cookie became the source of information I had been seeking. She told me for years she had been vacationing on the eastern shore of Kauai for weeks at a time without a car, motivated by the desire to protect her environment and to experience the local flavor.

Her adventure in bidding the automobile goodbye began 12 years ago when she and her late husband, Dan, started coming to Kauai, the northern most island in the Hawaiian chain. “We were going to be here for six weeks. We rented a car at the airport and drove to Wal Mart in Lihue where we bought groceries and other necessities. We also bought two bicycles.”

The couple loved being close to nature and on their bikes had one adventure after another. That first year, after emptying their Wal Mart essentials, they packed their bikes back in their rental car, drove back to the airport, returned the car and bicycled the eight miles north on the highway’s wide shoulder to Kapa’a where they were staying.

They were enchanted. “We saw things on the bikes that we would never see in a car,” she said. “We got a real sense of the energy and spirit of the island.” Throughout the years, Cookie and Dan rode bicycles from Kapa’a to Kilauea and past Princeville to Hanalei. They rode to farmers’ markets and carried their vegetables and papayas home in backpacks and draped their bouquets of birds of paradise, red ginger and heliconias across their handlebars. If their loads were too heavy or they wanted to venture further, they and their bikes caught a ride on The Kaua’i Bus.

Cookie notes that currently few locals walk or ride bikes for transportation, but they do take the bus. “The bus system is wonderful,” she added, explaining that you can get almost anywhere you want to go and you meet island residents at the same time. She also noted that the new Kapa’a bike trail, which follows an old sugar cane road, is making the island more friendly to cyclists.

Because the couple had no storage in Kaua’i, when they left that first year they gave their bikes to local friends. Each year thereafter, they rented bicycles, spending about a third of what they would on a car. They also got plenty of exercise and prided themselves on being good stewards of the land.

Cookie, 63, continued the practice following the death of her husband four years ago. She takes a cab from the airport to Kapa’a, rents a bike, buys groceries at the local markets, and takes her bike out every day for a new adventure. “I saw three people on the new bike trail along the Kapa’a shore the other day and they all had Bike Fridays,” Cookie said, making me feel I was in good company.

I shared her excitement. My husband and I rode that bike path in late January along the cliffs, looking for whales and hypnotized by the waves on Donkey Beach. We took a side trip from the beach to a roadside stand selling huli huli chicken on the highway. As our meal swung rhythmically in a flimsy bag hooked over my handlebar, we made our way back to the cliff to eat our locally-cooked chicken, rice and corn overlooking the Pacific and felt as if we were the only people on the planet.

Because Rick and I own a condominium near the south shore of Kaua’i, we visit once or twice a year. While I was unsuccessful in doing without a car this time, I will continue my quest. I had made a logistical start. I bicycled six days out of the nine that we were there, mostly near the Po’ipu and Kalaheo areas, exploring roads and meeting local cyclists riding upscale road bikes who wondered what in the world kind of bicycle was I riding.

I look forward to taking Cookie’s advice and making the bus part of my overall plan. I will be able to go anywhere. I can go to the nearby farmers’ market. I can get a back pack to carry groceries. I can be a role model and demonstrate that bicycling is a viable mode of transportation on the island. And if we want pizza? We can bike to the pizza restaurant and eat there or have it delivered.

E.P.A. Expected to Regulate Carbon Dioxide

Big overdue news: The federal government is finally set to regulate CO2 emissions. The regulations, however, are not yet taking the form of specific legislation, but will, for now, come as a reapplication of the old Clean Air Act.

"The Environmental Protection Agency is expected to act for the first time to regulate carbon dioxide and other greenhouse gases that scientists blame for the warming of the planet, according to top Obama administration officials."

More from the New York Times.

Gloomy with a 15% Chance of Depression

LBO has often described the U.S. economy by invoking the old Timex watch slogan from the 1950s, “Takes a licking and keeps on ticking.” Crash follows upon panic follows upon bust, and yet the thing keeps getting up again to binge some more. These remarkable feats of renewal, though, have always come with big help from the U.S. government, either multibillion dollar bailouts or long rounds of indulgent monetary policy from the Federal Reserve. But revive it always has, despite the forecasts from the hard left and the hard right that this time it was different and the medicine just won’t work.

Will it work again? Will the megadoses of stimulus do the trick? Or is the jig up? Will what’s widely touted as the greatest financial crisis since the 1930s be a prelude to Great Depression II?

More from the December issue of Left Business Observer.

Tuesday, February 17, 2009

A New Game

"Listen to recent debate about the $800+ billion federal stimulus package and you hear two strong underlying assumptions: the economy will recover within a few years, and it will function pretty much the same as today (except perhaps for some more wind turbines, more solar panels, and a dazzling new selection of fuel-efficient family cars)."

More from Daniel Lerch at

Thursday, February 5, 2009

Helium Dream

Although not as ambitious as the original DIY balloonist Larry Walters, Ira Mowen and Luca Antonucci have captured a bit of that old helium magic with their Balloon Project. It's a simple idea: tie a video camera to a bunch of balloons, release, recover, repeat. Brilliant!

Wednesday, February 4, 2009

The Ponzi State

Driving around Florida's ghost subdivisions, you feel not just that their influence is waning but that they are physically hollowing out. In a place like Lehigh Acres, near Fort Meyers, where half the driveways are sprouting weeds, and where garbage piles up in the bushes along the outer streets, it's already possible to see the slums of the future. More and more of the residents in Hamilton Park will be renters like Lee Gaither. The vacant houses in Country Walk will be boarded up. The St. Augustine grass in the front yards of Tanglewood Preserve will grow three feet high. The open fields with street lights but no houses will become dumps.
More of George Packer's excellent article on Florida's speculative real estate disaster here (New Yorker subscription required) and a video here.

Monday, February 2, 2009

Our Love Affair with Malls Is on the Rocks

"DEARLY beloved. We are gathered here today, in the midst of economic calamity, to ask if we really should be gathered here today, in a funhouse of merchandise designed to send us deeper into debt."

More from the New York Times.

Rust Never Sleeps

Braddock, Pennsylvania, just a few miles from Pittsburgh is bankrupt, distressed, and falling apart. But unlike other Rust Belt towns that try to put a good face on their decay or merely try hide it away, this one is embracing it. The mayor of Braddock, thirty-nine-year-old John Fetterman, is hoping the town can capitalize on its neglect by attracting pioneering creative types looking for cheap space. The town's website, which the mayor paid for, asks visitors,
Can a town that lost nearly 90% of its population, homes, and businesses come back? Could Braddock's remaining assets be leveraged by new ideas, energy, individuals to spark a cultural and economic revitalization?
The town has turned into a sort of laboratory of decay and renewal. People are willing to experiment in a place where things can't get much worse. Cheap real estate made it possible for residents to build a community farm the size of a football field right in the middle of town, which employs area youth. A bio-fuel company has set up shop. And creative types are starting to trickle in.

The mayor holds no illusions that his plan will work quickly, or even work at all. But the experiment he has set in motion is well worth paying attention to. Whatever lessons come out of it could have direct application to other decaying towns left behind by heavy industry, of which we are bound to see more of in coming years.

Read more about Braddock here, and see the town's website here.