Empire of Things

by Frank Trentmann

  The state also facilitates consumption indirectly. One of its jobs is to provide ‘public goods’ which are shared by all but which markets would not spontaneously create by themselves.52 Everyone benefits from peace and safety, whether they pay taxes or not. In the long run, a peaceful commonwealth makes for a more prosperous nation. Other types of state action enable particular kinds of private consumption. A car would be little fun without roads. National statistics treat such spending on infrastructures as investment; in the European Union, government expenditure on transport, energy and communication amounted to 4 per cent of GDP in 2009.53 ‘Public consumption’, on the other hand, is defined as all purchases of goods and services undertaken by government, ranging from schools and healthcare to pensions and submarines. This definition generates a very big shopping list and is fraught with problems. It could be said, for example, that education is an investment and does not belong under ‘public consumption’, but to remove it would add a new distortion since ‘private consumption’ includes what households spend on schooling. For our purposes, spending on national defence is of less interest. Its benefits are more diffused and of a different kind from the dollars or euros a government puts into the pockets of a consumer either directly – through a pension or income support – or indirectly, by subsidizing a visit to the theatre or a dip in the public pool. In the following, we are mainly concerned with those types of public consumption that have a tangible effect on people’s ability to enjoy goods and services: so-called social transfers and public spending on culture and recreation.

  The conventional account of consumer society has rested on standard measures of private market activity, such as disposable income and GDP. Public expenditure has been ignored. Mr and Mrs Smith’s level of consumption here appears as a function of wages and prices. This is a naïve oversimplification. Affluent societies are full of households that rely wholly or in part on non-market sources for their actual consumption: state schools, healthcare, pensions, child benefits, social housing, unemployment benefits – the list could go on. To rely on GDP as an indicator of the standard of living, as many commentators do, is similarly problematic. As the name indicates, gross domestic product measures what is produced for the market. It does not tell us about everything that is consumed. Just how crucial public services and spending are is suggested by the Nobel Prize-winning team of Joseph E. Stiglitz, Amartya Sen and Jean-Paul Fitoussi, who have developed fresh ways of measuring economic performance. In France and Finland, they show, household final consumption expenditure jumps by 20 per cent once social transfers are taken into account. In 2007, the French government channelled €290 billion to households, mainly in the form of health services and education. In the United States, by contrast, such transfers add only 10 per cent.54 Real consumption in France and Finland, then, is much closer to that in the United States than standard national accounts would have us believe. A previously hidden world of consumption comes into view.

  Since the 1950s, it has been natural to criticize affluent societies for promoting private consumption at the expense of public goods. This powerful idea was most brilliantly expressed by J. K. Galbraith in his 1958 bestseller The Affluent Society.55 It is very bad history. The record of the last half-century tells a quite different story. The richer a nation got, the more public money it devoted to health, pensions and education. Some countries, it is true, continue to spend much more on social benefits than others – social spending is 30 per cent of GDP in France but only around 20 per cent in the United States and 10 per cent in Korea. Still, the overall trend has been almost universally upwards. In 1960, average social spending in the OECD was 10 per cent of GDP. By 2007, its share had almost doubled, to 19 per cent. Even Korea spends three times more of its GDP on welfare today than it did a generation ago. The relative decline in the Netherlands and Ireland since 1985 has been an exception to the rule. Since 2009, a few countries have slightly reduced their social spending relative to GDP (Britain and Germany by 2 per cent), but for rich countries as a whole – the OECD group – it stands in 2014 exactly where it stood before the 2009 Great Recession, at just over 21 per cent (social spending ratio to GDP); indeed, Japan, Finland and Spain increased theirs by 4 per cent. Austerity measures have especially hurt the poor and disadvantaged, but it remains to be seen whether most governments will be able to reverse the historic surge in public spending in the long run, especially those with ageing populations.56

  The age of affluence (1949–73) is now remembered for the boom in private consumption. This is only half the picture. In the United States, federal consumption expenditure (excluding defence) grew by an average 2.7 per cent a year in the 1950s and ’60s, rising to 4 per cent a year in the 1970s; state and local consumption expenditure rose by 4 per cent and 6 per cent a year respectively in the 1950s and ’60s. In 1958, the year Galbraith published his Affluent Society, US government spending grew by over 5 per cent, twice as fast as private consumer expenditure. In most years, it is true, private consumer spending grew faster than public. But the important point is that throughout these golden years, public consumption did not contract but expanded, both in total dollars and as share of GDP. By 1978, public spending on social security and medicare exceeded military expenditure.57

  What difference government spending makes for wealth and welfare has divided economists ever since Keynes, and it would be presumptuous for a historian to try to settle the debate in a few quick words. Public spending is not automatically a boon: in certain contexts it can displace private spending. In the high-growth decades of the post-war miracle, with high employment, public monies probably did not ‘crowd out’ that much private spending. Measuring the direct effects is difficult. In Canada, for example, federal transfers played an important part in boosting consumption immediately after the war but then lost their force as inflation eroded the family allowance; from 1949, a rise in consumer credit and a fall in saving came to matter more.58 But a lot of the dynamics from public spending for consumption were indirect, such as the support for home ownership in Canada and the GI Bill and mortgage relief south of the border in the United States. Over a million new homes were built in Canada in the 1950s, mostly detached. How many fridges and cars would have been sold without such government support for houses and roads?

  A few general observations on historical patterns might be helpful. The dramatic rise in public spending does not appear to have hurt affluence. Otherwise, France, Sweden and Germany would be in the poor house. The United States was much better off in 1964 than in 1954, a period during which its welfare bill doubled. For all their alternative models of capitalism, and all the heated debates between self-proclaimed liberals and defenders of the welfare state, the club of rich nations has pretty much travelled on the same road towards greater social spending, some a bit further along than others, but all moving in the same direction. As countries get richer, private consumption makes up less of GDP.59 Modern history does not reveal a second road, where diminishing welfare spending leads to greater affluence – at least, not yet. If anything, the pace on the welfarist road of development has quickened with time. In 2000, spending by Sri Lanka and Panama on social transfers was more than twice that of the most advanced European countries in 1930.60 Nor must the differences between welfarist Scandinavians and liberal Anglo-Saxons be exaggerated. Swedish and Danish benefits look generous on paper but, in reality, a good deal of what these states give out with one hand, they take back with the other, through fine-tuned taxes. Conversely, public spending in the United States and Britain remained high in the neo-liberal 1980s; Margaret Thatcher managed to cut it in only a single year (1985), Ronald Reagan not even that.61

  How sustainable is this state of affairs? In the 1950s and ’60s, high growth and investment generated money for hospitals and pensions. Since the 1970s, however, growth has slowed and the rise in public consumption has been accompanied by a drop in public investment; in the United States and the core European Union (EU12), public investment fell fr
om 4 per cent of GDP in 1975 to around 3 per cent in 2005. For some commentators, this shift from public investment to consumption sets off a dangerous downward spiral, leading to lower productivity and private investment, and ultimately to lower wages, recession and bankruptcy.62 Yet it is historically risky to castigate public consumption as if it is all about a hand-out of cash benefits which trickle away without a trace. It also means better health and education, which is good for development. Interestingly, the eurozone country which experienced the biggest fall in public investment also happened to be the one which has emerged strongest from the 2009 crisis: Germany.63

  A last observation concerns social spending. Statisticians speak of ‘social transfers’. This is technically correct, since the state uses income support, state pensions and housing benefits to move money from one section of society to another; these transfers are not always from the richest to the poorest – unlike in Britain, Northern Europe and Australia, in Mediterranean countries most cash benefits go to fairly well-off households with a strong employment and pension record.64 What happens in the course of such transfers has been the subject of long-standing debate. Harold Wilensky, an American expert, in the 1960s argued that such welfare schemes had a ‘negligible’ effect on equality. The poor stayed poor. The real winners, he argued, were the poor’s better-off relatives, who would otherwise have picked up the bill to look after them. Now, instead, they had money to spend on themselves.65 This is doubtful. Private charity in the past was never on the same scale as public benefits would be from the 1930s. Most needy individuals would have faced destitution. Public welfare has probably made people more, not less, charitable in the course of the twentieth century.66

  Most importantly, social spending does not stop with the transfer of money. It has changed the nature of private consumption. The rich and the poor carry with them quite different shopping baskets – so-called ‘consumption bundles’. To a millionaire, a few thousand pounds lost in taxes is peanuts. It might mean one luxury watch less but it makes no difference to his diet, comfort or convenience. To a pauper, a few thousand pounds gained makes all the difference in the world. It means regular meals instead of going hungry, being able to run the radiator rather than sitting in the cold, having a TV instead of not having one. Social transfers did not eliminate inequality. They did, however, play a crucial role in lifting the disadvantaged and the poor into a society of mass consumption from which they had been excluded. By the late 1960s, TV screens were flickering in housing projects as much as in suburban villas across the developed world.67 Without the rise in social spending, the bottom would have fallen out of the boom in consumer durables. Public consumption deserves at least some of the credit (and blame) for the rapid advance of private consumer goods.

  The expansion of public consumption is even more impressive once we remember that Western nations scaled back their defence spending at the same time. The Cold War saw a great shift in spending from military to social purposes. In the United States, defence was 14 per cent of GDP at the end of the Korean War in 1953, 9 per cent at the height of the Vietnam War in 1968, but had dropped to 5 per cent at the time of bin Laden’s death in the ‘War on Terror’ in 2011.68 The United Kingdom devoted half its public consumption to defence at the height of the Korean War. By 1980, it was down to a quarter. The big winners were health and education; the latter doubled its share in Britain during these years.69 Since then, ageing populations have meant a further rise in spending on health and pensions. Within this broadly shared international trend, many national peculiarities remain. Depending on national priorities and benefit systems, some groups have benefited more from public consumption than others. Among rich nations, the United States spends disproportionately on healthcare but leaves only crumbs for those on income support. In Denmark and Sweden, the elderly, disabled and families with young children receive five times as much support as in the United States or Spain. Public pensions are a major transfer in Italy, France and Austria (12–14 per cent of GDP), but tiny in Australia, Ireland and Iceland (less than 4 per cent). Those in need of public housing are more likely to find it in Canada than south of the border.70

  Let us now turn away from social transfers to focus on a few other zones where the state has left its mark on how people consume: food, recreation and culture. Armies teach fighting, and schools teach maths, but they also shape tastes and leisure. In 2005, the American forces were 1.4 million strong. Their recreation centres now offer everything from horse riding and boating to car washes and travel services. More than half of army spouses use its fitness centres. The largest child-care programme in America is run by the military.71 In some cases, armies have revolutionized national food and identity. In inter-war Japan, nutritionists were convinced that beriberi, a disease affecting the central nervous system, was caused by a lack of protein. This was wrong – vitamin B1 deficiency was to blame – but had far-reaching consequences. Army canteens started to serve up hamburger dishes and doughnuts, and use curry and Chinese stir fries to flavour and disguise cheap meats; curry dishes had made their appearance at the Nakamuraya restaurant in Tokyo in the 1920s, introduced by the exiled Indian revolutionary Rash Behari Bose. After the war, army chefs and nutritionists took their multicultural recipes to restaurants and company cafeterias. The Japanese curry, doughnuts with mustard and other miracles of fusion food were the result. Food in Japan has never been the same.72

  In the home of the doughnut, schoolchildren were subject to rather different influences. In the 1930s, social reformers on both sides of Atlantic seized on the school meal as a way to build stronger citizens.73 In the United States, it was also a way to absorb vast surplus food. The New Deal was already serving lunches in thousands of schools at the outbreak of war. By 1942, the Surplus Marketing Administration was dumping 5 million pounds of food on schoolchildren. In 1946, the National School Lunch Program passed into law. School meals had a broad alliance of support. They turned rickety kids into strong citizens. They gave nutritionists a chance to put their expertise to use. And they promised to forge a shared American way of life – unions supported the scheme under the motto ‘Kids Eat Democracy’. Above all, they pleased farmers eager to get rid of their surplus. Tellingly, the 1946 bill emerged from the Department of Agriculture. A subsidy to agriculture was dressed up as a service to the nation’s young. In practice, combining the two goals was problematic. Fruit and vegetables, after all, had their distinct growing season. Some schools were deluged with apples for weeks, and there were only so many that kids were willing to eat. Many ended up in toilets. The farming lobby also looked at schoolchildren as captive customers for new foods. This may have worked in the long run, but in the short run it often backfired. In Maryland, children refused to eat surplus grapefruit and, instead, played catch with them.74

  By 1970, the school-meals programme cost $2 billion. Parents paid half, but this still left the federal government and states to pay the other half. It was then, under Richard Nixon, that the priorities shifted. Instead of aiming at healthy food for all, school meals turned into a welfare scheme to feed the poor. By 1972, 8 million kids ate a free lunch. Once meals were earmarked as an anti-poverty scheme, however, paying kids started to drop out and local government lost the will to contribute. Schools fired their nutritionists and called in private caterers. By the time the Reagan administration slashed federal support and redefined ketchup as a vegetable in 1981, the main damage had already been done. French fries, soda and candy were the new American school meal. Apples and carrots were pushed off the tray by milkshakes and cheeseburgers, fortified with vitamins to meet dietary guidelines. It would be too easy to blame the school meal for obesity – Italian children have also become fatter in spite of a Mediterranean lunch. It would be equally foolish to deny that it disposed a generation towards a high-fat and high-sugar fast-food lifestyle. Here is an example where a shift in a tiny portion of public consumption – 0.1 per cent – has had a disproportionate long-term legacy for private consumption and al
l the private and public costs that come with it.

  We noted earlier how consumers have become ever more active, especially in the second half of the twentieth century. Leisure benefited from state support of recreation as well as from commercial development. In the United States, the cult of motoring for fun and outdoor recreation was oiled by the extensive state park system. In 1955, state parks covered 5 million acres and attracted over 200 million visits. The number of public pools almost doubled between 1948 and 1955. American children threw balls on 15,000 baseball and softball diamonds. Recreation was not always free. The government built pools but then charged families to use them. It put a tax on sporting goods. Such inconsistencies notwithstanding, the rise in public spending on recreation was impressive, even if it slightly lagged behind the phenomenal rise in income in the 1940s–’60s.75

  The fitness wave reached Europe and Japan in the 1960s and ’70s. The cult of physical exercise had been central to nineteenth-century nationalism. In the inter-war years, fascists, socialists, and conservatives, too, had lined up thousands in gymnastic rows. In France, pools and sports grounds were one of the legacies of the short-lived left-wing Popular Front (1936–8). But, in general, sports facilities were few and far between before the 1960s. In Finland, for example, there were only 1,600 facilities in 1930. By 1970, there were ten times as many. Most were owned by local authorities.76 Across the developed world, governments discovered ‘sport for all’: the young, the old and the bulging middle-aged. Germany opened fitness trails, Sweden built communal leisure halls – the Hallonbergen housing estate near Stockholm included a sauna, a fitness centre and a shooting range.77 France, in 1978, established a separate department dedicated to ‘sport for all’. The response was impressive. In 1967, one in seven French citizens practised a sport. Twenty years later, it was every second.78 By 1995, the Japanese state spent almost 1 per cent of its budget on sport; half the facilities were public, not counting schools. In Korea, public grounds mushroomed in the 1990s and far outnumbered commercial sites. Without this kind of public support for recreation, the take-off in fashionable sports shoes and leisure wear since the 1960s would be inconceivable.79