The origins of America’s consumer-driven economy

Make Me Smart November 21, 2023 Transcript

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Kai Ryssdal 

Hey everybody I’m Kai Ryssdal. Welcome back to Make Me Smart, where none of us is as smart as all of us.

Kimberly Adams 

And I’m Kimberly Adams, thank you for joining us, everyone. It is Tuesday, November the 21st. I guess the question of the day Kai is have you actually started your holiday shopping?

Kai Ryssdal 

Absolutely not. It’s not even Thanksgiving. You kidding me?

Kimberly Adams 

Me neither. That’s what a lot of Americans are actually doing this week, or at least thinking about doing with great trepidation, I imagine. So we thought it was a good time to do a deep dive on how it got to be this way that we are so consumery. So today, we’re talking about the rise of the American consumer economy.

Kai Ryssdal 

You have heard me say more than once on Marketplace that spending by or on behalf of consumers accounts for something like 70% of this entire economy. But how did it get to be this way? And what was it like before it was this way? This is a history question, which I just kind of love. Louis Hyman is an economic historian at Cornell University. Louis, welcome to the podcast. Good to have you on.

Louis Hyman 

Thanks for having me on.

Kai Ryssdal 

So have I suppose it hasn’t always been this way. But it hasn’t always been this way that consumers drive this economy.

Louis Hyman 

It is not always. We used to live in a world of utter scarcity. So it’s a little surprising that we live this way now.

Kimberly Adams 

Oh say more like, when was this sort of pivotal turning point?

Louis Hyman 

Well, if you want to get big history on this, I usually like to start a story in the around the time of the Salem witch trials. So we think of magic as something that’s used for world domination today. But in the late 17th century, you know what magic was used for, to find your last spoon. And so that’s what actually what scarcity really looks like. So today, we have sporks, all around us cluttering up our kitchens. But in the 17th century, the best use of magic was spoon finding. And so I think for me, this illustrates just how scarce everything was. And then, of course, everything changed.

Kai Ryssdal 

Oh, go on, please, everything changed? Don’t leave us hanging, again.

Louis Hyman 

Okay, what began to change around 1740 in what historians call the consumer revolution, it was a moment when we began to figure out how to make more stuff, the Industrial Revolution was proceeding at pace. And over the course of the 18th century, by the time of the revolution, you go from a world where nearly all Americans made their own cloth and something called homespun to them buying it in shops. And of course, tea, as you may have heard was an important part of the revolution, the beginning of the 18th century was, you know, a luxury good that no one could afford. And by the time of the revolution, everybody had it. So when you tossed it in the harbor, it meant something, everybody. And so we can see this kind of consumer life being very intertwined with American life, almost from the start.

Kimberly Adams 

Is, was that uniquely American? Or was this happening globally? Because I’m thinking, this timeline, just so happens to align with, you know, sort of industrial slavery and low cost of production because of, you know, enslaved labor?

Louis Hyman 

Yeah, that’s not a coincidence. Yeah. So it is a part of this expanding world of sugar and slavery, and the expansion of cloth production, although that accelerates in the 19th century. And it is an important part of the story, the story of those who are exploited by these new industrial regimes, but also a time when there’s just so much demand for stuff. This is the story of the 19th century that there is no need to advertise very much. Because everything you make, you can sell. And of course, the story changes in the 20th century, when suddenly, we have so much stuff. The problem is how do we sell it?

Kai Ryssdal 

So go on go on about that for a little bit. Like what is there a moment you can point to where where that tips where we have so much stuff that we can’t sell it because there’s just too much stuff and consumers are driving this economy.

Louis Hyman 

I like to point to around 1920, because I think that’s the moment when you go from a world where the most expensive, most amazing thing humans had ever sold. That is the automobile goes from being something that sold for cash to being something that sold on credit. And you have the invention of things like GMAC and other kinds of finance companies in the 1920s not just for cars, but for all the new amazing electrical goods like you know, vacuum cleaners and refrigerators and through the 1920s this boom, this boom that we often call for days and where, you know, Henry Ford famously paid his workers enough to buy the cars really rippled through the economy. And it’s underpinned by both the incredible productivity of American factories, but also a new ways of lending money to consumers.

Kimberly Adams 

Yeah, it sounds like there’s been a series of moments that kind of tipped us to get to where we are today. But a lot of historians also point to this period coming out of World War Two, as a very pivotal moment for the American consumer. Why then?

Louis Hyman 

As they should, because it was during the Great Depression, that American capitalism got very intentionally reconstructed around a very particular kind of consumer. So coming out of the 1920s, we collide that new tidal wave of goods and credit with the Great Depression. And then the New Deal policies create something called suburbia, the suburban boom of FHA lending that creates homes and in the suburbs that require cars and new kinds of furniture, to fill up those houses. And so the new suburbs are funded by credit, you know, through policies initiated by the federal government. And of course, that was a very exclusionary so when we talk about this postwar consumer, we’re really talking about postwar white consumers to a large degree, although, of course, African Americans participate in very important ways. In this new kind of consumer life, it’s not a coincidence that so much of the civil rights movement takes place in places that are places to shop, lunch counters, or other kinds of places like that.

Kai Ryssdal 

So that gets us roughly to present day. And I guess my question is, how much longer can this go on that we just consume everything?

Louis Hyman 

Well, I guess until we eat up the whole earth, right, that’s the big question, how can we consume our way to the center of the planet? Right, and this question of sustainability is, you know, really two questions, right? It’s the question is, can we keep making things people want to buy? Which is one different is a very different question, then can the earth sustain all of our consuming? And I think for the first question is, yeah, there’s always great new stuff to buy. That’s sort of the miracle of capitalism. And certainly, I’m glad that my shirts wear out, and I’m not wearing the same clothes that, you know, my grandfather war in the 1950s. But at the other hand, you know, we should be concerned about E-waste, and all the kinds of environmental side effects from our consumption. And of course, there’s a question, you know, perhaps even more important of how do we bring up and can we bring up the rest of the world’s population to an American standard of living? And it’s not clear that we can without destroying the planet?

Kimberly Adams 

Well, right. Is there a way to have I guess, two parts here? Is a consumer driven economy a good thing, in your opinion? And is there a way to have a consumer driven economy that is environmentally sustainable?

Louis Hyman 

Well, I think the question about a consumer driven economy, and ultimately, I’d much rather consumers benefit from the economy, than I don’t know, bankers. Well, that’s not the world we live in to a large degree. But I think that, you know, that’s not really a problem. That’s that’s actually kind of the one of the upsides there’s all kinds of downsides to capitalism, but the ability for us to buy air conditioners is not the downside. I think the environmental consequences, however, are really questionable. And even things that seem like they have nothing to do with, you know, trash dumps, like cell phones, or computers, you know, those things do end up there. But even their everyday use, requires extraordinary amounts of power and data centers that have used water, you use energy, and it’s something that we’re gonna have to reckon with. So even our so called digital goods, our digital economy, are still having very real effects in the world.

Kai Ryssdal 

So what’s the flip side, though, of a consumer driven economy? I mean, you know, you made the joke about bankers, because nobody needs bankers to get richer and drive more of this economy. But what’s the what are the options?

Louis Hyman 

Well, the opposite would be something like a producer driven economy, which is what we used to have where more of the money flows to businesses that invest in producer goods. And that’s not necessarily a bad thing. It’s something where you are investing in machines or organizations in some way that produce more economic value. You. And you know, there is an argument to be made that that’s more sustainable in the long run that we are growing the economy more. And people are providing a better standard of living that maybe we shouldn’t be spending so much money as consumers, but more spending more money as producers. And certainly you talked about the way in which 70% of the GDP comes from personal spending while it was only 60% right at the end of the post war. And so if we’re nostalgic for a kind of post war economy, well, maybe we need to cut back how we spend that money as well. Or at least change it.

Kai Ryssdal 

Spitball it for me, what do you think the odds are of that?

Louis Hyman 

0.0%.

Kai Ryssdal 

Louis Hyman is an economic historian at Cornell. Louis thanks a lot. I appreciate it that was great.

Louis Hyman

Thanks for having me. It was great. Thanks so much. history matters. It’s all I’m gonna say history matters.

Kimberly Adams 

Salem witch trials.

Kai Ryssdal

Right how about that, huh?

Kimberly Adams 

I’ll be thinking about that all day. Yeah. Yeah. All right. Well, we want to hear from you all about your own consumer habits. And I guess what you trace your family lineage of shopping back to, how are you doing on spoons? Meanwhile, what have you been buying? Why have you been buying what you’re buying? Go ahead and let us know at 508-827-6278, also known as 508-U-B-SMART. We’ll be right back.

Kai Ryssdal 

News is what we have arrived at at this point in the podcast, Kimberly Adams, you go first.

Kimberly Adams 

I have a very political story that actually has, as usual an economic angle to it. So yesterday, the Eighth Circuit Court of Appeals put out a ruling that a lot of advocacy groups say could basically gut the Voting Rights Act. So it’s a decision out of a case that I’m just going to read here from Politico. “The decision originates in a racial gerrymandering case out of Arkansas, where the state chapter of the NAACP and others alleged that the state’s legislative districts violated the Voting Rights Act by diluting the voting power of Black voters. A lower-court judge, also a Trump appointee, ruled in early 2022 that he couldn’t decide the case on its merits because he found there was no private right of action — that, effectively, they had no right to bring the lawsuit. On Monday, the circuit court affirmed that finding.” Now, that means that this will probably end up at the supreme court and the court is what the court is, and this is going to be really interesting to decide. Now, why is this have an economic issue? This private right of action is the right of private entities to sue the government on various issues. So in this case, suing the state governments on their districts in saying that they’re violating the voting rights, wrote Voting Rights Act. Under this ruling, what they’re basically saying is that only the federal government can sue or attempt to enforce the Voting Rights Act. And so in CNN’s coverage of this they have a really interesting paragraph, “The US Justice Department’s voting section – which enforces federal voting laws – simply does have not enough lawyers “to be everywhere in the nation at once,” said David Becker, executive director of the Center for Election Innovation & Research. He worked as an attorney in the DOJ’s voting section during the Clinton and Bush administrations.” That’s why quote,”’That’s why over the course of over 50 years, private plaintiffs have also brought those cases so that residents of a small county in Arkansas are just as well protected as residents of the entirety of the state of California,’ he added.” So this gets back to government funding, which we’ve talked about, you know, all this drama on the hill, and these decisions over how much money each agency gets each department gets and for what tasks when you have the rulings like this, that actually put more of a burden on the federal government to do enforcement that has previously been, you know, kind of signed off to private entities in large part, then it requires more money. But is that more money forthcoming, unlikely in this current environment? So then what happens to the Voting Rights Act? So that just some I want to flag?

Kai Ryssdal 

Yeah it’s it’s actually huge, and I’m glad you called it out. And I’m glad you highlighted the economic part. I do think we need to just super quickly review that part of your commentary about the Supreme Court and the Supreme Court being what it is. It’s important to point out the supreme The Court gutted section five of the Voting Rights Act a number of years ago, which required preclearance from states who have a history of bias and racism in their voting records. It did very narrowly upholding section two of Voting Rights Act this year on the Alabama congressional district map. But this is not a court that has high regard for the Voting Rights Act so.

Kimberly Adams 

And at least two of the justices. So this is also about section two of the Voting Rights Act. And I believe at least two of the justices have since have signaled an openness to revisiting this idea of the private right of action. And it’s a big deal because if they overturn it for the Voting Rights Act, will they overturn it for environmental laws? Does that mean that private entities can’t sue for enforcement of the Clean Water Act and things like that, this this matters a lot.

Kai Ryssdal 

It’s huge, it’s a huge story.

Kimberly Adams 

What’s your news?

Kai Ryssdal 

So cryptocurrency is a fraud, do not put it in your 401K, do not think that it’s ever going to be real money. And that’s where we are. I exaggerate but only a tiny little bit. So we all know about FTX and Sam Bankman-Fried now comes Changpeng Zhao, who is the CEO and founder of Binance, which was until today and will be for a while until the Feds really get it Binance was the biggest cryptocurrency exchange in the world champions. Now that founder and CEO is going to step down and plead guilty to violating criminal US anti-money laundering requirements. It may preserve the company’s ability to continue operating, The Wall Street Journal reports. But who knows? So how about that fraud is challenging, challenging in the world of criminal currency? I should say I’m not I’m not exactly yeah, he’s the founder. I just want to be sure it wasn’t better. Yeah, this is a big deal. This is a big deal crypto event. We’re in crypto winter. I don’t know what bitcoins doing today. But oh, man, this is not a great thing for the credibility of cryptocurrency. That’s all I’m saying.

Kimberly Adams 

No, it is not. No, it is not.

Kai Ryssdal 

Yeah, so anyway, so there’s that. Don’t put crypto on your 401k kids no matter what you’re here. Always be true believers though no matter what you hear. All right. That’s it for the news. Let’s do the mailbag.

Mailbag

Hi Kai and Kimberly. This is Godfrey from San Francisco. Jessie from Charleston, South Carolina. And I have a follow up question. It has me thinking and feeling a lot of things.

Kimberly Adams 

So last week, we asked you to send us your submissions for your state’s unofficial cocktail and we heard from a bunch of you.

Montage

This is Melinda in Anchorage, Alaska, our state cocktail would have to be the duck fart. And that is Bailey’s, Cola, Canadian whiskey in a shot glass. The New York cocktail should be the Long Island Iced Tea. This is Jill from Wisconsin and I promise you there’s not a Friday, or I don’t end my wonderful work week with a brandy old fashioned. There are two different types of brandy fashion though. There’s sweet, and there’s sour. I highly recommend watching Charlie Berens video of how to do it on YouTube. He’s an excellent comedian, and his recipe will produce an authentic Wisconsin style brandy old fashioned. You can bet I’ll be bringing one to economics on tap next week. Cheers.

Kai Ryssdal 

There you go.

Kimberly Adams 

Cheers everybody. We also heard from Carrie in New York, Carl and Tyler in Wisconsin. As I said, we’ve been getting lots of submissions. And you know, there’s there’s some more exciting things coming down the pipeline on that. So please keep listening. But for now, do us a favor and keep sending us your ideas. I’m headed to Missouri later today. So maybe I’ll get some ideas on a Missouri cocktail as well. But yeah, send us your state’s signature cocktail or mocktail. If you have one. Makemesmart@marketplace.org or you can leave us a voicemail at 508-U-B-SMART.

Kai Ryssdal 

We leave here as we always do this week’s answer the Make Me Smart question. What is something you thought you knew but later found out you were wrong about this week’s answer comes to us from food journalist Francis Lam. He’s the host of The Splendid Table podcast and their annual show Turkey confidential, which is about Thanksgiving cooking. Here you go.

Francis Lam

You when I was wrong about Thanksgiving, like most Americans, I always knew what’s supposed to go in the Thanksgiving table. And of course, it’s gotta be turkey. So I looked into what was served at the original Thanksgiving. You know what, there was a ton of venison, and fish and corn and birds. Yes. But they were probably ducks and geese. And there was no Turkey mentioned anywhere. No proof of Turkey. There’s actually a whole fascinating history of how Turkey became the featured burger. And it has to do with intentionally inventing a national tradition during the fracturing of the Civil War. But my point is what we think of as immutable tradition, in food, but really, in any part of our culture is almost always not actually the way things have always been.

Kimberly Adams

That could apply to so many things.

Kai Ryssdal 

That’s exactly what I was gonna say you just got it out of your mouth faster than I did. Absolutely true. Absolutely true. Send us your answer to the Make Me Smart question our number is 508-62- bleh bleh. 508-827-6278, 508-U-B-SMART. Make Me Smart is produced by Courtney Bergsieker. Ellen Rolfes writes our newsletter, today’s program was engineered by Drew Jostad. Gary O’Keefe going to mix it down later out of our New York Bureau. Our intern is Niloufar Shahbandi.

Kimberly Adams 

Ben Tolliday and Daniel Ramirez composed our theme music. Our senior producer is Marissa Cabrera. Bridget Bodnar is the director of podcasts. Francesca Levy is the executive director of Digital and Marketplace’s Vice President and General Manager is Neal Scarbrough. I think duck tastes better than Turkey anyway.

Kai Ryssdal

I’m not a big duck guy, I’m not a big duck guy.

Kimberly Adams

It can be very fatty. Let it drain onto potatoes.

Kai Ryssdal 

That’s right, right. Duck fat potatoes. Yes, for sure. Totally, totally.