Do we still want to maximise consumption?


by Jon Alexander
Jon Alexander

The Consumer Confidence Index is a child of its time. Established in 1967 by US business association The Conference Board, it was developed in response to the first slowing of the post-war economic boom. As the momentum of growth could no longer be taken for granted, it was necessary to understand and monitor its drivers more clearly, in order to codify what might be called a theory of change. As consumption became an increasingly significant part of the economy, the model was simple: if more consumption increased GDP, boosting people’s confidence to consume would be a powerful leading indicator of growth.

The structure of the indicator was equally simple: a short survey of subjective perceptions, administered monthly across a nationally representative sample, covering the state of the national and local economy, personal financial situation, and intent to spend or save. It would swiftly prove a powerful barometer to inform business decisions, and an early response metric for government policy interventions.

As the logic of consumption spread and intensified over the second half of the 20th century, the simplicity of the CCI made it easy to scale and spread in tandem. Research organisations replicated the model, first across the US and then around the world, competing with one another to become the go-to source, selling analysis and other services with their expertise. Something close to the original model is now measured on a monthly basis in every country we have yet looked at.

The CCI’s popularity reached a peak in the 1980s, when it seemed consumption might not just fuel endless growth but solve all of society’s problems too, from the Body Shop model of shopping to save the planet to Band Aid’s equivalent for global poverty. Increase consumer confidence, and all else would follow. In the early 21st century, though, much has changed, raising three important questions.

Three questions for the CCI

First, do we still want to maximise consumption? As the Beyond GDP series on this site reflects, there is a growing consensus that quantitative growth has outlived its use as the ultimate “end of chain” measure of societal success, and that some conception of well-being must replace it. The place of consumption as a driver of success must therefore also be open for question. Certainly, there is little evidence that consuming more per se drives greater well-being in any simple or direct manner, either at individual or societal scale. Even if we do still want to increase some consumption, the question of what kind is increasingly important.

From an environmental perspective, sustainable consumption is a hot topic. From a purely economic view, the former Chairman of the UK Financial Services Authority Adair Turner argues that we need to extend the distinction between consumption and “useful investment” into the private and household domain. “If credit finances consumption rather than useful investment, it is more likely that the debts created will subsequently prove unsustainable. We have always recognised that fact in relation to public debt: fiscal deficits that finance consumption rather than growth-enhancing investment are more likely to produce unsustainable public debt burdens. The same is true for private-sector credit creation.”

The second question is whether measuring and reporting CCI might actually have some damaging psychological consequences. The fields of cognitive and social psychology have turned assumptions of rationality in decision-making upside down, with their seminal moment arriving as Daniel Kahneman won the Nobel Prize for Economics in 2002. More recent experiments have started documenting the troubling psychological impacts of framing people as “consumers”, as regular media reporting of the CCI arguably does on a societal scale. One series, by Monica Bauer and colleagues, found that priming people with this mode of thinking (even using only the single word “consumer”) can activate reactions that are more selfish and competitive, less trusting, less open to social participation, less motivated by environmental concerns and even more anxious.

Third, has the CCI got long to live even on its own terms? With the global economy becoming ever more complex, markets often provide a better leading indicator of growth than the CCI. While it remains widely reported by media outlets, other indicators are usurping its role in strategy and policy formation.

Put all this analysis together, and a picture forms of an indicator that is decreasingly used and useful, and where it is used, steers towards unhelpful economic, social, psychological and environmental outcomes. Yet in this crisis, there is huge opportunity to harness the CCI’s still significant influence and global infrastructure, and to redesign it around a more holistic model of people’s behaviour that is more suited to the times we live in.

What might replace the CCI?

What if we could build, in place of the CCI, a measure of people’s confidence in their capacities to meet the Fourth Industrial Revolution’s demands? What if we could develop an evidence-based indicator for productivity, participation and well-being, not just for consumption? What if a measure could be developed that helped us increase sense of purpose, personal power and social connection — the things we now know cause people to thrive? What if we could replace the Consumer Confidence Index with a Citizen Confidence Index?

A small but growing team is organising itself within the Forum of Young Global Leaders (YGLs) to explore exactly these questions. Our starting point is a belief that people can and want to shape the society they live in for the better, given the right conditions to do so. People want to create their context as citizens, not just choose between options offered to them as consumers. In the digital age, the means are now in place for this to happen, but outdated systems, structures, and goals such as the CCI are keeping us trapped.

Our work imagines what might happen if we had a Citizen Confidence Index. This would ask people not just how confident they are that they can consume, but that they can shape their context and find agency, purpose, support from their community and an intent to participate meaningfully in the world. We are challenging ourselves to consider what might happen if such a measure were treated as a key performance indicator by government departments the world over. Imagine if education policy were measured by its output in citizens equipped to deliberate, debate and create; health policy in its support for the agency of the citizen; and business frameworks for their ability to encourage a sense of purpose and human flourishing both inside and out.

We live in a moment when “people need to feel more like owners of their own destinies, rather than pawns of elites”, our fellow YGL Jeremy Heimans argues with co-author Henry Timms in their groundbreaking book New Power (2018).

“If the only meaningful expression of all this pent-up agency is the occasional election or referendum, people will naturally be inclined to use their participation as a way to lash out. Platform strongmen and extremists will offer easy answers. But we need something different: a world where our participation is deep, constant and multi-layered, not shallow and intermittent.”

Our early work leads us to believe that we can develop a measure that is as structurally simple as the Consumer Confidence Index, and so able to harness its infrastructure and influence, but that crucially encompasses these bigger ideas of the role of individuals in society. We are actively seeking help and input. If there are analogous projects we should know about, or if you can help us deepen our understanding of the CCI, or even link us to opportunities to pilot and refine, please do get in touch.

Measures are powerful intervention points. If we can get this right, by creating a child of our own time to replace the Consumer Confidence Index, the impact could be huge.

Jon Alexander is Founder and Director at New Citizenship Project