Previously, I wrote about ‘abundant’ and ‘scarcity’ mindsets. In summary, an abundant mindset is knowing what is enough and framing your consumption around gratitude for what you receive, spend and give away. A scarcity mindset on the other hand, is framed around insecurity, which leads to comparison to others, accumulation, and fear to give some of your wealth away to good causes or even giving a little extra if you are happy with a product or service.

Scaling up abundant and scarcity mindsets from the individual to societal level we can look at how we frame our economies. There is a saying, democracy is the worst form of governance except for all others. We can arguably apply this saying about the market economy in which many of us live. Post-war, despite the faults of the market economy, developed countries have seen rising life expectancy, living standards, educational attainment, etc.

Advancements have been fueled by consumption, where people are encouraged to spend money to purchase the things they need. In turn, governments can then tax income and spending to be able to provide health and education which its citizens need but may not necessarily prioritize.

However, just as the abundant mindset seems counter-intuitive on a personal level, so it is at a macro-level. Take the example of Henry Ford, in the early twentieth century as he was building his automotive empire. The industrial practice at the time was framed around a scarcity mindset where output was maximized at the expense of workers, with 14-hour days, seven days a week. In contrast, Henry saw beyond this way of thinking and cut the hours of Ford’s workers while simultaneously raising their wages. His efficiencies were ‘enough’ he didn’t need to cut costs to the bone.

While the first order effects of this move were negative as it cost Ford more to pay its workers. The secondary and third order effects were hugely beneficial. It gave workers more money and leisure time and so created a new class of consumers for Ford’s products. Also, it meant that Ford attracted the best quality workers whom were motivated and benefitted Ford in terms of innovation and productivity gains.

This action by Ford, still lives on today and in my opinion why traditional manufacturing jobs are higher paid in developed economies than service jobs, because service jobs have not seen beyond the first order benefits. However, in these developed economies we have seen a reduction in manufacturing jobs as companies revert to first order thinking moving jobs overseas to realize cost gains.

This trend towards moving manufacturing to developing countries, is exacerbated by companies not having to pay for the negative externalities of this move, in terms of the environmental and societal effects, such as increased transportation, increased utilization of unclean power and often long work hours for those in the developed countries.

The reversion to competing on first order measures, has presented a trap for developed countries whereby we are reducing costs by producing overseas, and reducing security by providing services through the gig economy. This is resulting in a lack of well-paid jobs and so to incentivize consumption, there is cheap personal and governmental debt on offer.

It looks like we have come to a crossroads where we need to switch from the first order thinking of growth at all costs. There are only so many material items we need, a certain amount of clothes, cell phone, computer, car, housing, and equipment for one or two hobbies. But because of the faster product lifecycles and the scarcity mindset, we are replacing these items at faster and faster rates. Consuming more of the world’s resources over ever expanding supply chains, which are not being priced into the product.

Our economy has to become more circular whereby, at both an individual and societal level, we need to figure out what is our right container size and what are the key items that flow into and out of that container. Regarding inward flows, we need to not only consider the sticker price of the product or service, but also the environmental externalities that are not being priced in, for instance resource depletion and carbon emission. In terms of flowing out, we should make it our responsibility to ensure as much as possible is either reused, recycled or safely deposited back to the environment as a net benefit. Finally, the speed of that flow needs to be considered, do we really need a new iPhone every year, can that car last me ten years?

These are the sort of questions we should be asking. In summary, we should be moving from a unidirectional fast and cheap model, to a circular slow and fully priced model for both our own and our environments wellbeing. This all starts with changing our mindset, sit back, slow down and learn to sit with the consumer impulses of the scarcity mindset without reacting. You will see, that these impulses are feelings. Ones which dissolve almost as quickly as they arise. Begin being comfortable with these negative feelings and in time you will see them for what they are, just feelings, that naturally disappear whether or not you purchased that item that aroused your uncomfortableness in the first place. Until next time . . .