For The Sake Of Something Else

I was living in Mexico in the mid-1980s when I decided to get serious about my health and fitness. I began by sponsoring a basketball team in a city league in Merida, Yucatan.

Running the court with kids half my age helped to get me in the best physical condition of my life. Paying for uniforms and post-game snacks out of my own pocket made it an expensive way to do aerobics, but the benefits were well worth the cost.

As a “thirty-something” in a league of athletic twenty-year-olds, it got harder for me to keep up with the competition as the season wore on. When I retired from the city league, I based my decision more on a desire to preserve my knees than on a need to cut down on my leisure expenditures.

Jogging offered a less punishing way to stay fit. After training for two years, I completed a marathon. I joined a tennis club after that, where I took lessons with a young man who had played in the U.S. Open Junior Championship in Forest Hills, New York.

Although every hour with my coach did wonders for my game, I soon stopped taking lessons and gave up my club membership. I was juggling too many commitments in my professional and personal life to enjoy what little time I spent on the tennis court. Squeezing trips to the club into an already hectic schedule was wearing me out.

It was time for a serious lifestyle assessment. I was living in a part of the world where the tempo was slow, at least in comparison with the pace of life in my native United States. But I couldn’t hide from the truth any longer. I had become a member of “the harried leisure class.”

The phrase is from The Harried Leisure Class, a little-known book by Swedish economist Staffan Linder who taught at Yale and Columbia.

As Geoffrey Godbey pointed out in a 2003 review in the Journal of Leisure Research, “Linder was perhaps the first economist to understand and predict the frantic pace of modern life and leisure.” Long before I overloaded my life with increasingly frantic leisure activities, Linder saw the warning signs on the horizon.

How Are We Doing Today?

“Wealth is evidently not the good we are seeking; for it is merely useful and for the sake of something else,” Aristotle wrote in Nicomachean Ethics. How are we doing today by Aristotle’s standards?

Not well, said Linder. As Geoffrey Godbey noted, the main message of The Harried Leisure Class is that “the pace of life has sped up and has caused the ways in which leisure is used to change.”

Since the end of World War II, futurists have predicted that people will have more goods to enjoy and more time to enjoy them. But where is the surplus of time that all the futurists have been predicting? Linder pointed out an obvious fact that most economists continue to overlook today: it takes time to consume goods, and people have limited time.

According to Linder, “Consumption is being accelerated to increase the yield on time devoted to consumption.” The “increased goods intensity” of leisure activities leads people to desire “ever-larger sets of commodities.” As a result, satisfaction becomes increasingly elusive: what good is a lake without a pleasure craft?

Linder divided the economic process into three periods:

1. The constructive growth phase (the poor countries are still at the beginning of this period)

2. The period of decadence (economic improvement comes to be regarded as a goal in itself instead of as a means to a goal)

3. The phase of reformation (in which people reevaluate their goals and acquire new purposes)

In the third period—which may or may not come about—the level of human well-being can no longer be raised by raising the level of consumption. A century and a half ago, John Stuart Mill predicted that economic growth would not make people happier. Mill would have been saddened but by no means surprised by Linder’s findings.

The more we depend on consumption as a means of enhancing our leisure, the less we value pursuits that truly add value to life. The result is a society in which people only feel happy when they’re consuming something in the ill-fated attempt to squeeze more pleasure out of their free time.

Has Growth Become an End in Itself?

When I completed my first marathon, a good pair of running shoes accounted for the total “goods intensity” of my pastime. By joining a tennis club and taking private lessons with a local celebrity, I increased the apparent “yield” on my leisure consumption even as the enjoyment I derived from it diminished.

As I watched President Bush speak to the United States on July 15, I was reminded of an obvious fact: leaders of wealthy nations view growth as an end in itself, not as a means to “something else.” Staffan Linder was right. It’s likely that wealthy nations will continue to desire economic growth even when continued growth offers no further increase in well-being.

In my next article, I’ll take a closer look at the questions Linder raised in The Harried Leisure Class. In the meantime, I hope you’ll spend more of your own time thinking about the ultimate purpose of our economic growth.

Even if it means you’ll have less time to spend on the tennis court.

Hoping the Brakes Will Grab: Australia’s Uncontrollable Growth

Australia finds itself in an enviable situation. While many of the world’s economically developed nations are slowing down, Australia is speeding so fast it’s going to have trouble stopping.

Over the past two years the growth in the Australian economy has been phenomenal, mostly due to skyrocketing commodities. Fully 17% of Australia’s economy depends upon exporting raw materials including coal, iron ore, gold, meat, wool, alumina and wheat. So when prices go up, Australia gets richer.

At first blink, it seems that the slowdown currently underway in the U.S., the UK and the Eurozone, whether technically a recession or not, would tend to choke off those exports. However, most of Australia’s shipments go to Asia, including Japan (19.4% in 2007), China (13.6%) and South Korea (7.8%), as compared to the U.S. (5.8%) and the UK (3.7%), and those to the Eurozone were so minor they were under the Australian Bureau of Statistics’ official radar. With economic growth in Asia remaining fairly strong in global terms, the market for Australia’s exports remains hungry.

Because of this economic surge, the Australian budget has run a surplus since 2002, although the government keeps several million dollars in bonds available as risk-free securities.

More Jobs than Workers

Australia also has an extraordinarily tight labor market. In May 2005, the unemployment rate was 5.1%. That’s not bad, but by May 2008 it had fallen to 4.3%, and many businesses reported that they’d love to expand but just couldn’t find the skilled workers to fill new positions.

In fact, the economy has been accelerating so fast it’s starting to overheat. Rising consumer and corporate demand has boosted imports even faster than exports, with passenger cars, computer and telecommunications equipment, pharmaceuticals and petroleum products being offloaded onto Australia’s docks daily. This demand-pull, coupled with the cost-push of higher fuel, energy and food prices, has sent inflation spiraling. On average, prices for finished goods were 1.3% higher in March 2008 than in December 2007 and 4.25% higher than March 2007.

In their fight to slow business and consumer demand and thereby curb inflation, the Reserve Bank of Australia has raised interbank lending rates twelve times since May 2002. In March 2008, the official rate hit 7.25%, in contrast to the U.S. at 2.00%, the Eurozone at 4.00%, Japan at 0.50% and Switzerland at 2.75%, which should speak volumes about the relative speeds of those economies.

Interest rates for retail clients, of course, are higher than interbank rates, and 12.0% per year for an Australian credit card or car loan is considered a pretty good deal right now. Variable rate home loans start at 7.98% and fixed rate at 9.53%—if you can find a lender willing to offer one.

Desired Results

Such a high price for credit has answered the RBA’s intent, and consumer and business demand has diminished. In April 2008 new loans for buying a home fell by 5.8% from March for a total decline of 17.3% over the previous three months, and in June consumer sentiment fell to its lowest level since December 1992.

But the prices of Australia’s export commodities just keep rising. Driven by strong demand for steel in developing Asian nations, prices for Australia’s iron ore rose by 85% in June 2008. Wheat has more than doubled over the last two years, and gold has averaged well above US$850 per ounce for the year to date.

To make matters worse, Australia’s high interest rates have made it a favorite target for the carry trade, an investment strategy where funds are borrowed in a nation with a low interest rate and invested in a nation with a high one. The investor earns the difference between the rates, currently 6.75% between Japan and Australia, but runs the risk that violent exchange rate fluctuations due to financial market fears will wipe out the profits. The weekly chart above of the Australian dollar versus the Japanese yen graphically illustrates that risk.

The big drop in the middle of the chart marks the beginning of the subprime mortgage crisis, but note that every time the bottom falls out of the carry trade market, it just comes right back up.

With economic activity plunging, the RBA is understandably hesitant to raise interest rates further and risk throwing a vibrant economy into recession. But if that brake doesn’t hold, the influx of exports and foreign investments will refuel demand-pull and cost-push, starting the inflation cycle all over again.