14: UTILITY VERSUS CONSUMPTION AND UTILITY TAXATION
Frank Taylor
Once I saw, in a nearby garden, a contraption for hoovering up leaves. It was almost the size of a Shetland pony. The effort involved in lugging it from its shed, wiring it up, and dragging its bulk around would actually be greater than the time honoured method of rake and wheel- barrow. Any additional usefulness provided by this machine would be negligible, even negative.
Technical developments are prone to a law of diminishing returns. Whilst washing machines are a great leap forward in domestic utility, what of tumble driers? After all the actions involved using such a device is hardly less than that involved in pegging clothes on a line. Yet a tumble drier will double or treble the energy used on washday, quite apart from the productive resources absorbed by the machine itself. Does a dish washer, using three times more energy and water, really save much effort? What is the advantage of a shoddy plastic electric mower, with a life expectancy of perhaps six years and which consumes energy in use, against a hand mower which uses no power and which can last twenty?
We must consider the balance of domestic productivity against the whole life resource cost of appliances, their development, design, production, marketing, distribution, servicing and ultimate disposal. In that scenario the law of diminishing returns eventually yields a negative.
Our world picture is one of ever more frenetic activity to produce ever less of enduring worth. There is much wringing of hands as to why life becomes ever busier, more complex and costly. We can at least partly explain this phenomenon by utilising Adam Smith’s notion that a society contains a ‘stock’ of goods, - that is the sum total of its usable assets - and that this ‘stock’ can be ‘improved’. If we equate the concept of ‘improvement’ to ‘utility’ then a given totality of goods will yield a given sum of utility.
Today we have a situation in which growth in the ‘stock’ of goods does not further ’improve’ the total utility available. Indeed, the more goods accumulated the greater the gap between potential use as against actual and resource input against output. ‘Economic growth’ is not about ‘improving’ the ‘stock’ of society but accumulating ever burgeoning mountains of surplus utility.
Conventional economics is principally concerned with production and the efficiency of production and only very marginally with what happens to a product after it has been ‘consumed’. By and large a product, once purchased, drops into an economic black hole and out of the picture altogether. Yet if economists focus their attention on the efficiency with which goods are produced, why should they not take a more holistic view by focusing attention also on the efficiency with which they are consumed?
What constitutes efficient consumption? Examples abound. Take a launderette which serves two hundred houses. Instead of two hundred washing machines in two hundred houses operating four hours a week, we might have eight machines in a launderette each operating ninety hours a week. A family car will be used perhaps five hundred hours per year, the bus will receive ten times that utilisation.
The relative resource inputs required to manufacture, service and operate, for example, eight large machines as against two hundred smaller ones are abundantly clear. On the one hand we have small numbers of highly utilised resources but which are shared. On the other we have modular consumption where large quantities of merchandise are held in conditions of low (usually very low) utilisation.
A consumer society relies, using the pretext of ‘convenience’, on modular consumption. Since a person can, at any given time, only ‘consume’ so much this pattern of consumption is reliant on merchandise spending much of its time idle. A car might be used ten hours per week, a washing ma- chine four, a lawn mower one hour in two weeks, a book may be read once and then spend thirty years unopened on a shelf. Consumerism requires the creation of ever greater mountains of redundant utility.
We are told that ever more appliances are needed because we work so hard and have little time or energy left for domestic matters. But where is the convenience or the logic in having millions of people working forty hours per week, engaged m the unsustainable guzzling of finite resources, in order to churn out labour saving devices? The productive dog ends up chasing its own tail ever faster.
This indicates an inverse relation between improvements in the efficiency with which goods are produced and the efficiency with which they are consumed. To promote economic ‘growth’ there must, for every advance in productivity, be a countervailing reduction in the efficiency of consumption.
Thus there are two components to surplus utility. First we have merchandise which does eliminate
drudgery but whose utilisation is low. Secondly we have merchandise where not only is the utilisation low but that any further improvement in utility offered is negligible or non existent and whose main purpose is to com- modify undemanding activities such as raking the lawn or hanging out the washing. The tipping point of diminishing returns is passed and we get into a situation of utility glut where further production and consumption can only add to the total ‘stock’ of surplus utility.
All that is ‘growing’, then, is surplus and redundant utility, in short waste. A whole life calculation of the re- source inputs required by many modern appliances as against both actual and potential output yields a picture, not of ‘growth’ but of decline. Thus we can account, at least in part, both for the mirage-like appearance of ‘economic growth’ and for the spiral- ling externalised costs which derive from the social and environmental stress required to produce, service and dispose of all this gadgetry.
Human stress is sometimes defined as the non-specific reaction of the organism to its environment. We see a pandemic of compulsive-addictive disorders running hand in hand with a relentless growth in crime and stress- related health disorders both physical and mental. Over time the growth in such malaise runs in approximate parallel to ‘economic growth’. The stress created by the productive processes needed to create this glut of redundant utility has become unendurable both to the environment and to many people. Consumer materialism is the realisation both of anomie and of environmental degradation.. The cost in both human and financial terms will always spiral in parallel with the ‘growth’ as the volume of redundant utility grows, whilst the net potential utility of the total ‘stock’ of ‘labour- saving’ appliances relatively declines. We all pick up the hidden costs.
All this exhibits a form of decadence which redefines ’austerity’. The further primary poverty is left behind the more austerity becomes a relative notion. ‘Austerity’ becomes the inability to afford a new BMW or two foreign holidays every year. It be- comes not a question of hardship, but of relative
diminution of access to surplus utility and a matter of social ideology.
This ideology is, of course, of vast benefit to the major corporations and massively promoted by them. The advertising does not itself matter so much as the publications which the advertising creates. The media is stuffed with every frivolous whimsy under the sun. It has become a whorehouse to maintain the level of titillation which the accumulation of surplus utility requires.
This ideology also permeates every corner of politics. Even the concept of ‘child poverty’, setting aside the risible notion that ‘the child’ can somehow be cut out of its immediate social and familial environment like snipping a coupon out of a newspaper, has become infected with it. ‘Child poverty’ is now more to do with interpersonal competition, consumerism and keeping-up-with-the-Joneses than any concept of poverty that Rowntree or Beveridge would recognise.
Central to this ideology is the supremacy of acquisition and the related phenomenon of conspicuous consumption. Conspicuous consumption is the decadent aggrandisement of waste. The aristocrat might once have had footmen dressed in absurd uniforms, rendering them wholly useless. Here was a man so wealthy that he could preen himself by wasting the lives of his minions as pointless decorations.
Thus the utility of goods becomes irrelevant. It is the ownership and the display of that ownership that matter. The whole point is for people to fill their lives with piles of frivolous, resource-guzzling gadgetry.
The consequences of conspicuous consumption loom ever larger. Conspicuous consumption can never be consistent with sustainability. From a practical point of view could the tax system be changed to calm and reduce demand for frivolous merchandise?
The answer is for a massive shift to indirect taxation. It will be argued that such a shift will be to disadvantage the poor. This need not be so if we revive a principle, lost with the disappearance of purchase tax thirty years ago, of differentiating between ‘luxuries’ and ‘necessities’. In that case indirect taxation can become just as progressive as direct taxation. The poor get what they need whilst the affluent pay extra for their resource guzzling frivolities.
For want of a better term I will call this Utility Taxation. Taxation would be graded in accordance with the real utility that the merchandise confers. It would be a basic sales tax banded into three rates. The lowest rate which would approximate to the present level of VAT and would be applied to high utility goods. There would be an intermediate rate for more marginal goods, at perhaps three times the present level of VAT, and a top rate for the wholly frivolous at, say, ten times the present level of VAT. There would be an opportunity to phase the tax if a particular industry needed time to make a soft landing.
For example a washing machine has a high domestic utility whereas a tumble drier does not. The former would be low rated, the latter top rated. A later policy option would be to transfer domestic machines to the intermediate rate leaving only launderette machines in the lower rate. Dishwashers, which again add very little to household utility yet guzzle energy and water, would be high rated. There is no need, in most domestic gardens for powered lawn mowers. Thus a hand mower would be low rated and a powered mower top rated. The application to cars is clear. A small saloon would remain about the same price, the cost of a Rolls Royce doubled.
Aerosols provide a further example. Their manufacture is highly material and energy intensive, they use carbon base propellants, so only a proportion of their contents are active ingredient in any event. Disposal is a major problem. Yet there are very few things that an aerosol can do that a refillable squeezy bottle can’t. Thus the refill- able bottle would be low banded and the aerosol top rated.
Such taxation could be directed against a range of high energy-use products such as air conditioning (unlike VAT, this tax would not be recoverable by companies). In addition it could be used to attack other points of unsustainability. For example broiler produce could be high rated..
It may also be objected that such a radical increase in indirect taxation would lead people to buy abroad. The tax would have to be payable on the item entering the country, effectively operating as an import duty. Of course this is not compatible with WTO and EU rules, but that battle has to be fought at some stage.
There is a policy choice between taxing at the point of production or the point of consumption. Too often either taxation or regulation applied at the point of production will only serve to drive that production abroad as with the Climate Change Levy and the Landfill Levy. These are cumbersome instruments and there is little evidence that they have brought about anything beyond the most marginal reductions in waste or energy use. Far greater gains can be made by taxing at the point of consumption.
Frank Taylor