Managing Desire - Creating the 20th Century Consumer to Support 20th Century Productivity

In 1754, Rousseau wrote of the French,

"You aren't so rich that you have become numb to true happiness because of the distractions of luxury nor poor enough to need any financial help."

Rousseau thought French incomes at the dawn of the Industrial Revolution were at a Goldilocks' "just right" level. 

Per capita GDP in France in inflation adjusted dollars?
1750: $1,766
2016: $37,124.

The 18th century French would have to work all year to make as much as the present day French make in 2 or 3 weeks. Rousseau thought the French were perfectly satisfied; we would think of them as impoverished.

Obviously we had to create modern factories to live like we do today. Less obviously, we had to create modern consumers to live like this.

John D. Rockefeller's wife once shocked a friend by opining that a woman only needed two dresses in her wardrobe. The children wore hand me downs and John Rockefeller Jr. once reported that with three older sisters, he wore dresses until he was 8. Even the world's richest man thought it unseemly to spend money freely.

Attitudes like Rockefeller's were a big problem in the early 20th century. It was not enough to create factories that made more. You had to create consumers who bought more.

I often talk about how the information economy is characterized by knowledge workers who use their brains to manipulate the symbols of things rather than their brawn to manipulate actual things. But information technology has as much to do with advertising - alerting us to what is missing in our life - as knowledge work. Facebook and Google have created vast wealth by selling ads, ads that remind us that we do not, as yet, have everything we need. If we all suddenly believed Rousseau and thought that we needed to spend only $1,766 a year, the economy would collapse.

And that actually happened after the roaring twenties. The causes of the Great Depression were complicated but a big obstacle to recovery was stimulating enough demand to create jobs for everyone. It took a world war to create enough demand to reach full employment. After the war, the factories that had produced tanks and planes at record numbers to fight fascism were transformed to produce cars and TVs at record numbers. Consumption was helped a great deal by TVs, a device upon which you could advertise TVs (and so many other products).

Once American producers and Federal Reserve Chairs learned how to stimulate demand to keep pace with rising productivity, the economy became less dangerous. Unlike Rockefeller, we've made our peace with consumption now, finishing each year with a holiday inspired flurry of consumption (the mas' in Christmas apparently now referring to mass manufacturing and mass consumption rather than traditional Mass). Between 1900 and 1933, the American economy was in recession 48% of the time. Since 1933, it has been in recession only 14% of the time. We've learned a lot about how to manage factories, financial markets and economies. We've also learned a lot about how to manage and stimulate demand or - as medieval clerics would say - desire.