The world economy is losing one of the main ways in which markets can expand. This loss is shifting the burden of market growth to the growth of consumer demand among the world’s existing consumers.
Markets are the meeting places of producers and consumers. In the dynamic of capitalist economic growth, the growth of demand for goods and services available in the marketplace must accompany the expanding capacity of economic enterprises to produce goods and services for the market.
For much of the history of capitalism, one way new consumer demand was created was through a process of moving communities of people away from producing goods and services for themselves to buying goods and services in the marketplace. In this process, economic enterprises did not so much expand the volume of goods and services being produced as take over existing home and community based production of goods and services.
(A hamburger made at home by a homemaker mom for her teenager is the same product and has the same wealth value as a hamburger made by a mom working in a restaurant to be sold to that teenager.)
Most visibly, this was facilitated by bringing peoples outside the market system under the control of western nations through the imposition of colonial governments and later through the formation of dominant state—client state relationships. As is well documented, bribery, intimidation, violence, and war played large parts in this history.
Over the course of the 20th century the potential for this source of new consumer demand diminished steadily, as the numbers of communities of people who live mainly by producing goods and services for themselves fell toward zero. Economic growth became much more dependent on increasing the levels of consumption for existing consumers. (The growth of the role of the advertising industry is tied to this shift.)
Today, new consumers are added almost exclusively through births. This is an incremental process of consumer demand growth that doesn’t keep pace with the world’s growing production capacity because most births are in lower income families with very little purchasing power. Moreover, it lacks the potential for jolting a sluggish world economy back to life through a massive infusion of new consumers — a potential that did exist in the process of geopolitical incorporation of new peoples into the global market system.
Today, significant increases in consumer demand can be injected into the world economy only by significantly increasing the levels of consumption of existing consumer populations. This can happen only when a substantial number of the world’s existing consumers get a large income boost that is not produced by lowering the incomes of other consumer populations in the world economy. The income boost must be a net addition to the world’s consumer income.
This is a new constraint on the world’s investors, corporate leaders, and governments. The slowing rate of growth in global consumer demand because of the slowing of the rate at which new consumers are being added to the system is generating enormous domestic and international tensions over national economic policies and global cooperation among nations.
These tensions will persist for a long time, contributing to an upward trend in the world’s disruptive geopolitical events.