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Consumption and the Environment in Europe

3 The Context: Demography, Economy and Technology

Chapter 2 identifies some of the areas of consumption that are responsible for the greatest environmental damage and resource use, and those that are emerging as having significant environmental impacts. It also explores some of the influences underlying consumption trends in those areas. The current chapter explores some of the links between consumption and the wider context in European society, in particular in demography, the economy and technology.

3.1 Demography

Several demographic trends are linked to the growth of consumption. This section briefly reviews the links to population growth and the demographic transition, migration, urbanisation, the ageing of the population, and the trend toward smaller households.

3.1.1 Population growth and migration

Improved public health and medical care enabled a near-doubling of the European population during the 20^th century. But the food supply has grown faster, and the productivity of agricultural labour has increased faster still, so that the population has been able to move from agricultural labour to industry, and then to work in services. In general, the physical quality of life is greatly improved, at least as measured by life expectancy and physical health.

Fertility rates have declined in recent decades from their peak in the 1960s. Among European Union countries, women on average have 1.7 children over their lifetime, too few to maintain the population level through reproduction alone (Eurostat, 2003). Nevertheless, in western Europe the population continues to grow by about one million per year, mainly because of net immigration. In central and eastern Europe, the population has been roughly constant since 1988.

The so-called “demographic transition” to below-replacement fertility levels is closely connected with some of the influences on consumption discussed in Chapter 2. It follows on from the development of the contraceptive pill. The greatly increased personal choice and freedom helped to generate the individualisation trend that is shaping the way we eat, travel and use our homes. Reduced family sizes have given parents more time to pursue their own interests or careers, the option of spending their income on their own consumption rather than on raising children, and the ability to concentrate more of their resources on the children they have. Individual children now are more likely to have their own bedrooms, and have much more influence over family choices. Consumer sovereignty starts young.

Lower fertility levels combined with the increase in mobility also mean that people are less likely to live with their families. Households are getting smaller, but the housing space per person is increasing, contributing to higher levels of material and energy consumption. Increasing divorce rates contribute to the smaller household sizes and to an increasing amount of housing required per person, as absent parents have rooms for their children to stay in.

Increasing migration has probably had more influence on other world regions than on Europe, by creating family links between Europe and other parts of the world, and so contributing to the export of consumer culture. At a superficial level, immigration has clearly contributed to the diversification of consumption patterns within Europe, with the introduction of cuisines, clothing styles, art and music from other world regions. At a more fundamental level, the mixing of cultures and religions has helped to challenge the dominance of traditional European cultures. In breaking down cultural assumptions, it has again paved the way for the growth of individualism and pluralism. As Chapters 4 and 5 will show, these two trends have important consequences for consumption and for the potential for coherent responses to the sustainability challenge.

3.1.2 Urbanisation

The 20^th century saw a large shift in the rural-urban balance of population in most European countries, continuing a process that had begun early in the 19^th century. In Europe, the urban population was about 38% of the total in 1900 (Bairoch, 1988). There were substantial variations between countries and regions, and Table 3.1 shows how urbanisation proceeded from 1950 to 2003.

Table 3.1. Urbanisation in Europe, 1950-2003

Sources: UNPD, 2001, 2003

Urbanisation was a key part of the emergence of the consumer society. This process was underpinned by increasing agricultural productivity, which enabled a growing proportion of the population to work outside food production. It permitted the growth of the industry and commerce that supply goods and services for consumption. But urbanisation may have also helped to create the demand for consumer goods. Kempton and Payne (1997) suggest that, in crowded city life, where it is difficult to know one's neighbours intimately, social status and community position are increasingly established and communicated through visible display of material possessions. Hence, it is in urban areas that “conspicuous consumption” (Veblen, 1898) and the demand for “positional goods” (Hirsch, 1976) are most pronounced. However, in Europe now, there is little difference in consumption levels between sparsely and densely populated areas. The highest levels of household consumption are found in areas of intermediate population density – i.e. wealthier suburbs – rather than in high-density city centres (Eurostat, 2001).

3.1.3 Ageing

With increasing life expectancy, radically reduced child mortality, and lower fertility levels, the European population is ageing. This is creating a challenge for governments, especially in countries where the state is the main pension provider. As the working age population shrinks and the retired population grows, falling tax revenues have to pay for growing pension and health bills. A number of solutions are being explored (Casey et al., 2003). Many governments are raising the retirement age or reducing the pension and other benefits available in retirement, especially at early retirement. Some are encouraging the take-up of private pension plans. A few are actively encouraging immigration of working age people.

In the short term, some increase in consumption as a proportion of national income might be expected as a result of ageing. On average, over-60s are less wealthy than younger people, and their household expenditure is lower, but they are at a phase in their lives when they are running down their investments rather than increasing them. Many who were young adults during the boom years of the 1950s and 1960s, and who also were able to establish generous final salary pensions, now have the opportunity to travel and otherwise enjoy their retirements.

The ageing process may slow GDP growth as people spend more of their life in retirement (OECD, 2001), although it is also possible that it will become the norm to retire later as state pension provision becomes increasingly inadequate. Households headed by older people generally spend a higher proportion of their expenditure on food and health care, and less on transport and recreation (Eurostat, 2001). Nevertheless, people do tend to follow social trends through their lifetime, spending more on transport, for example, as they get older (Greening and Jeng, 1994). As successive cohorts reach retirement age, expectations of an active retirement are likely to increase.

In the long run, it is possible that the expectation of a longer life, and the reduction in state pensions, will lead a greater awareness of the need to provide for the future. This might result in higher rates of saving and lower levels of consumption among younger adults, while people will spend more in retirement.

3.2 The Economic Context

The economic context influences consumption in a wide variety of ways. Figure 3.2 illustrates just a few of the connections in a highly complex system. It focuses on the chain of influences on household consumption, but of course the various institutions and markets are all highly inter-connected and all of the influences operate in both directions.

Figure 3.1. Some economic influences on household consumption

This section focuses on three groups of influences on household consumption:

• the products available through the supply of goods and services, mostly by the private sector;
• the household's involvement in the labour market;
• the household's propensity to save or borrow, which is influenced by financial institutions and markets as well as the job and housing markets, and government policies.

3.2.1 Supply of goods and services

One major feature of the consumer society in the last 20 years has been the diversification of goods and services. Whereas the early years of mass consumption focused more on quantity and cost reduction, companies now work increasingly hard to find and develop market niches. For many, diversification and innovation is a matter of survival.

Another widespread pattern is consolidation. One way to go on producing the same product, and to have consumers continue buying it over the long term, is to stay ahead of the competition in terms of both quality and price. Companies often seek to keep up with the competition, maintain market share, diversify their product portfolio and keep their costs down through mergers and takeovers, especially in the food, cleaning materials, transport services and energy industries.

Hence, consumers are faced with institutions of growing cultural and political power, whose main objective is to sell them goods and services, and to find new ways of persuading them to consume.

While companies are sometimes painted as the villains of the sustainable consumption challenge, they have little choice but to compete to sell more products and services, and to increase market share. It is extremely difficult in the current business environment for company boards to pay attention to issues such as sustainable development. Their top priority, often by law, is to meet the priorities of shareholders, whose main concern is to maximise the return on their capital. Meanwhile, governments regulate to encourage competition and minimise the prices of goods and services.

3.2.2 The job market

Employment markets differ significantly among European countries, but there is a general trend away from the certainty of a job for life, towards a need for workers to be flexible. Instead of having a well-defined trade or profession, we are increasingly expected to have a personal curriculum vitae, which expresses our own unique experiences and qualities. Beck (1988) links this trend in the labour market with the broader cultural process of individualisation, which was connected in Chapter 2 with the trends in the consumption of food, transport and household energy.

The job market also helps to lock people into a high-consuming lifestyle in a variety of ways. Employers generally prefer to have their employees work longer hours (perhaps earning overtime pay) rather than to take on new staff and incur additional training, insurance, office accommodation and other costs. At the same time, in an uncertain job market, employees need to strive to prove their value to their employers. One of the results is a culture of excessive working hours, common in the United States (Schor, 1998) and the United Kingdom, as well as some other European countries (Sanne, 2002).

There is a significant counter-current to the overwork culture, most notably in some Scandinavian countries, and in particular in the recent introduction of a 35 hour working week in France (see Table 3.2).

Table 3.2. Working hours and holidays in the EU15, 2003

Source: Incomes Data Services Ltd. (www.incomesdata.co.uk), 2004.

Demonstrating employability also depends on having a healthy-looking progression of salary increases on one's CV. Hence, overwork is motivated by the fear of being left without a job, more than the desire to earn more money, and those in highly competitive job markets may be working and earning more than they would otherwise wish.

The other side of what Schor and Sanne call the cycle of “work and spend” is that staying in the job market requires people to consume. Many jobs depend on being able to drive. Getting to work usually depends on having a car. Looking respectable in the office may mean wearing expensive clothes that need to be dry-cleaned. And for many, working long hours stimulates higher levels of expenditure on convenience foods and appliances, toys and entertainment equipment for the children, and foreign holidays to let go of the stress (Schor, 1998; Sanne, 2002).

3.2.3 Savings and credit

Another major engine of the consumer boom has been the growth of consumer borrowing, whether in the form of mortgages, consumer credit or bank loans. The forms and extent of borrowing differ considerably among European countries.

The largest single loan taken out by most households is to buy their home. As Figure 3.3 shows, the level of mortgage debt is rising throughout Europe, although it varies from country to country depending on the form of the housing market and the way purchases are financed. Overall in the EU, 22% of the population have mortgage loans. In Denmark, the outstanding debt is comparable with one year's GDP.

Click here to see Figure 3.2

Consumer credit is also growing and takes a variety of forms. Hire purchase loans (provided by the seller to purchase a particular item) are particularly common for buying cars and other expensive items, including computers. In the EU, 11% of the population has an outstanding car loan and 9% has outstanding loans on other goods.

The use of credit cards is growing rapidly. In 1999 there were 215 million credit cards in the EU, with a growth rate of about 16% per year. These are in addition to store cards, payment cards, and consumers drawing on overdrafts in their current accounts. Again, the level of credit card and current account debt varies considerably between countries (ECRI, 2000).

While credit clearly makes life easier for many consumers, its growth results largely from a commercial imperative. The financial services industry has been one of the most buoyant sectors of the economy in recent years. One of its most lucrative sources of profits is the high interest rates charged on consumer credit, and especially credit cards.

The proportion of income saved in the EU fell through the 1990s to about 9% in 2000, partly as a result of the growth in credit. While the savings ratio is much higher in Europe than in the United States, it is much lower than in Japan. It seems possible that the shift towards private pension provision as a result of ageing, as discussed above, will lead to an increase in savings and a decrease of the proportion of income spent on consumption.

3.2.4 Resource efficiency and technological innovation

Economic efficiency and profit maximisation underpin economic growth, and economic growth is one of the most important indicators of a successful government. This is despite growing recognition among experts and in organisations including the OECD and the World Bank that GDP is a poor indicator of welfare (Jackson and Marks, 1999; World Bank, 1997).

Economic growth is not in itself a problem for the environment, the problem is the depletion of resources and release of persistent toxic substances into the environment. Perhaps one of the central questions within the sustainable development agenda is whether technological innovation can decouple consumption from resource use and environmental damage. Environmental experts have argued that factor-of-ten improvements in resource efficiency are needed over the next 30-50 years. Resource use would be cut by a factor of five, while the economy doubles in size. This aim has found considerable support in some government and business circles, including discussions at the UNCSD and the OECD. Publications such as Factor Four (von Weizsäcker et al., 1997) and Natural Capitalism (Hawken et al., 1999) have also encouraged a hope that technology might deliver resource savings without lifestyle changes. However, a review of historical rates of change in resource productivity, in a variety of countries, sectors, and economic and political circumstances, suggests that technology could deliver at most only about half of the Factor 10 target, which would require annual improvements of 5-8% per year (see Table 3.3).

Table 3.3. Historical increases in a range of productivity indicators (OECD, 1998)

Sources: a: Maddison, 1995; b: OECD and IEA statistics; c: WRI, 1997; d: Schipper, 1996; e: ICAO statistics; f: Tuppen, 1997.

The higher rates of productivity increase in this table are associated with a variety of influences: competitive pressures; strong price or regulatory incentives; catching up or recovery; or a good “climate for innovation”. Mostly, the circumstances for rapid change do not last long, although some sectors have sustained very fast improvements over considerable periods.

These examples do not help us to predict exactly what rate of improvement in resource efficiency might be possible but they help to identify some challenges for governments. Obvious areas for action include: reforming government policies that limit competition in resource-intensive industries; removing subsidies and other policies that encourage resource use and environmental damage; and internalising externalities. Unfortunately, this is not an easy recipe. The more rapid rates of change in Table 3.3 have occurred only in response to very strong price signals: nominal aviation fuel prices increased nearly ten-fold between 1970 and 1980. Nominal crude oil prices increased by a factor of 30 in the same period while real prices rose ten-fold. It is not surprising, then, that the aviation industry and industry in general made huge efforts to reduce their oil consumption, effectively “decoupling” CO₂ emissions from economic activity.

Experience with rapid “catching-up”, for example in Japan during the 1950s and 1960s, can help to give some insight into the potential for whole sectors or economies to move towards “best practice”. The Japanese experience is often used as a model for creating a “climate for innovation” (e.g., Freeman, 1987; Rosenberg, 1994; Wallace, 1995).

Another observation from Table 3.3 is that economy-wide changes are much slower than changes in industrial sectors. A key challenge for policies to promote sustainable development is to achieve more rapid change in consumption patterns.

3.3 Linking technology and consumption

Technologies influence everyday life in a variety of ways (Røpke, 2001). Some inventions, such as the refrigerator and the internal combustion engine, perform pre-existing functions more cheaply and efficiently than the previous technology. Others, such as radio and the phonograph, perform functions that had not previously been anticipated. Either way, they stimulate increased consumption.

Economic analysis tends to focus on these two results of technological change: improving the efficiency of supply of goods and services, and generating new goods and services. But technology and consumption are intertwined in more complex ways. Technology shapes our worldview, which in turn shapes behaviour in all sorts of ways, including feeding back to the direction of technological development.

In considering how recent and ongoing technological innovations may change life over the next 30 years, the following “taxonomy of innovations” (derived from Freeman and Perez, 1988) could be used as a guide to different types of change.

1. Incremental innovations (efficiency gains through scaling-up, learning-by-doing, engineering improvements, end-of-pipe controls, gradual response to market forces). These innovations occur continually.
2. Radical innovations (completely new technologies such as photovoltaic power sources, wheat genetically engineered for pest resistance, molecular sieves, etc). These innovations are discrete events. It might be possible to identify several radical innovations in a given year.
3. Changes of “technology system” (clusters of radical innovations — e.g. development of a new form of transport, communication or energy supply system). Such changes occur relatively rarely — there might be a few such changes in the economy as a whole in a given decade — but when they do occur they have widespread effects throughout a sector or group of sectors.
4. Changes in “techno-economic paradigm” (linked to “long waves” in the economy, or “Kondratieff cycles” — these are revolutions which may include innovations of types 2 and 3 but go much further). Such changes might occur once or twice per century.

This typology is illustrated in Figure 3.1 which also shows how technological change is linked to human behaviour and consumption. On the whole, the greater the technological change, the larger the behavioural change that is required to accompany it.

This human dimension of technological change is often ignored in the advocacy of new, “sustainable” technologies. An innovation such as an alternative transport fuel or a compact fluorescent light bulb appears to offer performance comparable with that of the conventional technology. But there are many small subtle differences in the way the technology fits into the life of the user – and some, such as up-front costs, that are not so subtle. Hence, government programmes to introduce new technologies have often had disappointing results.

Click here to see Figure 3.3

All technological innovations entail behavioural change somewhere in society, even if only during the production process. This behavioural link is a major part of technological “lock-in”, a phenomenon widely observed by historians of technology where a particular technology becomes dominant despite the existence of apparently superior alternatives (Rosenberg, 1994). An often-quoted example of lock-in of is the QWERTY typewriter keyboard, which is designed in a way that avoids the keys sticking in a mechanical typewriter but is not necessarily the best layout for a computer keyboard. Where technologies become locked in, they are often connected with behavioural patterns that become similarly fixed. It then becomes extremely hard for any alternative technology or behaviour to compete.

Lock-in can have tremendous social, economic and environmental significance. Perhaps the best example is the car. Mass car ownership was pioneered in the United States before the Second World War, while Europeans followed mostly in the 1950s and 1960s (see Table 3.4). By the 1970s, car ownership in western Europe had risen to levels in the region of 250 per thousand in the population, so that the majority of households had a car. By 2000, with ownership levels in the range 350-550 per 1000, there is more than one car per household.

Table 3.4 Cars in Use (per `000 in population)

Source: Maddison, 1995; 2003; Eurostat, 2003; Davis, 2001
Note: US data include “light trucks”

It is now hard for many West Europeans to imagine a lifestyle that does not depend on car travel. Other transport modes have become uncompetitive, as off-peak usage declines, and they fail to keep up with the falling real costs of car use. Work, shopping and leisure are increasingly organised around the car. Non-car owners are disadvantaged in a growing range of normal activities.

Where technological innovations do succeed, they can have unexpected effects on social structure and culture. Long before the 20^th century, one of the most significant culture-changing technologies may have been the printing press. Eisenstein (1983) suggests that this 15th century development may have given rise to modern science and the European Enlightenment. It may even have transformed the self-conception of modern Europeans through exposure to others' ideas and the development of a much richer interior life.

It may be too early to tell how 20^th century technologies are changing culture. Putnam (2001) identifies the television and the car in particular as having contributed to increasing individualism and the decline of community participation. A host of technologies, such as television, personal stereos and computer games, may be contributing to a decline in communication within families. They may also be bringing about psychological shifts – for example, in cognitive and emotional development, self-image, and models for social interaction. In recent years, the mobile phone has brought new changes, offering the promise of much greater connectedness within families and social groups. Rapidly declining telecommunications costs are contributing to the strengthening of international relationships and networks.

Continuing technological innovation is motivated by some of the tensions inherent in modern society (Røpke, 2001). Some of these tensions are practical – for example, between the desire for material consumption and the need to protect the environment. This tension may be addressed, if not resolved, by developing more eco-efficient technologies. Others are cultural – for example, between desires for individual freedom and family belongingness. This particular tension may be partly addressed by the freezer and microwave oven, which allow families to eat diverse individual meals together.

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Version 1.0 November 2004, © Danish Environmental Protection Agency