BOOK REVIEW

Asia rolling headlong to disaster

Consumptionomics: Asia's Role in Reshaping Capitalism and Saving the Planet by
Chandran Nair
Reviewed by Benjamin A Shobert
For an interview with Chandran Nair, click here
In the aftermath of the 2008 financial crisis, it has been easy to point out the many
flaws of capitalism. The idea of homo economicus - the rational man upon which the
most basic predicates of classical economics was built - was shown to be an
incomplete capture of how we approach markets.
From the ashes of this crisis, schools of thought have been given new life, not least of
which has been behavioral economics, which has brought into focus the psychological
dimensions to how we make purchasing decisions as opposed to the purely rational
calculus classic economics assumed.
In the United States, the events of 2008 have thrown into disarray both the role of the
state in dealing with structural shocks to the national economy as well as the extent to
which the state has the responsibility of managing certain programs that act as social
stabilizers in moments of crisis and the aftermath which follows. But the biggest
pushback has undoubtedly been the backlash against free-market fundamentalism, the
idea that markets govern themselves purely through the self-interests of the actors
within the market.
This idea has been shown to be woefully inadequate in the face of
bankers who lent money they should not have to consumers who had
little chance of repayment. The perverse system of incentives that
drove bankers forward had its sights set on purely short term gain
which, while ultimately realized, also nearly brought the entire
system down. If this was not a manifest illustration of the shortcomings to the particular insight markets claim to offer - the
preservation of self interests above all - then one shudders to think
what would be.
And yet, much as with Winston Churchill's comment about democracy - it being the
"worst possible form of government, except all others" - capitalism and free markets
have proven more capable and competent than any other economic system in
advancing the globe's standard of living. It remains a set of ideas that are inherently
human: conceived of by human minds, implemented through human actions, and as
such, prone to the errors, short-sightedness and fallacies that any other system built by

human hands must be. But within its humanity also lies its hope - the aptitude to
admit error, adjust, and move forward.
To the extent we all believe in capitalism's great goods - that economic freedom has
rarely been effectively decoupled from political liberty, that it encourages innovation
and has inspired the entrepreneurial passions of millions, and that it has offered
practical solutions where politics left only festering questions - if we hold all these
insights as powerful and worth preserving, then we must equally be willing to
acknowledge capitalism's flaws.
To say that capitalism does not incorporate all that we now know about human
psychology, or that it can be inefficient when dealing with social problems that span
generations, or that it can prove unresponsive when confronting costs born by
everyone, is not to disembowel capitalism of the good it has done us all.
It is with this in mind - a desire to build upon and not see torn down - those insights
capitalism brings the world, that Chandran Nair has written Consumptionomics:
Asia's Role in Reshaping Capitalism and Saving the Planet. Nair's analysis is
ostensibly written for an Asian audience, and yet its implications are undeniably
global in scope. Unlike what some reactionaries may take away from Nair's book,
Consumptionomics does not desire to tear down capitalism; rather, it asks us to think
of certain shared social resources as a type of capital stock, albeit one more precious
than any shown on a company or central bank balance sheet.
To their detriment, some reading Nair's book may struggle to get beyond his criticism
of the almost religious emphasis Western policymakers have put on their particular
form of capitalism. Nair is particularly critical of what he sees as the unbalanced
perspective taught in many business schools.
For Nair, the tragedy here is not only the short-sightedness this encourages overall,
but that it leaves these leaders woefully unprepared and largely unaware of what he
believes will be the defining challenges facing their businesses and societies. When
writing about his own experiences here he says:
It seemed to me that these young minds - some of the brightest in
the region - were going to these schools not to be taught practical
skills that would make them better, more responsible citizens,
able to help the problems of their home countries, but rather to be
schooled in an ideology.
Learning how to manage and innovate within the limits and
constrains imposed by our planet featured nowhere in their
teaching. Instead they were told how, via its reliance on free
markets, capitalism had emerged as the best means of creating
prosperity. Governments had a role in all this, but principally to
remove obstacles such as unnecessary regulations. Throw in
democracy as icing on the cake, and not only had the West
succeeded in advancing civilization to new heights of well-being
and scientific achievement, but it had also, as Francis Fukuyama
observed, arrived at the end of history. (pg 13)

These are strong words and for some who read Consumptionomics, they will prove
too acerbic to learn from. Yet this would be a mistake for, as Nair writes later on,
"Freeing up markets can be an effective way of ensuring economic growth."
To understand Consumptionomics requires a willingness to confront doctrinal purity,
the sort of fundamentalism that all ideologies are prone to, and to admit that an idea
can offer piercing insight in one way, and yet suffer from anemia in another. For Nair,
capitalism's deficiency remains its inability (or perhaps, as some might suggest, its
contemporary unwillingness) to acknowledge the natural resource limitations that
confront most of the developing world.
This message may fall on deaf ears in the West, and in America especially. The US
may be insensitive to Nair's concern over natural resource limitations simply because
for so much of its history, the country has rarely had to confront any itself. America's
relative lack of population density, its enormous arable land holdings, and its vast
natural resources have all combined to make Americans less aware of the reality faced
by most of those in Asia.
In many ways, Asia remains the mirror image to America's bounty: where America
has vast arable land holdings, Asia faces a chronic inability to grow enough food to
feed itself. Where America has - absent pockets in the West - large sources of natural
water, Asia confronts a chronic water shortage that has the potential to dislocate tens
of millions of people.
Nair is right that Asia may lead the way simply because it has to - but that to do so,
Asia must develop a coherent ideology that incorporates these natural resource
limitations into policies and practices. As Nair writes, "Growth on the scale envisaged
by Asia's development over the next few decades will lead to a loss of natural capital
that will dwarf the losses seen in the West during the 20th century, let alone what the
world managed in the centuries before that." (pg 90)
Perversely, if Nair is right, it may well be that American business loses out as a
consequence of not understanding the enormity of these needs. Asian entrepreneurs
see more directly and feel more acutely these problems, and they are likely to advance
the solutions more indigenously and rapidly than their Western counterparts.
In his emphasis on society's collective needs over the absolute freedom of the
individual, Nair's solution to these problems will deeply trouble many in the West. He
asserts three primary realizations that need to be incorporated into traditional
capitalism: first, "resources are constrained; economic activity must be subservient to
maintaining the vitality of resources", second "resource use must be equitable for
current and future generations; collective welfare must take priority over individual
rights" and third, "resources must be repriced; productivity efforts should be focused

on resources, not people." (pgs 91-92)

Nair's solution to the third point is worth expanding on. As he writes, "... resources
must be repriced. Wherever possible, market capitalism has deliberately downplayed
or ignored negative external factors that would increase costs. This must be reversed."
When seen through the lens of capitalism's formation in population scarce countries
who enjoyed a wealth of seemingly inexhaustible natural resources, this luxury was
understandable and possibly even a necessary factor in much of the Industrial Age.
But it simply will not work for Asia, a fact Nair expands on when he writes further,
"Emissions must have costs attached to them. Other resources - especially land and
water - must have prices that compel people to use them in a sustainable fashion.
Where necessary, outright bans must be placed on the use of particular resources." (pg
92)
It is impossible for Western eyes to read this book and not be provoked by Nair's
assertion that a form of capitalism can exist which brings forward the idea of a strong
state (something essential for implementing and enforcing the self-imposed
constraints Consumptionomics advocates), while also enabling a sufficiently free
market that can equally encourage innovation and risk taking.
But it is perhaps equally impossible for those same set of jaded Western eyes to read
Nair's book and not realize how, if the West does not respond, it may end up lagging
behind Asia's economy, technology, and perhaps even mode of governance. The
restraint Nair advocates for may well prove to be the discipline which Western
economies have proven to be so lacking in recently.
Consumptionomics makes many legitimate criticisms of capitalism, and thankfully
provides many solutions. Yet one finishes the book wondering whether any mode of
human governance has the ability to respond to these challenges in time.
The longer-term issues Nair raises are ones that will ultimately be weighed against the
very real short-term political needs in Asia's emerging economies and our most
human of tendencies to push off for tomorrow that which seems less pressing today:
the need for jobs, improved standards of living, and distribution of food and water to
people with very present memories of neither.
Nair's acknowledgement of this reality is haunting: "... humans procrastinate; their
concerns are about the present, not some hypothetical tomorrow. This is almost
certainly an evolutionary trait. But it is one that must be consciously repressed and
replaced with a careful consideration of the range of different futures that lie ahead."
Nair is not the first thought leader to raise the question about whether our economic
system is compatible with the resource limitations imposed by the explosive growth
from Asia's emerging economies. But he may be the first to suggest that capitalism

can be adapted to address these problems, that it can be compatible with a more
assertive state, and that it can still harness the entrepreneurial passions that drive
economic and political innovations forward.
In a world that has seen in the last century two ideologies advance - one disastrously
advocating the role of the state alone, and another successfully advocating a more
balanced relationship between the state and the economy - Nair's suggestion that the
latter can be further adapted to the realities of the next century seems wise. It would
be a shame if capitalism's most strident advocates make it impossible for such and
evolution to occur.
Consumptionomics: Asia's Role in Reshaping Capitalism and Saving the Planet by
Chandran Nair. Infinite Ideas (January 2011). ISBN-10: 1906821496. Price US$18,
256 pages.
Benjamin A Shobert is the managing director of Teleos Inc (www.teleos-inc.com), a
consulting firm dedicated to helping Asian businesses bring innovative technologies
into the North American market.
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