Deconsumption

This buzzword that we have seen flourish in the media in recent months is born of a reality: the French seem to be abandoning the shops and reining in their consumption. The question is whether it is a cyclical phenomenon or a secular trend. What if we were simply condemned to consume less?

Fad or new era?

It would be quite tempting to put the drop in footfall in stores in France – a decline of 6.7%1 in 2018 – down to the “yellow vests” movement. But the phenomenon was not focused on the last two months of the year: it was actually the fifth consecutive year of decline! It will come as no surprise to see that “bricks-and-mortar” retailing is facing difficulties, attributable to the surge in e-commerce. The French federation of e-commerce and distance selling (FEVAD) puts growth in online sales at 13% in 2018. The surprise is that the expected transfer to online retailing did not occur this year. The French simply consumed less.

It is still too early to conclude whether this is a structural trend or not. At this stage, it would appear that the French bought less, but put greater emphasis on quality in their purchases. This is behaviour that the younger generations, known famously as the millennials, who favour use over ownership, appear to have adopted a long time ago. According to an Observatoire Société et Consommation survey, 35% of people aged under 30 opted to rent rather than to buy over the last 12 months, double the average rate in France. Have the younger generations understood something that their elders have not yet fully grasped, namely that hyperconsumption is not sustainable? Does their common sense match that of economist Kenneth Boulding, for whom “anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist”? Are we condemned to a future of muted growth, or even “degrowth” through the exhaustion of natural resources? Deconsumption is obviously the first step on the road to degrowth: in France, consumption accounts for about 52% of GDP, and has accounted for 43% of growth in national wealth on average over recent years.

^{#Demand SRI2}

In the academic world, many people are pointing out that “sustainable development” is an oxymoron. They advocate acceptance of degrowth. But the decoupling between economic growth on the one hand and consumption of natural resources or pollution on the other hand is still not materialising. At best, we sometimes see a “relative” decoupling (a fall in resources per unit of GDP), but the urgency is such that “relative” is no longer enough. As far back as 1972, a group of experts from MIT published a report entitled “The Limits to Growth”, concluding that it would only be a hundred years before growth in the population and industrial activity exceeded the planet’s capacity. To mark the fortieth anniversary of the report’s publication, its lead author, Dennis Meadows, said that it was already too late for sustainable development and that, contrary to what the optimists believe, technological progress will be insufficient to reverse the trend. There is no doubt that the financial markets will not emerge unscathed if this scenario does indeed materialise. As long-term investors, we need to reflect on these questions. One thing is certain: acting for the environment is no longer optional. Each of us bears responsibility, in our daily acts as well as in the way we structure our savings. #DemandSRI!

Sonia Fasolo

¹^{Procos, French federation representing specialised retailers}² ^{#DemandSRI!, or rather #Exigez l’ISR !, is an initiative of the French forum for responsible investing: http://www.exigez-isr.com/}