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Environmental Politics
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The international political economy of (un)sustainable consumption and

the global financial collapse
Maurie J. Cohena
a
Graduate Program in Environmental Policy Studies, New Jersey Institute of Technology, USA

Online publication date: 08 February 2010

To cite this Article Cohen, Maurie J.(2010) 'The international political economy of (un)sustainable consumption and the
global financial collapse', Environmental Politics, 19: 1, 107 — 126
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 Environmental Politics
Vol. 19, No. 1, February 2010, 107–126

The international political economy of (un)sustainable consumption

and the global financial collapse
Maurie J. Cohen*

Graduate Program in Environmental Policy Studies, New Jersey Institute of Technology,

USA

Adopted at the 1992 Earth Summit and elaborated at the Johannesburg

Conference a decade later, sustainable consumption occupies an increas-
ingly prominent political position. Numerous governmental ministries and
supranational organisations have produced sustainable consumption plans.
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However, actual programmatic initiatives have been limited to modest

information and education campaigns as policy proposals are constrained
by political contexts. Researchers have documented flows of materials and
energy, but have disregarded the political and economic dynamics that
animate throughput movements. Inattention to factors that propel the
global metabolism, scholarship largely failed to anticipate the ongoing
global financial collapse. Work on the household economics and
macroeconomics of consumption is reviewed and an international political
economy of (un)sustainable consumption is developed. Realignment of the
global economic order will require renegotiation of the tacit agreements
that the USA strikes with its trading partners and the design of more
efficacious systems of production and consumption.
Keywords: international trade; debt; deficits; American empire; degrowth

Introduction
While the prodigious throughput of materials and energy in affluent countries
has featured in environmental debates since the early 1970s, governments never
imposed substantive responsibilities on consumers. Policy makers instead
compelled industrial companies to abide by regulatory controls and subscribed
to the presumption that overall consumption would continue to expand. As the
inadequacy of this approach became apparent, the emphasis shifted towards
strategies based on pollution prevention, ‘clean’ technology and environmental
economics. The most recent wave of policy innovation, largely motivated by

*Email: mcohen@adm.njit.edu

ISSN 0964-4016 print/ISSN 1743-8934 online

Ó 2010 Taylor & Francis
DOI: 10.1080/09644010903396135
http://www.informaworld.com
 108 M.J. Cohen

the urgent need to reduce greenhouse-gas emissions, centres on eco-efficiency,

waste minimisation and product stewardship (von Weizsäcker et al. 1997,
Hawken et al. 1999, cf. White 2002, Barry 2007).
Despite the continued centrality of production-led initiatives, sustainable
consumption has come to occupy an increasingly visible political position.
First championed by a consortium of developing countries and nongovern-
mental organisations (NGOs) prior to the United Nations Conference on
Environment and Development (UNCED) in 1992, the concept has steadily
evolved into an institutionalised fixture of policy discussions. In addition,
various commercial efforts to reshape household consumption have prolifer-
ated, and allied ideas pertaining to ‘ethical shopping’ and ‘green consumerism’
have become infused into marketing practice and popular culture (Brower and
Leon 1999, cf. Hardner and Rice 2002, Pedersen and Neergaard 2006).
This turn away from a resolute preoccupation with production, and the
subsequent forging of complementary demand-side strategies, has necessarily
entailed compromises. In particular, the cautious embrace of a weak con-
ception of sustainable consumption has led to a withering of the novelty that
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characterised early expressions of the concept. Pragmatic policy entrepreneurs,

forced to work within political contexts that repudiate heterodox views of
economic growth, have favoured straightforward initiatives to supplement
consumer information and education. Such neutralisation is palpable in the
cascade of sustainability plans that now pour forth from government bureaus
and international organisations (UNEP 2001, UK DEFRA 2003, 2005, EEA
2005, Finnish Ministry of the Environment 2005, UK SCR 2006, German
Federal Environment Agency 2007, CEC 2008).
The insipidness of contemporary policy making on sustainable consump-
tion reflects the hesitancy of affluent countries to forthrightly confront their
wasteful materials and energy usage patterns. Researchers must shoulder some
responsibility for the disarray. Current disorientation is at least partly
attributable to an intellectual posture that eschews the political economy of
resource appropriation and instead privileges the enumeration of metabolic
flows. This fixation has relegated consideration of the engine that propels the
overall metabolism – the global financial system – to the periphery, as
scholarship on the linkages between consumption and sustainability in the
main failed to anticipate the ongoing global financial collapse. The current
process of retrenchment, with much of the world desperately trying to revert to
the status quo ante, provides an auspicious moment for reassessment.
The premise of this article is that the notion of sustainable consumption
needs to incorporate the global financial system into its frame of analysis. To
develop this perspective, the section ‘The emergence of sustainable consump-
tion’ traces the history of sustainable consumption as a policy issue and
highlights both its established and insurgent schools of thought. The section
‘The household economics of sustainable consumption’ approaches the issue
from the standpoint of household economics and reviews relevant work of
economists and sociologists. The section ‘Macroeconomic deficits and
 Environmental Politics 109

(un)sustainable consumption’ describes the macroeconomic dimensions of

government budgeting and international trade, as policy decisions in these
spheres are ultimately responsible for driving consumption. The section ‘The
international political economy of (un)sustainable consumption’ integrates and
extends these perspectives by developing the contours of an international
political economy of (un)sustainable consumption that explains how American
foreign policy has secured the acquiescence of other countries in exchange for
access to US markets. The conclusion identifies some directions for future
research on sustainable consumption in light of new economic circumstances
and a more expansive understanding of the factors that animate resource flows.

The emergence of sustainable consumption

The role of consumers in policies for sustainable development is increasingly
appreciated. Much of this dialogue has taken place around the concept of
sustainable consumption that first emerged on the international agenda during
the early 1990s. Early proponents sought to reframe the global environmental
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problematique, as well as the challenges of sustainability more generally, in

accordance with a more equitable distribution of obligations between the
developed and developing countries. A critical dimension of this undertaking
involved recognition of the large disparity in per capita resource appropriation
between, for example, India and the USA. After contentious debate, an entire
chapter of Agenda 21, the action plan produced by the UNCED process, was
devoted to the issue, and stated that ‘[a]ll countries should strive to promote
sustainable consumption patterns’. The document proceeds to encourage
developed nations to assume primary responsibility for forging appropriate
strategies (UNDESA 1992). The governments of most affluent countries
greeted this initial call for the public regulation of consumption with a
combination of anger and exasperation: the first President Bush famously
responded with the declaration that ‘the American way of life [was] not up for
negotiation’ (McKibben 2005).
Nonetheless, in the following years, the Organisation for Economic
Cooperation and Development (OECD) and other secondary policy-making
institutions quietly worked to sharpen the focus of discussions (e.g. Nordic
Council of Ministers 1995, OECD 1997), and authoritative scientific societies
and independent researchers embarked on complementary investigations
(Durning 1992, Redclift 1996, Royal Society and US NAS 1997, Stern et al.
1997, Cohen and Murphy 2001, Princen et al. 2002).
At the 2002 Johannesburg Summit, sustainable consumption (and produc-
tion) was again a major theme and a key pronouncement called upon UNEP, in
conjunction with the United Nations Department of Economic and Social
Affairs (UNDESA), to formulate a 10-year international framework of
programmes to support this objective. After consultation with government
representatives, academics and NGOs, UNEP convened an experts meeting in
2003 to launch the Marrakech Process. The aim of these deliberations has been
 110 M.J. Cohen

to develop a comprehensive plan for submission to the United Nations

Commission for Sustainable Development (UNCSD) for the 2010/2011 cycle
to guide initiatives to encourage sustainable consumption (and production) over
the next decade. Concomitantly, UNEP convened a series of stakeholder
dialogues in Latin America and the Caribbean, Africa, Europe, North America
and the Asia-Pacific area to develop regional perspectives.
Separate from the Marrakech Process, a number of national governments
and supranational bodies have created new forums to consider the social and
environmental implications of contemporary lifestyles. The European Com-
mission’s action plan (CEC 2008) in particular generated considerable
expectancy in the months prior to its release. Early indications were that the
report would move the policy discussion in innovative new directions and
embrace several ambitious ideas. After numerous delays, the document
unveiled during summer 2008 proved to be more reactionary than revolu-
tionary (ENDS Europe Report 2008). Commentary at the time suggested that
competing interests had overwhelmed the drafting process and realigned the
document with established commitments favouring economic competitiveness.
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The highly charged internal debates that characterised the European action
plan on sustainable consumption are indicative of extensive cleavages over how
to organise the overall political agenda. Policy makers have tended to prefer
individualised models of consumer behaviour predicated upon paradigms from
social psychology and behavioural economics (Thøgerson and Ölander 2002,
van den Bergh 2008) that privilege environmentally conscious consumer
purchasing, eco-labelling and long-term capital investments in household-energy
efficiency. Other prevalent strategies merge with approaches from the realm of
sustainable production and encourage complementary initiatives grounded in
product policy, life-cycle engineering, waste and material minimisation and eco-
efficiency (Thomas and Graedel 2003, Sinclair et al. 2005).
It has become common to challenge mainstream interventions based on these
circumscribed models of consumer motivation because they ignore the social
dimensions of consumption and the likelihood of perverse rebound effects
(Herring and Roy 2002, Hertwich 2005). Another basis for criticism has been
that the modest anticipated gains are incompatible with the bold targets
endorsed by scientific experts (Seyfang 2004, Spangenberg 2004). This mismatch
appears to be especially prominent with respect to global climate change, where
influential analyses of the Intergovernmental Panel on Climate Change (IPCC)
(2007) and the Stern Review (2007) assert a need to reduce greenhouse-gas
emissions by 80%. Moreover, by emphasising only notionally rational
consumers and narrow technological solutions, policy makers marginalise the
essential politics of any meaningful programme to elicit changes in consumption.
Separate from the established discourse on sustainable consumption, a
diverse community comprised of academics, think-tanks, policy advocates and
social experimentalists has been assembling a more ambitious agenda. Yet to
cohere into a single strategic vision, this array of alternative approaches focuses
on fostering transformational changes in both the quantity and the quality of
 Environmental Politics 111

resource use. Instead of consumer rationality and engineering redesign, a broad

conception of ethical responsibility is at the heart of this insurgent view of
sustainable consumption (Paavola 2001, Hobson 2002, Schrader 2007, Cohen
2006b, Hobson 2004). Some scholars situate household provisioning within the
everyday social practices of consumers (and citizens) (Spaargaren 2003,
Hargreaves et al. 2008, Quitzau and Røpke 2008); others seek to develop
sustainable consumption as a means by which to encourage ecological
citizenship, democratic engagement, innovative governance and alternative
systems of economic organisation (Hobson 2004, Fuchs and Lorek 2005,
Cohen 2006a, b, NEF 2008). There are also attempts to understand the
complex dynamics of global supply chains and international trading regimes
with an eye to identifying strategic points where pressure for change can be
maximally applied (O’Rourke 2005) and where household provisioning can
effectively be relocalised (Seyfang 2006).
These treatments are motivated by implicit social critiques of consumption
(and consumerism) and clearly distinguish themselves from more established
metabolic analyses that disregard the political dynamics behind material and
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energy flows. Some of this scholarship and experimentation has drawn on the
burgeoning body of literature on ‘happiness’ and sought to uncover linkages
between material abundance and lifestyle satisfaction (Jackson 2005, 2008, NEF
2006, Offer 2007, UK SDC 2009) suggesting that beyond a certain threshold level
of consumption (and income) consumers do not realise significant improvements
in subjective wellbeing. Paradoxically, the proportion of people in developed
countries that claims to be ‘very happy’ has not changed over recent decades
despite manifold growth in material throughput. These findings suggest that
contentment is more a function of interpersonal comparison than a matter of
absolute accumulation. If it is true that happiness is predicated upon relative
standing, consumers could conceivably reduce expenditures and cut back
proportionately on the amount of time they devote to paid employment without
experiencing any diminution in perceived quality of life.
Some researchers have sought to subject these contentions to personal tests
by, for example, modifying their lifestyles in accordance with the principles of
voluntary simplicity (Elgin 1993, James 2007). Other social experimentalists
have been variously motivated to drastically reduce their individual environ-
mental impacts (Levine 2007). Related efforts have picked up pace with the
formation of carbon reduction action groups and the diffusion of the
‘transition towns’ movement (Hopkins and Heinberg 2008).
Despite its inchoate form, this alternative thinking about sustainable
consumption takes quite seriously the assertions of prominent environmental
scientists who call for multifactor improvements – ranging from factors of 4 to
20 – in the efficiency of materials and energy use (von Weizsäcker et al. 1997,
Hinterberger and Schmidt-Bleek 1999). These ambitious targets derive from
the recognition that it will be necessary to accommodate a worldwide
population of 10 billion people by 2050 (along with concomitant growth in
resource utilisation) and simultaneously control the most dangerous impacts of
 112 M.J. Cohen

global climate change. Such circumstances call for large-scale reductions in the
volume of resources appropriated by developed countries and for endowing
developing countries with ‘leap-frogging’ capacity (Köhler 2006, Tukker et al.
2008, cf. Perrels 2008). This awareness has led to consideration of so-called
transition pathways and the radical transformation of entire socio-technical
systems (Rohracher 2001, Elzen et al. 2004).

The household economics of sustainable consumption

Sustainable consumption has emerged politically as national governments and
international organisations have begun to adopt elements of this policy agenda.
For instance, sustainable consumption (and production) is one of the four
priority areas in the UK government’s national sustainability strategy, and the
Marrakech Process is an important component of UNEP’s activities. Even so,
these developments retain a certain quixotic quality, in part because of a sense
that proponents are furtively intent on undermining consumer sovereignty and
weakening prevailing prerogatives favouring economic growth.
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The point of departure for the current discussion, however, is the dominant
tendency to conceptualise sustainable consumption in overly narrow terms as
the management of metabolic flows. Most scholarship in the field disregards
the fact that the movement of materials and energy is contingent upon
dynamics in the international economy. This section begins to widen the frame
of customary analysis by highlighting how economists and sociologists have
approached the financial dimensions of (un)sustainable consumption from the
standpoint of household savings.
The amassing of savings by households provides both a source of domestic
security and a societal pool of investment capital. With respect to the
sustainability of affluent countries, financial accumulation also has the
advantage of diverting money from current consumption and redirecting it
towards capital assets and other activities with prospects for long-term benefit.
The following overview uses OECD data and focuses on savings behaviour
in 17 member countries over a 15-year timeframe.1 More than half of these
nations (the so-called Anglo-Saxon group plus Denmark, Finland, Japan,
Korea and the Netherlands) experienced declining household savings rates
during the period 1990–2005 (Table 1). The savings rates for a number of these
countries, turned negative in the latter part of this interval, suggesting that
consumers were depleting previously accumulated funds to maintain current
consumption. In contrast, the Germanophone and Francophone nations
maintained comparatively stable savings rates while the Norwegians and
Swedes evinced a generally increasing propensity to save.
Economists have advanced numerous reasons for this generally declining
pattern of household savings (Marquis 2002, de Serres and Pelgrin 2003,
Guidolin and La Jeunesse 2007).2 The explanations include a ‘wealth effect’
(suggesting that as people raise their net worth they will increase their
consumption propensity), a ‘labour productivity effect’ (contending that
 Environmental Politics 113

Table 1. Household net savings rates for selected OECD countries, 1990–2005
(percentage of disposable household income).

1990 1995 2000 2005

Declining savings countries
Australia 6.6 6.7 2.4 73.7a
Canada 13.3 9.4 4.8 1.2
Denmark 2.0 1.3 72.0 1.1a
Finland 1.8 3.9 70.1 70.1
Japan – – 8.5 3.2
Korea 22.5 17.5 10.7 4.4
The Netherlands – 15.7 7.5 7.1
UK 4.2 6.7 0.5 70.1
USA 7.2 5.1 2.4 70.4
Stable savings countries
Austria – 11.0 8.5 9.1a
Belgium 14.2 15.7 9.7 10.4b
France 9.3 12.7 11.8 11.5
Germany – 11.1 9.3 10.7
Switzerland 10.8 12.9 13.2 9.1
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Increasing savings countries

Norway 2.2 4.6 5.2 10.1b
Sweden – 9.1 3.2 8.7a

Source: OECD (available at http://www.oecd.org/site/0,3407,en_21571361_34374092_1_1_1_1_1,

00.html).
a
Data are for 2004.
b
Data are for 2003.

improvements in workplace efficiency prompt people to revise upward their

expectations of future income and to cut back their current savings rate), and a
‘financial security effect’ (averring that government-transfer programmes have
reduced dependency on familial resources to fund retirement, disability, and
major medical expenses).3
Others emphasise the role that demographics play in influencing national
savings rates: countries with younger age profiles will evince higher
propensities to save and this rate will decline as people reach retirement age.
Some historically minded economists reach back to the nineteenth century and
revivify the notion of Ricardian equivalence that asserts people are indifferent
to whether governments fund their activities through tax increases or debt.
Declining government deficits should encourage people to save less (because of
expectations of lower taxes in the future) while increasing government deficits
should induce them to save more (because of expectations of higher taxes in the
future). A final noteworthy explanation draws attention to the shift away
(largely in the USA) from stockholder dividends to stock repurchase plans,
claiming that this trend has reduced savings rates because dividends are
included in the calculation whereas share repurchases are not.
Though the reasons are varied, none of these explanations holds up
especially well to empirical analysis (Guidolin and La Jenunesse 2007). The
 114 M.J. Cohen

standing of the presumed ‘wealth effect’ is undermined by the finding that

during the past decade the periods of greatest consumption growth did not
coincide with the most robust phases of asset appreciation. The ‘labour
productivity’ interpretation fails because it accounts for only a very small
portion of the change in savings, and the ‘financial security effect’ is not
especially robust because of the paradox that countries with the most expansive
social welfare systems also have the highest household savings rates.
A further economic explanation that withstands careful scrutiny centres on
the development and diffusion of financial innovations. In particular, new
credit products made it easier (until mid-2008) for consumers to borrow money
on convenient terms. The wide diffusion of credit cards, as well as the
popularisation of home-equity loans, has altered conceptions of debt. Indeed,
savings behaviour declined most sharply in the OECD countries that most
enthusiastically embraced bank deregulation and the liberalisation of personal
credit (Sullivan and Worden 1989, Leyshon and Thrift 1993). Assessment of
why there was such relentless uptake of these new financial products requires
moving beyond econometric analyses and turning to sociological studies
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grounded in the lived experiences of actual consumers. Schor (1998) and

Warren and Warren Tyagi (2003) have been most prominent in developing this
perspective with respect to the USA.
Schor analyses changes in the American labour market and highlights the
expanding participation of women in paid employment. This trend evolved in a
context of increasing workplace stratification that brought people with vastly
different earning capacities into close social proximity. In the earlier eras, when
the assembly line was the paradigmatic mode of economic organisation, there
was little integration across income classes and workers took their consump-
tion cues from colleagues earning roughly similar incomes (hence the famous
aphorism about ‘keeping up with the Joneses’). By contrast, the heterogeneity
of contemporary workplaces encourages individuals of relatively modest
earning potential to emulate the purchasing practices of better-off colleagues,
inducing a steady ratcheting up of consumption standards – what Schor refers
to as the ‘new consumerism.’ This pressure has been exacerbated by the
pervasive influence of television and its tendency to showcase products that
exceed the budgets of most viewers, leading to the upward spiralling of
expectations, continuous upgrading of what constitutes ‘normal’ levels of
comfort and convenience, and the accumulation of outsized debt.
Warren takes a different tack, grounded in the rising tide of personal
bankruptcies in the USA and the budgetary challenges of maintaining a con-
temporary household. She notes the curious irony that recruitment of women
into paid labour tended to increase rather than decrease financial strain. The
addition of a second paycheck added to income, but the supplementary
resources stimulated new, largely unavoidable expenditures and reduced overall
familial flexibility. In contrast, during earlier eras, non-working wives and
mothers would seek temporary employment in the event of financial
emergencies and thus inject a new source of income into their households.
 Environmental Politics 115

Warren identifies five tightly interlinked factors as responsible for putting

American households into a financial straightjacket and contributing to the
demise of savings and the rising tide of national indebtedness: the quest for
decent public schools, the necessity of maintaining a second car, the expenses
incurred for childcare, the cost of medical treatment and the need to finance
higher education. Changes in this array of expenditures, she claims, tipped
middle-class households into the ‘two-income trap.’
We have here two quite different sociological explanations for the declining
savings rate in the USA. Schor contends that the failure to save is the result of
novel consumer aspirations driven by an unyielding desire for status and a
relentless quest for positional goods. Warren attributes the low savings rate to
a barrage of competing pressures that make it difficult for families to break
even. How might we reconcile these two views? One approach begins by
highlighting the divergent life circumstances of the upper and lower tiers of the
contemporary American middle class. Schor, primarily concerned with
‘middle-class and upper-middle-class consumers’, writes that
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[S]pending patterns are strongly differentiated by class, and the system of

competitive spending I describe is driven by those with discretionary income . . . I
focus on more affluent consumers not because I believe that inequalities of
consuming power are unimportant. Far from it. They are the heart of the
problem. But I believe that achieving an equitable standard of living for all
Americans will require that those of us with comfortable material lives transform
our relationship to spending. (Schor 1998:xiv–xv)

Warren does not qualify which facet of the American middle class her
analysis is capturing, but she does not appear to focus on the same consumers
that animate Schor’s discussion of lawyers, accountants and other profes-
sionals with considerable discretionary income. The evocative personal profiles
that Warren intersperses throughout her account are instead based on the
experiences of police officers, schoolteachers and dental hygienists – members
of a middle class who face a decidedly different set of financial challenges.
It is not only American consumers and their counterparts in other countries
that have had trouble setting aside savings from current income. National
governments have displayed similar tendencies, especially with respect to fiscal
policy and international trade.

Macroeconomic deficits and (un)sustainable consumption

Nobel laureate Paul Krugman (2003) observes that ‘[t]he basic rule of fiscal
responsibility for a national government is pretty much the same as the rule for
a family. Pay off your debts and build up financial reserves when things are
good, so that you can draw on those reserves later.’ For most of the past
decade, this advice seemed quaint and was in many circles regarded as unduly
cautious for failing to appreciate the benefits of leverage. However, fiscal
moderation is a precondition for sustainable consumption. In the absence of
 116 M.J. Cohen

financial prudence, efforts to successfully shift consumer choices in more

sustainable directions are likely to prove elusive. Two instructive macro-
economic indicators of (un)sustainable consumption are the government
budget balance and the current account balance (essentially the trade balance).
To provide for public consumption – as opposed to the private con-
sumption paid for directly by households – it is common for governments to
borrow money on both a short- and long-term basis through the issuance of
treasury bonds. Of the 27 OECD nations for which there are comparable data,
15 (55%) reported budget deficits in 2005 (Figure 1).4 Hungary, Portugal,
Japan, Greece and Italy (in declining order) were the most heavily indebted
countries relative to their respective gross domestic products (GDP); all had
annual revenue shortfalls in excess of 4% of GDP. Aggregate borrowing to
compensate for these deficits totalled more than $1 trillion, the USA
accounting for 45% of this amount and Japan a further 20%.
Government budget deficits occur when the treasury expends more money
than it collects in revenue. During periods when tax increases or spending
reductions are not politically viable, financial markets provide a convenient
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way to raise additional funds, particularly if interest rates are relatively low.
Countries have used this strategy throughout modern history to pay for wars
and other exigencies, but it can become dangerous if borrowing fails to decline
once the emergency is over or if altered conditions make it difficult to refinance
the debt.
A second issue is the extensive degree of economic interconnectivity that
has become a feature of the present era of globalisation. We can usefully divide

Figure 1. Net government lending/borrowing for selected OECD countries, 2005.

 Environmental Politics 117

countries into two categories: net importers and net exporters. Of the sample of
27 OECD countries, 15 (55%) had current account deficits (imports exceeded
exports) in 2005 (Figure 2). Iceland, Portugal and New Zealand had the largest
shortfalls relative to their respective GDPs, but these amounts were dwarfed in
absolute terms by the massive deficit ($793 billion or 71% of the total for this
group of counties) accrued by the USA.
Before proceeding, a few clarifying points. First, a negative current account
balance is generally the result of weak export capacity relative to strong desire
for imports. Second, the prevailing market price and consumer demand for
petroleum are both important components of the trade picture (especially for
net oil-importing countries like the USA). When national petroleum
expenditures increase, the current account balance will decline in the absence
of offsetting changes in exports or non-oil imports. Finally, a protracted
current account deficit will, ceterus paribus, tend to weaken the value of a
country’s currency. The USA has encouraged such a situation for two decades,
but the American current account balance has still been consistently negative
since 1982. The country has been able to buffer the adverse effects of its chronic
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trade deficit because the dollar serves as the primary international reserve
currency.
A further measure of macroeconomic wellbeing is the ‘twin deficit’ (or
surplus) and it is calculated by summing the government budget balance and
the current account balance. As depicted in Table 2, 10 OECD countries from
the sample of 27 nations (43%) have been experiencing twin deficits. Italy, the
UK and France have evinced modest twin deficits (with combined government
budget and current account deficits amounting to approximately 5–6% of their

Figure 2. Net current account balances for selected OECD countries, 2005.
 118 M.J. Cohen

Table 2. Twin deficits for selected OECD countries, 2005.

Country Current account deficit Budget deficit Total twin deficit

Low deficit
Slovak Republic 1.5 2.1 3.5
Hungary 2.8 5.1 7.9
Czech Republic 4.6 7.2 11.8
Greece 5.3 14.1 19.4
Portugal 11.1 19.1 30.2
Poland 33.9 19.6 53.6
Medium deficit
Italy 141.4 51.0 192.4
UK 124.7 100.9 225.6
France 129.1 123.4 252.4
High deficit
USA 1,140.6 743.9 1,884.5

All figures in billions of current dollars. Source: author’s calculations based on data from OECD.
Downloaded At: 16:10 29 June 2010

respective GDPs). This scale of imbalance puts these countries into somewhat
precarious positions, but most economists do not regard a twin deficit of this
magnitude as inherently problematic. It is moreover essential to put these
amounts into perspective by comparing them to the USA, which had a twin
deficit for 2005 of $1.4 trillion (10.1% of GDP).
In the wake of the global financial collapse, the American government
budget deficit was expected to rise in 2009 to an unprecedented $1.75. In a
more fortunate development, the current account deficit shrank to $738 billion
in 2007 and then to $677 billion in 2008 due to lower oil prices and contraction
of consumer demand. Nonetheless, because of the general magnitude of its
government budget and current account deficits, the USA faces an
unprecedented twin deficit of nearly $2.5 trillion (approximately 18% of
GDP) for at least several years.5

The international political economy of (un)sustainable consumption

While household economics and the macroeconomics of government budgeting
and international trade help to highlight the scale of recent patterns of
(un)sustainable consumption, consideration of the motivations behind this
situation requires an approach grounded in international political economy. It
is the pivotal role of the USA as a ‘debtor empire’ (Ferguson 2005, Bonner and
Wiggin 2006) that helps to explain why the contemporary global system has
come to rely on immense materials and energy flows.
While history provides no shortage of examples of countries that have
amassed large debts (ancient re´gime France is perhaps the most infamous case),
this financial strategy has typically been limited to the sale of bonds during
periods when the survival of the state was under threat (as with Britain during
World War II) (Thompson 2007, Ferguson 2008). Stiglitz and Bilmes (2008)
 Environmental Politics 119

estimate the cost of American military operations in Iraq and Afghanistan at

more than $3 trillion. Although it is a huge amount of money, a significant
portion comprises future expenses associated with caring for injured soldiers
and needs to be compared with the vast size of the country’s economy
(approximately $14 trillion in 2008). As strategically challenging as these
conflicts have been, they have never constituted an existential threat to the
USA. The larger point is that there are few precedents of a great power relying
on debt to maintain current consumption to the extent that the American
government (as well as its citizens) has been doing.
After a decade of amassing huge deficits, the USA now finds itself
borrowing still larger sums to stave off further bank failures and to fund a large
economic stimulus programme. The present situation is also only the tip of a
vast financial iceberg. The American treasury has yet to feel the crashing wave
of claims that will come as the generation of approximately 77 million ‘baby
boomers’ becomes eligible for public health insurance and other expensive
entitlements. According to credible estimates, these implicit liabilities amount
to a staggering $45 trillion (Gokhale and Smetters 2002). As Ferguson
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(2005:262) observes,

[T]his overstretch has almost nothing to do with the United States’ overseas
military commitments. It is the result of America’s chronically unbalanced
domestic finances. And the magnitude of the problem is such that most
Americans, including those who consider themselves well informed about the
nation’s finances, find it quite simply incredible. Indeed, the main reason why
America’s fiscal crisis remains latent is precisely that people refuse to believe in its
existence. (italics in original)

To maintain its generally high standard of living, the USA has come to rely
on the steady infusion of borrowed money from China and other Asian
countries. While prominent economists have debated the relative vulnerability
of the various participants (Krugman 2003, Mühleisen and Towe 2004,
Summers 2004, Bernanke 2005, Setser and Roubini 2005), historical experience
suggests that the creditor tends in the end to hold the upper hand in these
financial alliances (Ferguson 2008). Should China decide to diversify its
financial portfolio (or even to reduce appreciably the rate at which it purchases
American debt) the People’s Bank of China would no doubt suffer significant
losses as its remaining holdings fell in value. However, such action would be
economically catastrophic for the USA as interest rates spiked upward to
attract new money to replace the withdrawn Chinese funds.6 A particularly
unsettling dimension of this situation, at least from the perspective of
American foreign policy, is that the mere threat of altered Chinese investment
preferences gives Beijing a unique degree of political advantage.
The scope of a crisis is, of course, not limited to the USA and China.
Potential curtailment of American debt purchases by the Chinese means that
other countries – probably Germany in the first instance – would be called
upon to prevent the global economy from spiralling into a parlous tailspin.
 120 M.J. Cohen

However, the magnitude of the required amount raises questions about

whether sufficient liquidity exists to mount an effective rescue, even if national
treasuries could be convinced of the necessity of doing so.
The financial circumstances surrounding recent patterns of immoderate
consumption in the USA could precipitate still more disconcerting futures if
the country is unable to resolve its deep and expanding structural deficits. More
than two decades ago, Kennedy (1987) famously inquired whether Washington
was in danger of ‘imperial overreach’ and this debate has assumed new
relevance as the USA once again is mired in protracted military conflicts,
contentious disputes with allies and accumulating debt (Bacevich 2002,
Calhoun et al. 2006, Jackson 2007). While there are few historical examples
of ‘debtor empires,’ there is growing agreement that the USA will be forced to
surrender in coming years some measure of its national sovereignty (Ferguson
2005, Maier 2006, Morgan 2008, Zakaria 2008). This situation has inspired
some observers to lapse into schadenfreude, but the country’s trading partners
have played accessory roles by allowing themselves to become subject to what
Mead (2004) describes as American ‘sticky power.’ This concept usefully
Downloaded At: 16:10 29 June 2010

captures a tacit objective of Washington’s foreign policy and approaches from

a sideways direction the customary Manichaean distinction between ‘hard’ and
‘soft’ power. For more than a generation, the USA has supplemented its
military prowess and cultural appeal by enticing other nations into dependent
relationships predicated upon alluring access to the American consumer
market. In exchange for acquiescence on a wide range of political fronts, the
USA provides its closest allies with an expedient way to export surplus
production. This situation is starkly apparent with respect to more than a
dozen countries, including those listed in Table 3. It is in fulfilment of this role
that the USA has enlisted its consumers to function as the ‘engine of the global
economy.’ While this strategy has been relatively successful in creating

Table 3. US merchandise trade deficit by major partner country, 2008.a

Merchandise trade deficit

Country (in billions of current dollars)
China 270.3
Canada 112.4
Mexico 84.8
Japan 77.6
Germany 45.6
Malaysia 19.1
France 16.6
Thailand 15.1
Korea 13.6
Taiwan 12.6
Israel 12.0
a
Major oil-exporting countries are excluded. Source: US International Trade Commission (http://
dataweb.usitc.gov/scripts/cy_m3_run.asp).
 Environmental Politics 121

enduring alliances, its perpetuation entails the movement and consumption of

massive resource throughputs, the unprecedented degradation of environ-
ments, and the maintenance of a huge marketing artifice. Reversing this
situation will likely require a lengthy period of parsimony by American
consumers and discipline by those countries that have become reliant on the
USA as a safety valve to ensure their own political and economic stability.

Conclusion
Though the concept of sustainable consumption has begun to achieve political
prominence, actual demand-side interventions have to date centred on
relatively modest measures like enhanced product information and consumer
education. Campaigns by advocacy organisations have focused on similarly
straightforward efforts to encourage various forms of ethical shopping and
green consumerism. All of these initiatives deserve encouragement under the
large tent of sustainable consumption, but such strategies are not scaled to the
size of the challenge. The ongoing contraction of the global economy starkly
Downloaded At: 16:10 29 June 2010

exposes the underlying structure of current modes of consumption and

production, namely that American primacy rests in important ways on
resolving the problem of how to dispose of surplus production. By impelling
the country’s populace to serve as a civilian army of consumers in exchange for
the obeisance of its trading partners, the USA has provided a practicable way
out of this dilemma. We are, however, now seeing that this strategy comes with
exceptionally high social and environmental costs.
A more implicit proposition that emerges from this discussion is that the
USA (or any other country) is not immutably prone to consumerism. As de
Grazia (2006) and other historians have convincingly demonstrated, consumer
societies are constructed manifestations of specific interests. This view leads to
the observation that policy initiatives to improve technical standards and to
raise consumer consciousness are unlikely to yield much improvement in the
absence of parallel efforts to bring production capacities into line with
legitimate consumer needs. Recent calls for ‘radical systems innovation’
represent a partial step in this direction, but attending largely to the socio-
technical dimensions of provisioning underplays the more expansive political
economy that frames the challenge. When the day arrives, as it surely must, to
renegotiate the terms of the global economic order, it will be necessary to
design more efficacious systems of consumption that do not rely on rampant
consumerism to ameliorate the quandaries created by the ineffectual
organisation of production.

Notes
1. Data on household savings for other OECD countries were not available in
comparable form.
2. The following discussion draws heavily on the report by Guidolin and La Jeunesse
(2007).
 122 M.J. Cohen

3. Some of this disparity may be attributable to variability in how governments report

savings rates. Comparative analysis is also complicated because nations differ in the
way pensions are funded and programmes are designed to provide insurance against
illness and unemployment.
4. The OECD data set does not include Belgium, Mexico and Turkey.
5. The Obama administration has announced ambitious intentions to cut the
budget deficit by 50% by 2013, but prevailing economic conditions and inevitable
political resistance to any tax increases will make this target very difficult to achieve.
6. Speculation currently abounds on the extent to which China’s economic
stimulus programme, announced in November 2008 and amounting to nearly
$600 billion, will divert surplus funds otherwise earmarked to purchase American
treasury bonds.

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