Wednesday 25 July 2012

What's the difference between spending and investment?

I've been looking for a new pair of shoes recently, to replace the over-loved and irreparable ones that have holes in the soles and torn inners.  But I'll come back to that in a moment, and take a detour into economics.

My shoes, with holes both top and bottom.
Each time our economy starts to take a downward turn, the government pipes up with "we must get the banks lending again" and as a result, the economists say "we must get Britain spending again", obviously to make sure there is a market for all these loans.

This, I'm not afraid to say, is absurd.  We are living beyond our own and the planet's means, but the maintained view is that we need to spend more, getting us further into debt and putting more pressure on our natural resources.

"So what's, your answer, smarty-pant, let our banks crash, unemployment run rife and reduce our quality of life to pre-industrial standards?"

No! My answer is to invest!

Investing is very similar to spending - almost identical, in fact - apart from the one distinction: that investment gives a stable or increasing return over time, where spending is instantaneously exhausted as the product or service is "consumed", leaving behind waste (which in itself takes more time and money to dispose of).

The distinction is still not clear, however, because we must answer the question as to whether the return on an investment has to be monetary, because if not, then surely lots of things we spend out money on are investments.  I would say that it doesn't:  A child's teddy, to take an example, may provide a return many times its price-tag in the pleasure and comfort it brings to that person throughout their life, making it a great investment, whilst a cheap plastic toy may provide merely minutes of entertainment before being discarded, firmly placing it in the category of consumer spending, and a drain on natural resources that could have gone into something which provided a significantly larger well-being benefit over a longer period of time.

Many people aren't very good at looking at their purchases as investments, and with good reason - it goes against human nature! Practically from birth our instinct is that a bird in the hand is worth two in the bush. Then at some point we learn the story about teaching the hungry man how to fish, rather than giving him a fish, and all becomes clear about the benefits of investment, rather than instant gratification. You would hope that from this point onwards, we would haven't learned and assessed both the short-term and long-term gains of our pursuits, but then advertising keeps on tempting us to satisfy our immediate desires, and we fall prey once again to unsustainable consumption.

So, whilst I've been looking for a new pair of shoes over the last few days, I've been asking myself whether they are a pair that I can wear day-in-day-out and still last me several years. I've also been looking at where they're made (Britain preferred), and what materials and processes contributed to their manufacture (to judge whether they are investment for the planet as well as myself, or merely a drain on natural resources). Alas so far I have been unsuccessful in finding a pair that fits the bill, and I'm sure that I'm going to have to compromise on something, even when I do find a pair!

But my point is this: if each of our purchases were seen as an investment, giving return of money, health or satisfaction in the greatest amount over the longest possible time, then what things would we stop buying, and what would we spend our money on instead?


  1. Shoes, aaaarrrgh! My great unrepairable second-hand boots are now giving way and the kettle has just stopped working predictably after a year (does a kettle you can invest in actually exist?)

    It's not cash-strapped consumers that are really at fault here, but "producerist" manufacturers who create stuff that deliberately breaks and cannot be repaired.

    Hope you find your sandals!

    1. Great point Charlotte. I've been supportive of the idea that it is producerism rather than consumerism that causes the largest problems for our society, but hadn't thought to apply that idea to the above ideas. I'll have a think about it, and perhaps another post will be about that!

      Still, there are many situations where the choice is out there to invest rather than spend, but the investment aspect of a purchase are just not considered!

  2. Ideally I would suggest that you should add 'can be resoled' to your selection criteria but I fear that may be a step too far and it is certainly a long time since I had a pair of shoes resoled - they were made by Clarks and at that time they offered a factory refurbishment! We should all be putting a lot more pressure on manufactures to create products that can be repaired and have their life extended.

  3. I blogged about unrepairable kettles in April 2011 and I'm pleased to report that the kettle that I bought then is bearing up well. As we have 4 people working here most days, the kettle leads a hard life. The main reason that I bought it was because it can be set to cut out at 95c - which is the right temperature for coffee and saves a significant amount of energy on each use. But like all kettles of its type, the element is not replaceable.

  4. try
    made in devon by hand from Uk leather and they fix and resole them..ive been wearing my boots for years!