When Modern Fashion meets the Modern Economy

Thursday, January 27

By Piper Rae Davidson

With carbon emissions rising and landfills growing, many are pointing fingers at the mass-market fashion industry and demanding a change in industry business-models. The rise of eco-consciousness and the digital spread of awareness has sparked wide adoption of two distinct -- and chronically under-defined -- blanket terms for competing fashion business models: fast fashion and slow fashion. Fast fashion, based on rabid consumption and discarding of clothing, is detrimental to our environment. Reviewing the numerous social media movements pushing for the end of hyperconsumerism and “fast fashion”, I found myself asking the questions of “what is fast fashion?” and “can we really get rid of it?”. 

The dictionary defines fast fashion as “lower-quality, low-priced, mass-produced and machine-made garments that quickly end up in landfills'', but from an economic standpoint this can be simplified to the concept of supply flexibility; manufactures can respond to changes in supply or demand for a product incredibly quickly. This can maximize short term profits for a small group of financial stakeholders but at the expense of broader interests when considering the tons of unused clothing and waste that is created. The two defining characteristics of the supply flexibility model are markdowns and reduced stockouts. Research has been done to quantify these benefits, and even the most conservitive of numbers have shown that reduced stock outs alone provide a 5% increase in revenue, likely translating to at least 22% percent increase in profit. This means manufacturers can keep up with trend cycles, increasing their profits while providing a platform for an increase of consumerism. Traditionally, increased demand should increase the price of a product, however the supply flexibility model dodges this principle by sacrificing quality of product. For every increase in demand, manufacturers can simply increase supply. This is, until, the next trend comes by and they change their product. 

The mass conversion to fast fashion in the last decade has allowed for an exponential increase in consumer spending, resulting in higher output in nations across the world. The environmental footprint of fast fashion is a global one, but to fully understand the economic duplicity of this issue it is best to look at nations that export large quantities of these clothes. When households are buying more clothes -- both domestically and internationally -- output increases, and with it the unemployment rate decreases. This seemingly evident economic growth is one side of this economic coin. The other side raises the question of long run effects. In theory this increase in output should create an inflationary gap, but we have already established that prices aren’t rising. This leads me to the reasonable conclusion that potential output has simply increased, dragging down the natural rate of unemployment and increasing real GDP. 

Yet, the core principle of economics is the concept of scarcity, and my research has shown that many economists fear a sudden crash of the fast fashion industry. The rate of current production is using resources at an unprecedented rate, and while the final product may not fall victim to increases in price level, input goods certainly will. As resources get used up, it will become harder and harder to maintain supply flexibility at low prices. A crash in an industry as large as this would mean incredibly large economics impacts, and potential for recession in major export nations. While some have suggested dismantling the industry before this point has reached, there is no practical way to enforce it, and that too would have ramifications. The loss of the fast fashion industry, weather gradually or all at once, would lower output and simultaneously increase prices. It would disadvantage the lower and working classes, and increase the already prevalent wealth gap within many large exporter nations.

It is with this that we see the two sides of economics with fast fashion; short run growth and long run detriment. The research I have done has led me to believe that there is no perfect solution, but it is for the benefit of both the environment and the economy that those with the disposable income to do so, transition their personal consumption away from fast fashion. 

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