Sunday, February 27, 2011

Relative Poverty or Consumerism: Choose your evil.

I recently spent a day in a room with public school teachers, education experts, and humanities types. I was the only one there with any experience in empirical data or the kind of formal logic commonly used in empirical disciplines. My time with this group (I get to do it again for 2 days in May) will form the basis of a number of posts, but here’s the first.

One of the things that gets this group worked is consumerism (they often use the label capitalism but consumerism is more accurate). “Consumerism is the capitalist system trying to keep the worker down.” “Consumerism is destroying the planet.” “Consumerism is nothing but lies designed to keep us all unhappy.” If you’re reading this I’m sure you are familiar with this type of statement. I’m not going to discuss the veracity of these statements here (there is some truth here). I want to focus on a glaring hypocrisy.

Shortly after the outpourings affirmation of anti-consumerist ideology the discussion moved onto relative poverty, specifically decrying the unequal distribution of income for people identified as indigenous. (To be honest there was some actual discussion education related topics in between, but nobody want to hear about that).

I want to be clear – there are some people in this country living in deplorable conditions, many of them on reserves. In many cases, these living conditions count as absolute poverty and need to be addressed. Not tomorrow, but now! (Yes, I do have a suggestion, but it definitely isn’t politically correct and would likely piss off a number of people who were in that room to no end). Absolute poverty isn’t what they were talking about so I won’t either.

The concern was that some people are getting richer faster than others, as it always is with relative poverty. It isn’t about the fact that some people don’t have enough to meet a standard of living we would consider basic in this country (living high off the hog in most of the world).

So what does an increase in relative poverty without an increase in absolute poverty mean? It means that some are getting richer faster than others. So what does becoming richer really mean? It means you have more consumption opportunities than before. Consider your stereotypical working class joe. They are in no danger of starving to death, generally have a decent roof over their head, and can even afford some luxuries. So why would anyone be worried that other people are becoming relatively richer? The only possible reason is that consumption and *gasp* consumerism yields benefits. For the argument to make any sense it must be that the group getting richer is gaining happiness and those not getting richer are not. Remember that the only meaningful difference is consumption opportunities. If consumer is so “bad” we should be celebrating any reduction in consumption opportunities of any group. The worry about relative poverty is the worst form of keeping up with the Joneses.

So which is it, is consumerism bad or is relative poverty bad?


Anonymous said...

Good post though I would even argue that both topics are not necessarily connected but can be addressed better separately.

The wealth/income gap has never been greater than ever....the problem I have is an opportunities problem. Those in the upper tiers have greater opportunities than those in the lower. These opportunities do involve consumption but I'm more worried about other stuff than just buying stuff (the consumption factor).

I'll let others define "others"; although I have some examples of what I mean.

I don't want to ruffle feathers...well maybe a little...but economics isn't the solution to everything....politics, history, social science and etc., all play an important role in solving problems of all stripes. I still think that if everything boils down to a dollars and cents issue (and I know why it does), I'm afraid that not a lot is going to be accomplished of lasting nature.

economistatlarge said...

@ anon - a small but essential point, economics isn't just about dollars and cents. It's about choices made by people and the implications of those choice.

As for other disciplines, I have generally found they don't pay enough attention to the right kind of constraints. I'm fully prepared to admit a bias on this point, though.

the_iron_troll said...

I don't think your hypocrisy here actually exists.

When people say that they oppose "consumerism", they usually mean that they oppose the corporate engine that, through its marketing machine, says that you NEED to buy more stuff to be happy. And re: 'destroying the planet'; I don't know about you, but I sure don't want to breathe the air around any Chinese city.

There is a hidden hook in consumerism culture I will attempt to illuminate. Here's the logic, through Homo Hippy-icus.

1) Buying more stuff than you did last year makes you happy
1a) Corollary: buying less stuff than you did last year makes you less happy
2) Rich people got all the wage gains, and due to debt servicing, I bought less stuff this year than last
3) Conclusion: Screw those rich people and the white horses they rode in on.

It's that corollary that's the problem. I think it's reasonable to have a suspicion that, as it is in a business' self-interest, marketing has made our happiness more dependent on goods (and thus those in relative poverty more unhappy than they otherwise would have been).

So there is no difficulty here - you can hate The Corporate Man, but still be pissed when there are those in relative poverty who can't step up to play his game. I admit, it certainly seems hypocritical to hate consumerism but love consumer goods, but I don't think that the two are hopelessly intertwined. Saskatchewan seems to produce goods in a reasonably ethical manner - why can't the rest of the world do it that way?

I hope this rambleosity made sense.

economistatlarge said...

@ iron troll
Good to see you back. You might be on to something.

I do have a couple of counter points tho. Sask doesn't as well as we like to think it terms of production methods (drive by the refinery early in the morning, particularly when it's cold).

Marketing doesn't make us need to buy "stuff". We're wired to acquire (I claim that as a book title or something - I licked it). Marketing just gets to buy specific stuff instead of other stuff. The real solution to the consumerism-environment problem is to get more people to be consumers of experiences.

Here's an odd point to consider. Assume that Saskatchewan is actually using production methods that we approve of that are somehow different than in other places. These production methods are heavily subsidized by other parts of the world. When commodity prices were low they were subsidized through equalization. Now it's a resource rent meaning higher costs of raw materials. It's this issue that fascinates me. There's got to be an academic paper in there somewhere.

Anonymous said...

i would agree with your point about choices.

perhaps people are influenced by the wrong forces or let me rephrase that people let themselves be influenced too much by the wrong forces when making choices.

choices are not just influenced by corporations, you just can blame them for everything; governments play a role in that too.

actually, people have choices that can influence how governments and corporations act too.

environmental, good governance, sustainability issues, social issues, all these factors can be used by the consumer(s) to influence the choices that corporations and governments make.

i don't believe everything is a one-way street; although one can argue that perhaps the bargaining strength of various parties may be greater than others.

to top all of this off, the role of governments (well a big one) unless the government is sadistic is to maximize the consumption of the country.

Anonymous said...

So many variables come into play with your post.

In general, I don't think the consumer is bad - define what "bad" is?

It may boil down to how rational the consumer is and the expectations or the consumer's evaluation of their expectations. Same process applies to corporations and the financial system.

You think good things - good things "might" happen and vice versa. Self-fulfilling prophecies usually come true.


Economics of Nate said...

First, Good post it is an issue that plagues all societies. However, I think that your question should be rephrased to "which is easier to point the finger of blame at Consumerism or Relative Poverty." I often find that a leap is made in many circles that consumerism can hold a large portion of the blame for relative poverty. It is easy to see how they draw this conclusion since consumerism is the easiest way to see that person A has more stuff than person B. But I disagree with this quick assumption made by many. First, consumption is a prerogative therefore just because I don't have an ipod doesn't mean that my income is below said person with ipod. On the contrary with the addition of "credit" into our system, which I think we can all agree is a ballooning issue, one could argue that defining a poverty mark is harder and harder to do.

Finally, I agree with a certain portion of the first response. It really does all come down to dollars and cents. To make my point on this I will take an example from last week when I attended an executive zone board meeting , on which I sit, where the noted ward city councilors were in attendance. The reason for their attendance was in regards to correspondence from the zone board to Regina city council complaining that there was an apparent lack of support from council since the zone board's budget had been cut again and again over the last couple years. To make this short the board present it's argument that due to the shortfall in city allocation of funds the zone board had to shift the cost onto the clients of their programs which are quite substantive. 1400 kids alone are registered in the outdoor soccer program and well over 1000 kids in the hockey programs.

One of the councilor's responses was as follows "No matter where we go or how much funding we provide we always hear the same comment. Thank you for the funding that was great but we need more." I think this hits at the heart of the issue when it comes to relative poverty. It can not be completely fixed with dollars and cents. Because there is no ceiling that will suffice any member of the population and while any one member of society has more than another this argument will continue.

So I will throw a question back out there. We have funding programs to address relative poverty at a basic level ie school lunch programs for inner city youth. And we have educational systems which I believe have become more of a glorified babysitting service. What is a more effective solution for relative poverty; Social or Educational programs? Which I would point out to all those haters of consumerism is paid for by the taxes of consumption.

Anonymous said...

An afterthought, relative poverty or consumerism are not necessarily mutually exclusive events - both are linked to a certain degree.

When it comes to consumerism - the big beef I have is with how people are so easily influenced in their purchasing as a result of marketing (I call it THE BIG EVIL).

Back to relative poverty - I like your comment about keeping up with the Jones' - it really depends on your income level (flow), level of wealth (stock), your expenditure level/savings rate, etc. What I am trying to get at is let's say you're earning $60,000 and a buddy of yours is earning $100,000 - apart from perhaps having a bit of envy, if any (it depends on your personality - some care, some do not), I don't believe that such an income difference is going to matter too much. I guess it just depends. The individual with $60,000 might just be better off in THE MEDIUM/LONG RUN if they save/invest part of their income they don't need in current consumption, while the other higher income earner just spends, spends, spends with nothing leftover.

Again with the above analogy - it depends - shifting your consumerism between periods is based on your expectations of current/future income levels, job security, and so on.


Anonymous said...

Don't see the glaring hypocrisy.

consumption does not equal consumerism... communists with central planning also consumed.

One can be against this North American system and still consume for the happiness that that brings.

Some countries like Japan do not have the same disparity in income due to social sanction... execs tend not to demand huge sums.
Some countries in Western Europe even-out the disparity after-tax via government sanction. In both these situations, consumption still takes place, but the rules are different. Sharing, sharing, sharing (to quote the Beavers)

I read in a Econ text in 2005 and in a Statscan bulletin in 2007 how disparity was growing despite overall growth in the economy. Rich were getting richer, very poor were getting poorer and the middle class were working longer and spinning their wheels and becoming fewer in number. Maybe they weren't just Jonesing for the rich guy's wealth, maybe the poor and middle class were looking for a little fairness.

Consumerism bad, relative poverty bad, government and society bad for dropping the ball.

economistatlarge said...

Thanks to all for good comments.

Just a few things to clarify.

1) Consumerism and relative poverty aren't mutually inclusive or exclusive. The issue why should we care about RELATIVE poverty is consumerism is bad.

2) I don't have a lot of problem with consumerism. If there's a way out of our current mess it will involve consumerism.

3) I think that to much focus on relative income distributions leads to bad policy and unhappy people. We need some inequality for choices to have consequences.

Great comments folks.

Anonymous said...

I don't have a problem with consumerism - my problem is the type of consumption.

How do you reconcile, albeit more of a political science issue, your take on having inequality exist with democracy? I think I know where you're going with that but it does raise important questions.

I've always held the belief (that's my confirmation bias) that the key problem has been about distribution. You mention some inequality is good - I tend to agree - but where and how much?

Will not inequality itself have the potential to spiral out of control and create more problems than good? How to control that, if possible?

Are we not seeing massive inequality today and the mess it has caused with little effort to address it?

Homo economicus needs a good leash.


economistatlarge said...


Don't see the conflict between relative poverty and democracy, per se. It creates problems as long as everybody behaves in a jealous manner and gets mad because somebody else is doing better.

As for the how much question, that I don't know.

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