In America perception of consumerism, as an economic engine of growth has resulted in an orchestrated system in which the manufacturing, advertising and promotion, communication and media work in concert with industries. Their collaboration creates a mindset where consumer is encouraged to want things even when the need is not apparent. Marketing communication focuses on creating an urgency by manipulating the minds in a manner that consumers feel the need to make purchases, just to have the sense of fitting-in and being in lockstep with the times and the tastes that define status and affluence, even if it means borrowing money for the time being!
It is part of the pursuit of the American Dream, the main components of the dream being acquisition and ownership of material goods and improving the quality of living and leading a successful life. Accordingly, it is okay to be materialistic. In fact, it is actively encouraged by the Government policies, titans of the industries and the banking system. Upward mobility in America is neither prohibited by social norms nor sneered at as social climbing, as in many other restrictive hierarchical cultures elsewhere in the world. Ultimately, the shopping experience and acquisition of material goods are equated with measures of success and happiness.
Currently, the majority of Americans live a highly leveraged life style that depends heavily on easy access to credit. The “American dream” for the middle class is a high maintenance dream, in an era where salaries are barely rising despite the highest level of productivity, and lagging in relation to prices in the marketplace. These days, impulse buying is made as easy as breathing! One can buy even the groceries on a credit card because it earns the card member points in reward. No wonder, American’s personal credit card limits are at the highest levels! Most Americans households are living paycheck to paycheck and have very little savings to buffer them in the case of sudden catastrophic events!
America is a Consumerist Nation
Consumerism is revered right up there with religion and psycho-therapy in America! Anyone living anywhere in USA knows that through osmosis. Shopping is seen as a panacea for all the problems of life, big or small; a cure to alleviate depression and a prescription for happiness.
In the economic good times, people buy like there is no tomorrow, max out credit cards and credit limits. They are generally happy with their acquisitions that allow them to keep up with the Joneses and occasionally even trump them! They buy “McMansions”, buy bigger cars, boats or more luxurious vacations, cruises and premier brands. This keep the economy humming.
And in the bad economic cycles, they are just happy browsing the brick and mortar stores, or on online sites dreaming and waiting for the upcycle that will bring happy days back again! Till then the shopping malls become the surrogates village greens to hang out, have a cup of coffee, walk indoors or browse and take in what’s new and in. You will find that people have a greater zeal to go to the local mall than to a church on Sundays!! For them, the repeal of the Blue law is the best thing that ever happened. And for the shut-ins or introverts, who wish to avoid crowds, there is the QVC and 24/7 access through online shopping. The American market place is kept exciting by offering an incredible array of choices to consumers by manufacturers and personalized regimens and experiences by the service providers.
The “New and Improved!” Fuels the Economic Engine
There is a plethora of the “New and Improved” everything! There are magazines articles and trend watchers who are forever spouting what’s in and what’s out. Whether it is something in consumables, hard goods, or in construction; there is always something new. While there is no overt shaming, one would get a distinct feeling of being looked at as not being cool or hip or even cheap, if you are hanging on to your old stuff.
Besides the fashion apparel with their Spring, Summer, Fall and Winter lines of Designers’ styles, there are new fashions in jewelry, cosmetics and accessories to match the new “hot“ colors and trends. The realistic word to describe all this ongoing changes in style and look or design in the pre-digital area was called ‘Planned obsolescence’. In that era, there was still a pride that American businesses took in quality. Technically, American manufactured hard goods could last for years, but the marketing manipulation worked its magic through advertisements that appealed to the ego, and resulted in replacing perfectly functioning products years ahead of the need for renewal.
Depending on the product category, the ads were designed to appeal to the alpha males or dedicated home makers. For example, describing cars like ‘muscle’ cars or automobiles with fins that aerodynamically accelerate from 0 to 90 miles in seconds appealed to men who relished the idea of control and power. Even though the cars could last good 15 years, no one kept it beyond three to five years. This ongoing churn, kept the sales and profits up most of the time. The same was true of major appliances. However, the appeal to women was in terms of convenience, aesthetics and efficiencies in keeping home and hearth sparkling and clean, a hallmark of a capable housewife and homemaker.
Digital Era Compels Costlier Replacement Purchases
As we moved into the digital era, the “innovation” has replaced the “Planned obsolescence” of the analog era. Now, innovation is happening at such warped speed that the consumers are now at the mercy of software updates and new technologies. “Quality is Number One’, a slogan of the bygone era, is now replaced with “Progress, not Perfection” in the digital age. Which means that products reach markets before they are perfected with all the bugs in software are fully worked out. The competitive need to beat the rivals now has resulted in a concept called ‘time to market’ for faster introduction of products. The perfect products with lasting high quality are now replaced with good enough products. The marketplace is induced through forced changes when the manufacturers no longer support their product because of the new software or changes in technologies.
Recently, when I was in the market to buy a new washer, I asked about warranty or guaranty it comes with. The answer was one year. I was told by the sales person that companies no longer make products with life-time guaranty and that I would need to buy additional service contract protection, should a part give out or something goes wrong with the product.
Buy Baby Buy; the Psychology that Drives American Economy
Add to that the effect on pricing due to the mindset of the investors that now completely accept that “Greed is good”. Consumer prices are often marked up even 500% over the cost of the wholesale purchase price for the retailers to ensure the profitability and increase investor’s value. Our economic principle of “Profit maximization” condones such pricing in a free market and is made acceptable to consumers through discounts, couponing, and trade-ins and so on. We are all familiar with come-ons like, “Buy two get one free”, “20% off the regular price”, perennial sales etc. It still nets the sellers a healthy margin net of expenses.
Well, this is great for the Economy of the nation but how does it work for personal economics?
The person whose impulse is whetted to make the purchase, which may not have occurred without the incentive, ends up spending 80% to save 20%. What appears to be a win-win game hides the fact that the consumer spent $80 dollars on an item that he or she may not have needed in the first place. A $100 item that probably costs only $20 to the retailer. And on the carry over basis, the interest may add a whole lot extra to the original discounted purchase price.
Consumerism: A Prescription for Disaster
This type of market environment is leading Americans to live a highly leveraged lifestyle supported only with extraordinary debts assumed by them, even as their jobs are being taken over by robotics or globalization.
The up-selling of American dream is resulting in a class divide, of the haves and have nots and the gap is widening. Irony is that the middle class, as well as the poor class, both are living from paycheck to paycheck. The difference is that the middle class still has assets which are illiquid, and continue to have high aspirations for themselves and their children, which require them to continue borrowing. It makes saving for future unlikely as the future income is already spoken for, in terms of repayment of loans. The poor, on the other hand, live hand to mouth existence and are only a catastrophe, accident or a layoff away from homelessness.
This highly leveraged consumerist lifestyle is creating unprecedented stress on Americans. Additionally, the threat of the safety nets like Medicare and Social Security being yanked away by the current administration and the changes in affordable Healthcare laws, raise a very real potential for financial implosion. If the financial market bursts once again, both these segments are highly vulnerable to personal disasters or bankruptcies.
Alarming Shift in the Employment Picture
The availability of well-paying jobs has become scarcer due to outsourcing and automation with built-in Artificial Intelligence. The number of traditional jobs are being cut down significantly creating a potential for high unemployment. The gap in skill and education needed to fulfill future jobs is very wide and is creating uncertainty. Even though a greater number of people are enrolling in colleges for advanced education to stay competitive, their financial capacity is stretched beyond limits because advanced education has become prohibitively expensive for average Americans.
The drumbeat of robotics and computerization eliminating between 39 million to 73 million U.S. jobs of the by 2030 (according to a 2017 McKinsey Global Institute study), should raise alarm. Even though, the study indicates that of these nearly 20 million workers can be shifted to similar occupations, however between 15 million to 54 million workers would require major retraining and readjustment. The huge gap between the speed of adjustments in public policy and technological adaptation should be alarming. Presently, there are actual socio-economic experiments being conducted to see if the concept of a Universal income is viable in the face of massive disruption caused by technological advances in job automation, but Jury is out. Ottawa and Finland have stopped the experiment due to failure citing myriad reasons.
American productivity has gone up significantly but it is not benefitting average Americans, as their salary have remained flat and now inching up very slowly. Discretionary income is virtually non-existent for the average Americans.
Millennials are postponing life as they are burdened by extraordinary debts. They are postponing marriages, starting families and shunning ownership; key elements in the growth of economy and a hallmark of the American dream. Americans are staying afloat by managing credit but the high interest rates are piling up debts and any default in payments can end up in doubling or tripling the interest rates. Managing credit does not mean thriving in reality. Credit and borrowing are not bad in themselves but overdependence on credit as the means of managing life results in erosion of potential savings for stashing away for a short term safety buffer for unforeseen situations and for the long term safety net investments for retirement or asset building. Is this sustainable at all?
The future is very murky as to how the new economic forces will function but it is not hard to imagine that given this future scenario, it would be hard to maintain consumerism as the mainstay of our economy. Is it time to rethink and shift the paradigm?