I Can't Get No Satisfaction

You may have noticed a similarity between the last few posts, which are focusing on the failure of aggregate demand in our economy, and strategies for addressing this. Last time around the strategies focused on throwing money into the economy, reducing the quality of products, and, perhaps the strategy that has been most successful, changing the social hierarchy so that it relies on consumption rather than moral quality or personal charm.

The origins and techniques of the advertising industry as it developed in the US from the 1920s onwards is entertainingly discussed in Adam Curtis's TV series The Century of the Self. The critique began much earlier, with the publication in 1957 of Vance Packard's book The Hidden Persuaders. Packard blew the whistle on how scientific developments in psychology were being used to manipulate US citizens to undertake mass consumption. What he called the ‘depth approach’ to advertising was based on insights from social psychology. It was, as he described it, ‘impelled by the difficulties the marketers kept encountering in trying to persuade people to buy all the products their companies could fabricate’ (p. 17).

Packard expressed horror at what he called the marketing to ‘eight hidden needs’ which he identified as emotional security, reassurance of worth, ego-gratification, creative outlets, love objects, a sense of power, a sense of roots, and immortality. Although his work is now more than 50 years old, the routes advertising finds to exploit our psychological needs appear not to be. This use of scientific methods to uncover our inner needs and then to design products to meet them resulted in what Packard referred to as ‘the packaged soul’.

The focus of this activity was not the satisfaction of citizen-consumers; quite the reverse. To maintain levels of demand sufficient to avoid a slump it was essential that people consumed things they didn't need, and that what they bought rather than satisfying them, created desires for further purchasing. This helps to explain the paradox of growth as explored by Richard Douthwaite: that once societies reach a certain level of human development further growth can reduce rather than increasing happiness.
. Tweet

What is the cost of a child?

My original intention was to write a post with this title in response to the news that Tony Blair has been given a lucrative half-a-million-a-year post at J. P. Morgan. Since this bank was implicated in the illegal reconstruction of Iraq, I hoped to find a figure for the number of Iraqi children who died to enable this colonialist wheeze and do the maths. Now who's thinking like an economist?

Economists actually work out the cost of children - and this is part of the problem. Even the most liberal newspapers encourage parents to see their children as 'costs', a recent estimate rising as high as £165,000. This reminds me of the work of economist Gary Becker, who discusses all family relationships as market trade-offs. I laughed at his foolishness; now I realise others were more gullible.

Children have become an important part of the consumer-based economy, with pester power now the subject of discussion in academic journals read by marketing gurus. Parents have been willing to take on debts to over-feed and over-equip their infants - and to assuage their guilt at not giving them enough of what they really want - time and love.


What has finally pushed me into posting on the subject of children is the appearance of Thatcher's feral children in the newspaper headlines. Can anybody really be surprised that the generation that grew up in the 1980s have emerged as bestial and amoral? Wasn't that the culture their generation inherited?

The era of Thatcher was dominated by the law of the jungle so why should we be surprised that it has spawned a generation of wild, untameable people? But this is being unfair to the jungle and its inhabitants. My memory of feral children from Romulus and Remus to Kipling's Kim is that they are noble savages; the stories stand as reminders that the natural world has its own balance and harmony.

Commentators identify the source of the problem as failed parenting whereas they should rather criticise the absence of parenting. In this late and decadent form of capitalism only those who sell their souls in the workplace are accorded value. Even people heroically bringing up children on their own are forced to abandon this most important role to spend hours on the telephone persuading others - perhaps other single parents like themselves - to take on debt to keep the economy afloat.

Many of the children who compete to attract the most ASBOS - a sign of distorted aspiration or an alternative pecking order? - would have probably preferred to be brought up by chimps or wolves since their own parents no doubt spent every waking hour at work on the consumption treadmill. Tweet

The Lean Economy?

David Fleming, one of my many illustrious predecessors in the role of Green Party Economics Speaker and inventor of the Domestic Tradable Quota, likes to use this phrase to refer to a post-carbon world where we are more careful with things. I dislike the phrase and can't help thinking it displays his cultural origins in the 1950s and probably a mother who saved margarine tubs. I remember clearing out hundreds of these and similar junk when my grandmother moved into a home some years back. Ok they were, in relative terms, highly useful items, and had considerable embodied energy, but in the high-consumption world we live in today they were just pointless clutter.

Perhaps that is partly Fleming's point. In response to a similar concern with ever-increasing consumption that does nothing to add to human happiness I wrote an article called 'Sen and the Art of Market Cycle Maintenance'. It was published in the same issue of the FEASTA Review as Fleming's piece but an editorial decision was taken to retitle it 'The Freedom to be Frugal'. I was distressed by the taming of what I considered a swash-buckling title, but more so because I just don't think leanness or frugality will sell well. The convivial economy is far more appealing, suggesting better relationships, more music and dance and sharing of meals; in short, more fun; less stuff.

The point I was making in my article is a simple one: the relative definition of poverty is itself a contributor to the cycle of economic growth, as it colludes with the advertising industry to persuade us that we are deprived if we do not have the latest consumer gadget. Poverty is measured in terms of lists of consumer goods, ignoring the most important aspects of the deprivation we face as we see our natural world devastated and the quality of food and other essentials deteriorate.

In the Thatcher years leanness was considered a laudable quality of 'efficient' companies, by which was meant companies who had removed as many jobs as possible from their operation and exported the remainder overseas to countries where poverty wages and Dickensian employment conditions are still acceptable.

The private sector was keen to slim itself down; the public sector, where unions were stronger, less so. Modernisation was called in to do battle against flab, leading to the agencification of the civil service and more swingeing destruction of jobs. Even before the disastrous evidence of incompetence emerging from HMRC this week it was obvious that the ever-shrinking number of public employees, downskilled and demoralised, were simply not doing an adequate job. Complex phone-switching routines and elaborate computer systems can never substitute for personal interaction, especially where, as in the case of so many government services, intimate and sensitive issues need to be discussed.

So, while the population grows ever fatter our workplaces are becoming increasingly lean. Could we perhaps suggest a relationship between the two? Might the days spent in lean and fit working conditions lead to such despair that we can find no comfort until we reach the relative safety of our homes to slump onto our sofas with fatty meals and cream buns? Ideas merchant though I am, I don't expect to find myself selling 'frugality' with much enthusiasm. I think have more of an affection for a little bit of slack.

Tweet

The Assumptions of Perfect Competition: Lesson 2

Assumption 2. There are so many firms in the industry that each one . . . has no power whatsoever to affect the price of the product

The second first assumption is intended to guarantee that neither individual buyers nor individual sellers can have undue power within any market. This is because, with so many sellers, it would be impossible to operate an effective cartel, since the cost of finding information from so many sources would preclude such an arrangement. Again, because there are so many sellers, none can individually influence the price of the good s/he is selling. Large buyers might also come to have too much power in a market, so the assumption applies also to the demand side of the market.

Is this a realistic view of how modern markets operate? In reality, it flies in the face of the consolidation that has typified capitalism at least since it was critiqued by Marx (what a fantastic beard!). Perhaps in this Information Age we should be most concerned about the heavy consolidation in the world of media, as demonstrated by the merger of AOL and Time-Warner, two of the largest global media corporations, in 2001. Since the merger the group has gone from strength to strength, now out-competing other providers of high-speed internet connections and seeing profits increase by 76% in the last quarter of 2004.

Let us carry out that manoeuvre so detested by economists and test out this assumption against the reality of the market for food in the UK at the beginning of the 21st century. The reality is that the market is dominated by a small number of very powerful players—the supermarkets. As middlemen, standing between producers and consumers, they both buy and sell food, and ensure that what economic theory might consider the ‘buyers’ and ‘sellers’ have to meet their in needs in terms not only of price, but also in terms of quality. According to Corporate Watch research, in 2000 the major supermarket chains controlled 88 per cent of the UK food market, a concentration of retail power far greater than in continental EU countries or the USA. Later that year analysts predicted that the number of major players would be down from the existing five—Tesco, Sainsburys, Safeway, Asda, and Somerfield—to just two.

So much for competition: without a large number of potential entrants to the market, what mechanism does the market offer to constrain their behaviour? This assumption relies on a separate sub-theory focused around the concept of ‘barriers to entry’. In order to ensure that there are plenty of buyers and sellers in the market, there must be nothing to stop the potential market players from entering the market, no ‘barriers’. Competition only works when there are large numbers of suppliers who cannot unduly influence our purchasing decisions or preventing other producers from entering the market and improving on their offer to us as consumers.

This view may have made sense why you consider the 18th-century market that Adam Smith visited, where he might have bought meat, potatoes and shoes, but it has little relevance in a complex, modern economy where purchasing decisions are based on advertising and goods do not reach the market without many years of development and massive R&D investment. Or to a market where a new item cannot reach the consumer's attention without massive investment in branding and advertising.

Parkin and King deal with advertising as follows: ‘To the extent that advertising provides consumers with information about the precise nature of the differentiation of products, it serves a valuable purpose, enabling consumers to make a better product choice’. Sloman deals with advertising as follows: ‘There is no point in advertising under perfect competition, since all firms produce a homogeneous product (unless, of course, the firm believes that by advertising it can differentiate its product from its rivals’ and thereby establish some market power; but then, by definition, the firm would cease to be perfectly competition’ (p. 156). Trying to imagine what kind of advertising might conform to this the world of the perfectly competitive theory Mr. Cholmondley-Warner sprung into my head, kindly pointing out in his received pronunciation that Mr. McVitie is now producing his digestive biscuits with chocolate on top. If this was all advertising were about why would companies spend millions on it every year? Why would there by whole journals dedicated to informing company executives of the most effective ways to manipulate the minds of potential buyers?

In reality, the business of a corporation in the global economy focuses on holding its market share and defending it against all-comers. The business of corporate capitalism is not about perfect competition but about obstructing competition. This is done not only through creating and defending the corporation’s unique identity through its brand, but also through investing in advertising and PR to support its brand and litigation to attack those who transgress it, and through concealing virtually everything about its operations, from the details of how its products are made (remember the Coca Cola secret recipe?) to how it spends its profits. Tweet