Consumerism

Consumerism 

 The more I travel the more I know that people have started becoming shopaholic. We buy more than we actually need. Many economies of the world are crumbling down due to overconsumption of products. Have you ever thought that we have moved from a seller’s market to a buyer’s market? Sellers want to sell their products no matter what. They would go to any length to create a demand for their products so that they can sell. Increase in online shopping has given an ease and convenience to the consumer who can access anything at the click of a button. Relatively small town consumers too have access to products now with online services and cash on delivery facilities; all these have created a large consumption. While traveling I found that most of historic monuments have got turned into shopping malls. The culture of any country has been lost. There is no difference left from one country to another.

Let’s see the following data and information I gathered while researching the concept of consumerism. It just opened my eyes as to how difficult it is to control our desire to shop.
Buying is a habit – a bad habit

The Americans are compulsive shoppers. A country with a USD 600 billion trade deficit – about 5% of their GDP – is basically importing more junk than it can pay for. And the US has done this for decades. This means that the US government has printed US Dollar bills – which it gives to the Chinese and other exporting countries – and gets plastic toys, furniture, and clothes in return. Once in a while the Chinese send the Americans counterfeit parts for their billion dollar defence programme!

Two years ago, the savings rate of American households had turned negative. Their annual income was not enough to match their consumption. Not only were they busy buying Chinese goods, they were busy buying homes to put all those goods in and now they had a mortgage debt to repay. With jobs shipped offshore unemployment is north of 9%. Furthermore, salaries in the US have not increased over the past decade – with the exception of salaries of the financial sector and the lawyers, amongst others.

If you have visited a typical American home, the first impression that you will get is: Wow! These guys don’t need to buy anything for the next few lives! Yet, the mall is where you need to be – or maybe the online version of it. The in-flight magazines in US planes are full of junk that you never need, but feel that you should buy. The US consumer breaks the myth espoused by advertising gurus who believe that “advertising does not create a want, it merely fulfils a need”. No sensible person would need most of the products advertised in the in-flight magazines, yet the promotions create that “want”.

The first day of shopping is traditionally the day after Thanksgiving, which is always observed on the last Thursday of every November. To make it easier for the ever-consuming Americans to consume, many stores began their “Black Friday” on Thursday itself. People stood in queues and camped in tents for hours to be able to buy more. “Black Friday” allows you to buy limited products at some pretty good discounted prices for a limited time. (As an aside, we have our own version of “Black Friday” in India except that business groups get to buy national assets like coal, gas, iron ore, spectrum and assorted paraphernalia at discounted prices on a daily basis! The astute Indian buyers don’t stand in queues and pitch in tents, though. The well-connected Indian buyer just makes the right phone calls and gets it done.)

Drink rationally, invest rationally

The point is that the solution to an out of control drunkard is not taking him to the bar again and serving drinks on sale. The Americans need to save. They need to pay down their debt. A recent report by the Federal Reserve states that US household debt is USD 11.7 trillion – it declined some 0.5% over the past 3 months. But delinquent payments – people who are paying late or cannot fully pay their debt – have increased and nearly USD 1.2 trillion of loans would be in this category. The good news is that people are buying fewer homes – and renting more. Disillusioned by the myth that home prices can only increase and by the difficulty of getting mortgage loans due to subdued salary levels, the US consumer is renting.

But this is only the beginning of a long, secular trend in the US: there is a need to repair their personal – and national – balance sheets. The US – and European – consumer is dead for all practical purposes and cannot be relied upon as an engine for economic growth for the next 3 years. That music died in 2008. The drunken consumer has already been in a rehab clinic for the past 2 years with muted bursts of activity.

US, Europe, and Japan are in trouble. China has its own economic issues and bubbles to deal with. India has its challenges. The markets will continue to jump around in all directions based on silly news and new silliness. Don’t let these daily, wild gyrations scare you – or enthuse you. And don’t forget to understand your own needs and your ability to take buy and repay for it.

Advertisements