It is no secret that I am not a fan of libertarianism. While I do hold similar opinions in regards to non-interference in the personal affairs of individuals (gay marriage, abortion), I find the libertarian view of the free market a bit extreme and unrealistic. I cannot, however, dismiss the fact that libertarians apply their beliefs more consistently than those of other schools of economic thought. They are also much more willing to defend their position (rightly or wrongly) at length. As such, it is a hobby of mine to read libertarian blogs as a way to further educate myself on their position. One particular piece, entitled "Does Capitalism Make Us More Materialistic", struck me, as the topic presented is consistent with many of the topics that we hope to discuss here.
Given the bitter taste that libertarianism leaves in my mouth, it's probably easy to guess that I do not agree with the general points of the article, and I find it difficult to accept the neutrality of a piece whose first paragraph reads:
There was a time when the advocates of socialism argued that it would lead man to material abundance, whereas free-market capitalism would lead only to increasing misery and would ultimately collapse under its own internal stresses. You don't hear that too much these days, and for good reason. A century of empirical evidence has shown the contrary — that the free market leads to increasing wealth and material freedom, while socialism leads us only to poverty, state supremacy, and ultimately, mass murder.
While I usually do not tolerate this sort of baseless accusation, the author does not continue to make sensational claims, and given the article's otherwise well written prose, I cannot dismiss the piece entirely.
The basic premise of the piece regards applying the basic fundamentals of economics (the relationship between ends and scarce means that have alternative uses) to the daily choices made by the modern consumer. The author of the piece asserts that unfettered capitalism and the free market do not, and cannot, force an individual to become a rampant consumerist or otherwise grossly materialistic.
The author's main argument revolves around the relationship between what he terms as alienable and inalienable goods. Alienable goods are those that are tangible and transferable. This covers most of today's products: cars, money, property, televisions, and food. Inalienable goods are those which are intrinsic to a particular individual and cannot be transferred. These include: education, physical attributes, health, and even love. The author states that the acquisition of capital leads one to be able to allocate his or her funds between alienable and inalienable goods according to the individual's personal preference, thereby maximizing happiness for that particular individual. This is partly true, any individual may decide how to spend his or her wealth, splitting it between food, cars, clothing, and property and furthering education, seeking romantic relationships, and enriching one's experiences through travel and other activities. He writes:
If we suppose that both alienable and inalienable goods are subject to diminishing marginal returns, it follows that, ceteris paribus, an increase in one kind of good will lead us to shift effort and time to the acquisition of the other kinds of goods. Thus, if we have more money, so that we can acquire additional alienable goods, then we will derive less marginal satisfaction from further additional alienable goods than we otherwise would. In this case, we will shift some of our effort and time away from acquiring alienable goods and towards acquiring inalienable goods.
[...]
From this analysis, we see that the increase in wealth that obtains in the free market leads to a greater diversion of effort to nonmaterial concerns. Thus we see that capitalism, and the gain of material goods it engenders, leads to less "materialism" and "consumerism" — in terms of effort and time — rather than more.
The discrepancy between my feelings and the author's feelings arises from the author's assertion that once the basic need for certain alienable goods are met, an individual will automatically focus on inalienable goods rather than further amassing alienable goods, due to the diminishing returns involved with owning more alienable goods. For example, the difference in mobility between not owning a car and owning one car is drastic. However, the difference in mobility between owning one car and owning three, four, or five cars is small. Forgoing the acquisition of additional vehicles would therefore be logical if the individual had more pleasurable aspirations, such as finding the right mate or traveling the world.
In a perfect world where all individuals act logically and have a complete understanding of what will produce the most happiness for him or her, this would indeed be the case. However, even a casual glance at the world in which we exist will demonstrate that individuals rarely pursue what will produce the most happiness for oneself and will rarely pursue inalienable goods over alienable goods. Examine the increase in students enrolling in Computer Science programs during the pre-burst run-up of the late 1990s. These students were not interested in enriching themselves by fulfilling lifelong desires to master the field of programming, but rather were pursing the high compensation associated with CS jobs. This pursuit of compensation came at the expense of pursing what would truly enrich that particular individual: perhaps an education in history or drama or art.
One can argue that it is entirely possible that the students could, in the long run, be happier as a result of the alienable goods they are able to afford by taking these higher paying jobs. They may even forgo purchasing those alienable goods and instead apply the extra capital to inalienable goods such as going back to school in the field they originally would have studied. This is a possibility, but one I find remote. First, it would seem inconsistent for an individual to pursue a degree in a field solely for compensation, then years later surrender the compensation and return to school to pursue that individual's original objective. If the individual's first priority was to attend school in art, then he or she would have. Rather, the pursuit of compensation was the primary objective and it is more likely that the secondary objective of a more fulfilling education will never be realized as the individual falls into the trappings associated with the accumulation of alienable goods. Secondly, how often do individuals pursue the diminishing returns of alienable goods over the inalienable goods which will truly bring them happiness? How often do individuals who receive a pay raise purchase a larger home or sportier car or more modern electronic equipment, rather than returning to school or donating to charity or even just working less since they make more per hour? I would wager that this is a rare occurrence. What was once novel now lacks fulfillment as an individual surrounds him or herself with objects of a certain class. As one's earnings grow, so too does the expectations he or she puts on the alienable goods he or she acquires, demanding a higher and higher level quality (whether real or perceived) from the goods he or she acquires. Rather than serving as a means to exercise a measure of financial freedom, the increased compensation has disappeared in a sea of higher priced and (marginally) "better" alienable goods.
The author attempts to defend the free market by asserting that the continued consumption of alienable goods is natural:
Critics of the alleged excesses of capitalism and the acquisition of money observe the fact that wealthy people have an appetite for more wealth and more goods, despite their large existing wealth. They observe the fact that many wealthy people spend vast amounts on ostentatious and unnecessary goods that do little to satisfy their desires. Whereas a poor worker will save his earnings for several years to purchase some modest but crucial accommodation, a very wealthy person might spend the same amount of money - or even more - on a piece of jewelry or redecorating the bedroom.From this observation some have incorrectly concluded that wealth is addictive - that it begets only greater desire rather than greater satisfaction, leading to a hollow existence of "materialism" and "consumerism," devoid of psychic fulfillment. This is an ancient observation. It is expressed in the second part of the dictum of Socrates that "contentment is natural wealth; luxury, artificial poverty,"[6] and more recently by the anticapitalist social critic John Ruskin, that "every increased possession loads us with a new weariness."
But in truth, this behavior is nothing more than a manifestation of diminishing marginal returns. The highly wealthy person desires these more opulent goods only because his desire for basic accommodation and other more fundamental goods is already satisfied.
Somehow I find it difficult to accept the fact that the drive for these goods, goods which he already labeled as having "diminishing marginal returns", is "nothing more than" a natural extension of having one's basic needs fulfilled and cannot be attributed to the culture associated with unfettered capitalism and the free market. Although it does follow that an individual who has acquired the alienable goods required to function in the modern society (food, shelter, clothing, transportation, and a means of communication) will have more discretionary funds to spend as he or she pleases, I find the final statement here peculiar. He states that "this behavior is nothing more than a manifestation of diminishing marginal returns" yet admits that "[t]he highly wealthy person desires these more opulent goods only because his desire for basic accommodation and other more fundamental goods is already satisfied." By virtue of his previous argument, wouldn't the "manifestation of diminishing marginal returns" cause the highly wealthy to pursue inalienable goods over these "more opulent goods"?
Indeed it would, as he again attempts to further his previous argument:
While the acquisition of additional money and additional material goods is made at the expense of effort and time that could be directed to other nonmaterial pursuits, this does not imply that the wealthier man is any less fulfilled than the poorer man. For the very fact that greater wealth is available with less effort means that more effort can be directed towards nonmaterial inalienable goods.
So which is it? He admits that diminishing marginal returns simultaneously increases the wealthy person's desire for opulent goods and increases his desire for nonmaterial inalienable goods. We merely need to once more turn our attention to the world around us to find which really happens. How often do we hear of the unstable personal relationships of the wealthy and famous, despite their huge amounts of alienable goods? Indeed, the sacrifices made on the path to stardom or the boardroom are often made at the expense of personal relationships, personal enrichment, and a more leisurely lifestyle.
It is obvious that once the basic needs of survival in our modern world are met, the middle class and wealthy alike continue to chase the trappings of materialism, despite the decreasing returns associated with these objects. If it is not the culture of capitalism that's to blame, what is? The author attributes the continued pursuit of alienable goods to irrationality, rather than the free market:
This is not to deny that some people act irrationally, pursuing material goods that do not make them happy. Some may indeed be imbued with an irrational desire for material goods, which leads them to disappointment rather than satisfaction, though this is not inherent in the free market. But the mere fact that decreasing marginal satisfaction is derived from further acquisitions of wealth is no evidence of the "addictive" properties of material goods. It is evidence only of a logical preference ranking of material goods, with the most important goods being purchased first, and less important goods being forgone unless and until additional wealth is acquired.
My first disagreement with this comment is that it is not "some people" who act without rational thought, but society as a whole. Second, the free market cannot be absolved from its role in creating a people who act illogically and not only end up unhappy, but in financial peril. If anything, the current subprime lending "crisis" should be evidence of this. These individuals overextended themselves in order to purchase more home than they could afford and often had a history of failing to met financial obligations, meaning other loans. What were these other loans for? More often than not, these other loans were credit card and automobile loans, loans for... alienable goods. These individuals have an insatiable appetite for material objects, so much so that they jeopardize their own financial wellbeing by pursuing them.
Who is at fault here? Some of the blame must be placed on the individuals, of course. No one is forcing them to take out these loans or to continue to make themselves unhappy by pursing their misguided agenda. However, a closer examination of our society can easily show the critical role the free market has played in fostering an environment that devalues personal growth and inflates the value of opulent goods.
Marketing, the Free Market, and the Consumer
The existence of a free market allows companies to compete for customers by offering a many and varied array of products and services designed to in some way, shape, or form improve the lives of the end user. Most of us in the western world, myself included, can agree that having choice and being able to purchase products that fit our needs and lifestyle is a good thing. It would be dreadfully boring and bland to live in a country where the state provides us all similar clothing and similar housing arrangements. However, it is this intense competition for business that is guilty of fostering a society which values material wealth and objects, driving us to purchase goods that we don't need rather than expending our wealth on more worthwhile causes.
To stay competitive, companies must provide new and inspiring products that catch the attention, and hopefully the dollars, of individual consumers. Billions are spent each year on advertisement, companies telling us to "just do it" or "obey your thirst" or "taste the rainbow" in hopes that you'll remember their name and purchase their product. With the average adult spending 4.5 hours a day watching television, this captive audience is a huge source of potential customers. The audience sits, mesmerized as they watch their life pass before them at 30 frames per second, the sights and sounds flashing before them full of sound and fury, signifying nothing. And yet, it is these sounds and sights that urges these individuals to consume. The lifestyle of the wealthy and famous has become the goal for which our society strives. Products touted by athletes, movie stars, and the glamorous are pushed on the masses from birth; the young and impressionable minds enslaved the marketing presented on television. Mothers, the target audience during daytime talk shows and soap operas, are urged to purchase various brands of diapers, baby formula, and baby clothing so that their child can have the "very best start possible". Children, the audience during the after school 2pm-4pm television slots, are tempted with the newest, "coolest", and most "awesome" toys, toys which are often devoid of any redeeming qualities and are merely an amalgamation of cheap Chinese plastic and lead paint made to resemble a television character, serving only to tighten the marketer's grip and entice other youngsters to watch their particular program. As the day turns to evening, the marketers shift their focus to adults, pushing cars and beer that is guaranteed to make the viewer as popular or glamorous as the superstars who present them.
While some may suggest that ad revenue makes television, radio, and some internet sites viable, one cannot overlook the intimate relationship between broadcasting and marketing. Very often sitcoms are a rich canvas for use by marketers, filling the background with certain brands of cars or clothing or furniture in the hopes the viewer will associate these products with the sense of wealth, prosperity, and happiness often portrayed on television or by the lifestyle of the actors who use the products. This relationship, created and fostered by the free market, is central to our society's obsession with material wealth and alienable goods and is overlooked by the author of the piece.
A Question of Time in the Free Market
Time seems to be in short supply in nearly everyone's life. The phrase "in your busy schedule" is often used by marketers when advertising products that supposedly make our lives easier and allow us more time to pursue what truly makes us happy. Yet, where does all of our time go? Americans spend much of their time at work, especially when compared to other industrialized western countries. A report by the Center for Economic and Policy Research compared the required amount of paid leave in the 21 richest countries in the world. The United States was the only country which did not require a minimum number of paid vacation days while Finland and Demark each required 25 days paid leave plus 9 days paid government holidays per year, for a total of 34 days of vacation per year. France offers 30 days paid leave per year, and one paid government holiday, for a total of 31 days per year. In fact, every European country on the list offered at least 20 days paid leave, plus varying amounts of paid government holidays. Canada and Japan both required a minimum of 10 days days per year. These are just the minimum figures, with many companies go beyond the government mandated minimums. One may argue that while the US does not legally require employers to offer vacation, most do. However, according to the report, the average vacation for low wages earners (less than $15/hr) is only 7 days per year and 13 days for high wage earners in the US. In addition, 31% of the low wage earners don't receive vacation at all.
The inability for American workers to take consecutive days of vacation further compounds the problem. American employees rarely take a full week off of work, for many reasons. First, having only 13 days of vacation makes taking periods of 5 or more days difficult. Second, many employees fear that if they take a week or two or three off from work, they may jeopardize their jobs and potential for advancement, appearing less "devoted" to their job than other employees who do not. How does this compare to the other 20 countries in the survey? The countries of Sweden and Finland both allow employees to take four consecutive weeks of paid vacation during the summer. Norway allows at least 18 days to be consecutive, while France allows at least 12 days be taken consecutively. Further adding insult to injury, the report states that Austria requires employers to pay their employees a "13th month" salary during their required month of leave, meaning Austrian employees are paid two months worth of salary during their one month of required vacation. Sweden and New Zealand require employers to pay their employees more during their paid vacation, at a rate of 108% and 112% of base salary respectively. These measures all assure that employees will use their vacation time to truly take a vacation, and even get paid more to fund their rest and relaxation, allowing them to return refreshed and renewed to their jobs.
What does vacation have to do with the free market? Each country in the survey is to some extent less focused on the free market and more socialist. Why do US companies, given the supposed "advantages" of being in a free market and corporate friendly environment, take less care of their employees? It's simple: the free market encourages them to. The free market offers companies no incentive to provide their workers time off. Corporations exist solely to grow profits and increase the value of their owner's shares. One of the easier ways to do this is increase productivity by forcing their workers to work more. It doesn't make fiscal sense to allow a worker, a mere production unit, to spend an entire month not working, but still pay the employee. Furthermore, the free labor market puts an employee who wishes to do so at a disadvantage. Given the choice between promoting someone who takes no vacation and one who demands a month of vacation per year, a company will promote the one who is most cost effective, the one who requires least vacation, all other variables being equal. Therefore, there is no incentive for the employees to demand more vacation, lest it jeopardize their employment.
One may argue that it is in a company's interest to treat its employees fairly in order to retain skilled employees. After all, if one company offers better benefits, it can potentially court employees from companies with less benefits. While this is true, there is no protection for the worker if all the companies in the market act in the same fashion. To deny this is happening is folly. Any number of examples can be used to prove this point. Think of how many companies offered pension plans 30 years ago versus today. Furthermore, the number of companies that offer health insurance has been steadily dropping for years. Real wages have continued to deteriorate for the past decade. Companies have found that they can slowly strip away benefits and wages so long as they act as one. The grand "free market" touted by the author and other libertarians completely disregards the removal of safe guards like government regulations to prevent corporations from mistreating their workers. They continually argue that in a true free market society companies will treat their workers with respect and dignity, offering ample compensation and benefits packages. To say that companies in a free market will always do what's in the best interest of their employees is equivalent to saying that the state will always treat its workers well in a communist society. Both are ideals; neither work at all in reality.
Having demonstrated that American employees are treated less favorably compared to their counterparts in the other 20 wealthy countries, let's return to the author's original argument, namely that capitalism encourages us to spend more on inalienable goods once our basic needs for alienable goods is met. We can easily apply what I've just demonstrated to this argument. American employees do not have the time necessary to spend on inalienable goods. Furthering one's education and developing strong family ties take time, time US employees don't have. Employees in other countries who are awarded month-long vacations each year are more at liberty to go out on long family vacations which renew the relationships in the family, or to take classes which develop their ability in art or a foreign language. They're free to travel abroad and enrich their lives in a myriad of ways rather than slaving away at a desk, enriching only their boss and shareholders. These countries are more socialistic and have put government regulations and restrictions on the free market and that have... *gasp* encouraged employees to pursue inalienable goods!
The Free Market and Consumerism
While I find "Does Capitalism Make Us More Materialistic" well written and presented, I cannot absolve the free market as the author of that piece has. As I gaze outside my window, it's hard for me to imagine that the preoccupation we have with material wealth has nothing to do with capitalism and the "corporate culture". Each day millions of individuals go to work simply to earn the funds necessary to buy more alienable goods: bigger houses, "better" or faster cars, "nicer" clothes, more jewelry and Callaway golf clubs. When they can't, they charge it or take out home equity loans to finance their lifestyle. It's no wonder that the average American has over $19,000 in credit card debt alone: they fumble blindly from pay check to pay check, trying to sustain a lifestyle which will ultimately never be enough for them. In a world of "luxury" and entitlement, the ideas of furthering one's education, learning to play an instrument, or mastering a foreign language seem almost quaint.
Is it so hard to admit that capitalism does increase one's drive for material wealth? Just as it is naive to expect that a totalitarian socialist regime truly has the best interest of the people in mind, it is naive to think that a free market will foster corporations who treat their employees properly and encourage citizens to spend their time and treasure on things that are truly priceless and nontransferable. Corporations, by nature, exist in a world where everything can be itemized, amortized, assigned a value, risk, and cost and can be neatly filed away, leaving no room for those things that are priceless, for they produce no profit.
While no one wants to live in a world where we do not have the financial and personal security associated with owning personal property, we must learn to accept the pitfalls associated with capitalism. We must examine and scrutinize the deep and intricate relationships between wealth, power, money, corporations, marketing, and consuming; watching closely at how the market encourages us to spend rather than save and enrich ourselves. Only when we come to terms with how much our life revolves around the products pushed by corporations and the market will we truly be able to free ourselves from the shackles of consumerism and debt.
