Commerce, Economy / Finance, food, Globalization

From the production of generic goods, class goods, and individual goods to the production of social experience

Dec 11 2018

William Mebane*

 

The first generic goods were those based on a single model for everyone. The

black model T Ford is the classic example. One model mass-produced permitted

an enormous economy of scale and reduction of costs never before realized. The

basic function of road transport of persons was satisfied.

 

Business feared that with generic products all needs would soon be satisfied and

there would be little left to produce. A first step in overcoming this was the

introduction of more choices, according to the ability to purchase. A great

differentiation of products was introduced by the differences in price and quality.

 

The goods might serve the same basic function, but much higher average prices

were possible by the introduction of higher-class (luxury) goods. Psychologists

taught business and marketers how to condition and manipulate consumers’

emotions and needs, getting them to buy things they didn’t need. Products could

be marketed as they appeared to promise higher social status, or they could

suggest anxiety in the consumers’ mind and then present a product to relieve

that anxiety.

 

Business, referring to the needs pyramid of Maslow, begin supplying more

secondary needs in a variety of qualities and price. This would be more socially

acceptable, if everyone had satisfied his primary needs for food, clothing, shelter

and education. Obviously this was, and is, not the case. But with the excuse that

tide of a growing economy would lift all boats, limited attention was paid to the

excess of non-primary goods and services being produced and consumed.

Furthermore, business aimed at inspiring the upward mobility of goods, passing

from ordinary to extraordinary goods, as a mirror of upward social mobility. This

worked very well when in fact there was social mobility, in the US after WWII until

the 70’s.

 

Then with the advance of computer processing and eventually Internet, the

habits, purchases, preferences and psychology of individual persons could be

identified, measured and classified. Now products could be aimed at the single

individual according to his particular need with great precision. At the same time

production with the help of automation could introduce a wide variation within

products themselves. Since the preferences were extremely variegated and a

secondary need could be satisfied in an infinite number of ways, the potential

demand exploded. Business had no more fears of oversupply. Consumers give

away their consumption data and individuals are constantly supplied

(bombarded) with advertisements and products that are most suitable for them. It

is hard to resist the purchase, and many families take on considerable debt to

facilitate this. Consumerism has conquered completely, satisfying precisely one’s

individual desires. Of course there is the important question of income and

income inequality, but the consumer satisfaction seems so complete that the

issue of stagnant wages of the middle income, working family has come to the

forefront only in the last decades.

 

This new consumption has evolved in favor of a short term “sugar burst” of

instant satisfaction: examples include all the computer and video games, and

entertainment of all sorts that are available of on YouTube. There is a renewed

interest in highly dramatic TV serials with very professional directing, providing

short (30 min.) but very satisfying episodes such as NCIS, and the House of

Cards. TV itself has evolved to on demand services and competes with the

instantly available films and programs offered by Netflix. Interest in more difficult

and demanding products, such as books, has declined particularly with the

younger generation. Bookstores along with small cinema are closing everywhere.

 

Instead, the warehousing and fast delivery of Amazon is revolutionizing

commerce with very wide selection of products, low prices and one or two-day

delivery. Instant consumption is possible. Also the way of producing and

marketing fashion product has evolved with Zara (Inditex) testing the market in

the store and through very rapid production, providing the accepted models in

several weeks. Finally we have social media in the form of Facebook, WhatsApp,

Instagram, and Twitter that perform instant contact, messaging and services.

 

Obviously Internet and the cell phone have revolutionized communications,

making connection to persons, information and products/services extremely

easy. Nokia, who made the best selling cell phone initially, had envisioned

offering only essential services (to be supplied by Nokia); however the decision

by Apple to allow third party applications unleashed hundreds of thousands of

new online mobile services. This together with the rise of Amazon, offering

unheard of rapid even same day delivery, of millions of products, combined with

individualized advertising, constitutes an unprecedented and extremely powerful

level of individualized consumerism.

 

At the same time, to catch potential buyers this media has become more

entertaining, well designed, shocking and in a word addictive. And the future with

virtual reality will engulfed us in compelling artificial worlds, not necessarily of our

choosing. Again the potential is enormous, not excluding new forms of art, but

the opportunity for advertising is enormous, as they will have control of the

reality.

 

Even as adults, we cannot stay off our cell phone day and night. Maybe it is not

surprising that parents from Silicon Valley have become very restrictive of their

children’s use of all mobile devices, an indication of the excess. Apple itself has

begun to introduce applications for monitoring and limiting use.

 

It remains to be seen what kind of long-term relationships among persons this

new system will favor. And more importantly, the question is what control can we

have, as consumers and citizens, over the design of the new systems?  Will we

leave it all up to business as usual?

 

This evolution of consumption has occurred within the context of globalization

where extremely large economies of scale are possible for countries with mega

sized internal markets and thus with the possibility of producing for those internal

markets and then exporting to the world at very low costs. Even complex

products like the i-phone, with over 300 components, are produced by

outsourcing the production to the best producers worldwide. When less complex

products, such as photovoltaic panels, almost all of them can be produced and

exported from the largest internal market, China. Control of the technology and

access to mega internal markets makes it difficult for more limited players like

Italian industry to compete. Several millions of Italian jobs have been lost

through relocation of Italian factories in East Europe and Asia. Thus by

concentration of production centers from which to export and control technology,

globalization has defined a new set of winners and huge set of losers; creating

unemployment in many sectors and countries where the minor players cannot

compete.

 

The most important losers continue to be the developing nations that are in fact

not developing: hunger has increased from 460 million in 1974 to 800 million

today and poverty is the same as measured in 1984, about 1 billion persons with

no improvement in over thirty five years. Almost all the gains in relative poverty

have been in one place, China. If a higher threshold of poverty is used, five

dollars a day, the number of poor persons number 4.3 million, more than 60% of

mankind. The net financial inflows/outflows for the developing world are negative

by 26.5 trillion dollars between 1980 and 2012, as confirmed by the 2016 report

of the Global Financial Integrity and Center for Applied Research at the

Norwegian School of Economics. The developed countries are net borrowers to

the developing nations, greatly exacerbating the hunger and poverty situation.

Just the opposite of what one would expect. The “development” model proposed

by the rich for the poor is actually helping the rich. Poverty has more do with the

relationship between the poor and the rich, and how it has evolved in new forms

from the colonial past. To overcome hunger and poverty in the global South, this

must be radically changed. “For decades we have been told a story: that poverty

is a natural phenomenon and will be eradicated through aid. It is a comforting

tale, but it ignores the broader political forces at play. Poor countries are poor

because they are integrated into the global economic system on unequal terms

and aid only helps to hide this.” Hickel, J. (2017).

 

After decades of intense individualized production and consumption, perhaps

some of us are longing for something else. There is something forgotten based

on social experience and exchange. It is intense human interaction, usually

among several persons that is shared and highly valued. For example, it may be

a tour in a primitive setting and being able to talk and exchange ideas with the

natives. It could be a group cooking class for Americans in Tuscany. Experience

is built around the relationships that may be established locally. A very important

experience is the direct sharing of culture of all types from music to dance to art

to architecture to anthropology. Of course this culture can be indirectly shared

and sold as a product or video. There is a continuum between the direct

experience and the less involving indirect experience. Usually direct experience

is felt as more unique and enriched by numerous details and local happenings.

There is a difference in climbing up the steps of the leaning Tower of Pisa and

seeing the photograph. There are many differences in experiencing the Palio of

Siena and seeing the video. Tourism is in fact an area where the offer of

experience can be greatly reinforce its value. What are required are more local

programs, activity, and personal exchange. Another example of experience is

collaborative education. We are all experts in something, or wish to be more

expert in something: this is the basis of creating value through seminars and

sharing various forms of culture among friends and acquaintances.

 

Of course experience may involve many contradictions and problems. Usually at

classic music concert or jazz session there is a shared joy between performers

and listeners. This may not always be the case; the provider or facilitator of the

shared experience may not necessarily share the joy. He/she will have to be

adequately compensated. In the best cases the experience facilitator should

stimulate the participants to a deep level of exchange that also will be fulfilling to

the facilitator. This requires considerable psychological skills of all. Training is

needed for providing a high-level of experience. There is also a part of

psychology that investigates one’s peak experiences.

 

A key characteristic of experience is that it is almost always involving an

exchange among persons and thus gets us away from the individualistic form of

consumerism. Another key element of experience is that it can be applied to any

activity or interest; it has that great variety of form, like that of the individualized

products. This means the space for social experience is also infinite.

And of course social experience is not new culturally and historically. The Greeks

valued it greatly through their love of the music, dance, epic stories, tragedy,

comedy, philosophy, and their participation in direct democracy. Although they

had slaves, most Greeks did not proclaim nor seek the excessive accumulation

of material wealth.

 

The point is that we can substitute the frenetic consumption of individualized

products and services with that of experience created in large part locally and

with a much lighter ecological foot print. This will benefit us as individuals and

globally. It can be an essential part of the sustainability evolution.

 

Social experience and exchange may be a partial antidote to globalism. It does

not have to be mass-produced in mega markets for export. Experience is

providing one of the highest needs of the Maslow pyramid, at the same time

providing jobs and primary needs of all the local facilitators.

 

However, this requires a significant cultural shift towards recognizing the

fundamental importance of social relations. An example can be found in tourism

that can be, and frequently is, a hotel-to-hotel journey with limited contact with

the local population. “It is Tuesday, we must be in Belgium.” Or it can evolve into

relying on local guides, encountering natives, and possibly staying with local

families to learn and share the their culture.

 

At home, this implies fully developing one’s social opportunities and skills. It may

take the form of friendships in numerous activities such as book clubs, discussion

groups or travelling together. It may involve political activism, continuous adult

education or working with volunteer organizations. It usually involves active

listening to your spouse, neighbors, friends and acquaintances.

 

The empirical evidence supports the benefits of social experience and

relationships. In international studies on happiness, it has been argued

(Bjornskov 2003; Vermuri and Constanza 2006; Bjornskov et al 2008) that happy

countries have high social capital and strong friendship networks. A notable

study by DiTella and MacCulloch (2008) explores the Easterlin Paradox, referring

to the fact that happiness data are typically stationary in spite of considerable

increases in income. They show that for happiness responses of around 350,000

people living in the OECD, based on actual changes between 1975 and 1997,

only small contributions to happiness can be attributed to the increase in income

in their sample. They are negatively correlated with the average number of hours

worked, environmental degradation (measured by SO emissions), crime,

openness to trade, inflation and unemployment.

 

The famous Harvard Study of Adult Development, summarized by Mineo L.

(2017), reports that the “Harvard study, almost 80 years old, has proved that

embracing community helps us live longer, and be happier. Close relationships,

more than money or fame, are what keep people happy throughout their lives,

the study revealed. Those ties protect people from life’s discontents, help to

delay mental and physical decline, and are better predictors of long and happy

lives than social class, IQ, or even genes. That finding proved true across the

board among both the Harvard men and the inner-city participants.”

In animals, sociality is a survival response to evolution pressures. Perhaps man

should be considered an animal under evolutionary pressure.

 

The conclusion is that the recognition of the importance of social experience and

relationships can help us curb individualistic consumerism and allow more

resources to be dedicated to primary and social needs. The consumers, business

and governments need to ‘wise up’ and understand the choices at stake, which

also supports a more effective climate change transition.

 

References

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Bjornskov, C. (2003). The happy few: Cross-country evidence on social capital

and life satisfaction. Kyklos, 56, 3-16.

Bjornskov, C., Dreher, A., & Fischer, J.A.V. (2008). Cross-country determinants

of life satisfaction: Exploring different determinants across groups in society.

Social Choice and Welfare, 30, 119-173.

Di Tella, R., & MacCulloch, R.J. (2008). Gross national happiness as an answer

to the Easterlin Paradox? Journal of Development Economics, 86, 22-42.

Hickel, J. (2017). The Divide, Windmill Books, London.

Mineo, Liz (2017), Good genes are nice, but joy is better, The Harvard Gazette,

April 11, 2007

Vemuri, A.W., & Constanza, R. (2006). The role of human, social, built, and

natural capital in explaining life satisfaction at the country level: Toward a

National Well-being Index (NWI). Ecological Economics, 58, 119-133

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* William Mebane, former Director of Energy Efficiency Department, ENEA. Article provided to Other News by the autor

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