In its quest to make their products more convenient, McDonald’s Corporation almost single-handedly pioneered the throw-away lifestyle in the 1950’s. You might be asked if you’ll be consuming their products on their premises, but regardless of what you say, everything will still be wrapped with disposable paper and plastic. For fast turn-over of customers, their operations are structured for only disposability, not environmental sustainability! Moreover, in their ever increasing need to boost sales, their marketing strategy promoted “SUPER-sized” value meal deals!
Today, Costco and other big-box warehouse quasi-retailers / quasi-wholesalers are perpetuating the “buy more, pay less” model, except one must not forget that the retailers always mark-up the price at least 300%, so they never lose money on a sale.
In order to shop at these “discount” warehouses, you must almost always drive a car. For one thing, their parking lots are designed for only a massive number of motorized vehicles. They have absolutely no facilities to store, let alone secure, a bicycle or bike trailer. Contrast this with shopping in China, India, or even the Philippines, where most everyone drives motor scooters or bicycles – even merchants!
Moreover, all the products at Costco are packaged in jumbo and super-jumbo sizes. Instead of buying a 1 lb box of cereal, you must buy a 5-10 lb box of cereal. Because Costco touts itself as a “membership” club, members feel obligated to shop there to recoup their $55-$110 membership fee, even though certain categories of consumer items like food are no cheaper than retailers like Target or Trader Joe’s.
Another marketing tool, traditionally used by merchants of high-priced items like cars and houses, is the “buy now, pay later” credit model pioneered by Sears Roebucks, because they focus consumer’s attention on ability to pay (having a job) rather than having cash.
But now there is a threat on the horizon which is causing manufacturers utter panic. Generation X (16-24 years of age) show far less interest in buying cars, homes and other big-ticket items than their parents did at the same age. This is a dangerous precedent because consuming, and borrowing to consume, are the essential core of capitalistic economy. Without an ever increasing rate of consumption, and the ability to charge interest, capitalism will come to a halt! “Millennials are demonstrating significantly different lifestyle and transportation preferences than older generations,” declared a report by the U.S. Public Interest Group. Overall, it concluded, “the driving boom is over.”
The report suggests that mobile communication devices and urban living may be partially to blame, but ultimately the real reason America’s youth are not consuming is because they are saddled with student debts that can possibly last their entire lifetime – they are broke!
Mobile communication is no longer a rich man’s toy! Even homeless people today have access to a mobile phone. Mobile phones allow people to stay in touch without owning a car. But merchants are fighting back to protect the “Consumerican” lifestyle! Social media sites like Facebook have turned into nothing more than an advertisement portal. It is virtually impossible to not see a plethora of advertisements wherever you surf. Just look around THIS article!!!
To save money, urban Bay Area residents are using mass transit, and car share – non-profit City Car-Share and for-profit Zip-Car, where members don’t have to pay up-front to purchase a vehicle – they pay as they go. They’ve learned that strategic sharing is smart, and it is becoming a status symbol! But the SF Peninsula is struggling to implement a bike-share program between San Francisco and San Jose because of perpetual government threats to deny funding. It’s not just a war of priorities – it’s a question of whose?
How does the illusion of ownership affect price? In 2008, the housing bubble burst because mortgage lenders touted the “buy now, or forever be locked out” mentality! When all the people who already qualified to buy a house already purchased, lenders simply gave the money away to the poor, touting loans that were 112% the purchase price, so even the down payment could be borrowed and insured. That of course generated more sales which benefited the top echelon of the real estate lending industry. Normally, if a borrower does not have 20% down payment, they must buy mortgage insurance, so 112% included insurance on top of insurance. Of course, when poor people have access to such a large amount of money, they can bid more, which merely escalated the price of housing into the stratosphere. Without the power of the interest rate and borrowing, housing prices would be flat.
The US Internal Revenue Service (IRS) considers a lease of 30 years to be the same as ownership, so a 5 year lease with 6 options to renew is the same as ownership! But leasing gives the renter exclusive right to use a property without having to pay property tax on it. Moreover, if the renter is registered as a business, s/he can deduct the lease payments as business expense. So why are renters in the USA made to feel inferior to property owners? Under capitalism, property is better cared for by owners because they have a vested interest in it. But in China, the belief is the opposite because of Confucian philosophy.
China today is in some respects no different than it was 1000 years ago. The Emperor was the son of Heaven, but the communist party has replaced the Emperor, so the Politburo is now entrusted with the responsibility of protecting all the Earth’s physical resources under its political jurisdiction. Conceptually, if you don’t own it, you do not have the right to abuse it! That’s why individuals in China only have the right to purchase an apartment, with the land being leased for 70 years – the lifespan of an average person.
When you compare the upfront cost of purchasing an apartment in China to the accumulated monthly mortgage payments for a home loan in USA, the perceived advantage of “ownership” may disappear. Even when you consider the possible cost of releasing after year 70 (assuming you live that long), the additional cost is miniscule because the time value of money regards money today as more valuable than money in 70 years.
Habitat For Humanity’s model hints of a community-building lifestyle of yesteryear, where the community came together to build newlyweds a house. Then when the couple got older and had children, they too were asked to contribute to the next generation. This is a tradition that still exists in rural parts of China and India today. The people are poor, but the relationships are high, so they are self-sufficient and happy.
Contrast this with the USA, where material is more important than relationships. Everything must be purchased, including education, and young people are drowning in debt with few opportunities for employment. Today, one of the most expensive debt is insurance (auto, homeowner, medical, renters). Like American automobile manufacturers, insurance companies have been touting independence as the American Dream! “Why rely on your neighbors when you can buy insurance?” they asked. Then when people actually started making claims, they simply increased their rates. Their business model is actually a twist of Sears Roebucks “buy now, pay later” model, except for insurance companies, the assumption was “buy now, and (maybe) save later”- assuming most people did not collect, assuming no inflation, and assuming a lot of other things. But because borrowing drastically inflates the price of goods and services, who is to say consumers are actually saving money by buying insurance?
If insurance companies do not honor their promises, you can sue and take them to court, which perpetuates another business. If you have no money left, you can try to negotiate with lenders, or file for bankruptcy if you fail. But therein involves another hefty fee. If you have no money, the US military advertisements claim, “Join the US Air Force/Army/Marines/Navy, and (maybe) get money for an education” (assuming you obey everything without question, you survive your tour of duty, and a plethora of other assumption). What will you be fighting for? To protect the Consumerican way of life!
Why are Generation X so deeply in debt? They were only doing what they thought all good Americans were supposed to do – go to school, get a good education, go to work. But almost 20% can’t find a job, and now they are seeking ways to get off this treadmill! But will corporate America ever let them?
Debt is inherently built into the Consumerican lifestyle! Imagine you buy a car with a 5 year loan, but the car only lasts one year? So you have to buy another car every year. But every year, you accumulate another 5 years worth of debt. The automobile driving boom may be over, but how about the printing boom? The Federal Reserve charges interest each time they print money, and who gets to pay for it? There is a saying, “We owe, we owe, so off to work we go!”