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October 9, 1998


E-Mail this column to a friend Darryl D’Monte

A limit to consumption?

Economists are seriously speculating about the possibility of another global recession which is reminiscent of the 1929 Great Depression, when Wall Street crashed. The failure of the Asian Tiger economies, which were thought to be growing forever and ever, is one pointer in this direction. The collapse of the Russian economy, termed an 'implosion,' is another. Perhaps the only glimmer is the performance of the US economy, which is doing unusually well. Since it dominates the economic transactions that take place across the world every day, the US boom may lull others into complacency.

With an unerring sense of timing, this year’s United Nations Development Programme Human Development Report looks at yet another controversial issue: world consumption. Among all UN organisations, UNDP has not hesitated to call a spade a bloody shovel in its annual reports since the beginning of this decade. For this, we have largely to thank Dr Mahbub ul Haq, the eminent Pakistani economist, who passed away recently at a relatively young age. It was under his magisterial and inquisitorial scrutiny that the “progress reports” of some 170 countries were annually put to the test and found wanting or otherwise. Each year, a new facet of human development was emphasised as an index, whether it was freedom or gender. Countries, used to the diplomatic jargon of UN-speak, protested at their poor rating and some even shut down UNDP offices in their capitals! India now stands an abysmal 139th out of 174 countries.

The level of consumption is a pretty good index of the living standards of an individual or, collectively, of a nation. At one level, there is cause for satisfaction that the world is consuming more than it ever did before. In real terms, it has doubled in the last 25 years and reached a staggering $ 24 trillion this year. UNDP cites figures from a study conducted by the National Council for Applied Economic Research in this country which shows that more than 70 per cent of rural households own a transistor radio, bicycle and wrist watch. Even more surprisingly, a fifth have refrigerators. Thanks to burgeoning consumerism, consumer durables, especially television sets, are trickling down to the poorest 90 million households too.

China is a much bigger consumer, since it has twice the per capita income. In cities, families spent twice as much on durables in 1995 as they did 15 years previously. Purchases of washing machines, refrigerators and television sets rose 8 to 40 times. By the mid-eighties, China was the largest manufacturer of televisions, with a quarter of world output. These figures are important because between them, India and China account for one in every three people on the globe and what they consume will obviously affect the rest of the world. Current consumption levels are nothing compared to what will happen soon into the next century as many more million Chinese and Indians begin to live better lives.

However, the harsh truth is that we live in a highly unequal world, when a small minority allocates to itself a bulk of the world’s resources. In this year’s report, the UN points to the obscenity of how some 225 billionaires collectively own $ 1 trillion – as much as the annual income of almost half the world’s population or 2.5 billion people! To drive home the point, just 32 individuals have assets exceeding the total GDP of South Asia, which is one of the two begging bowls of the globe, along with sub-Saharan Africa. Just the assets of one individual, Bill Gates, at around $ 40 billion are an indication of the vagaries of the “invisible hand” of profit, so extolled by laissez faire economists. In 1960, a fifth of the globe’s population living in rich countries had 30 times the income of the poorest fifth. By 1995, this multiple had risen to 82 times. In other words, far from reducing disparities, globalisation and liberalisation are accentuating them.

The great myth that free-marketers propagate is that everybody prospers with increasing consumption – the more that is produced, the more there is to go around for everyone. In fact, one in every five people in the globe have been left out of the consumer explosion. What is more, it is not just the poor in developing countries but a growing underclass in industrial nations that is cause for concern. As many as 100 million in these affluent countries are deprived. Twice this number are not expected to survive till they turn 60. And some 37 million are without jobs – recalling what a previous Human Development Report reminded us about: the phenomenon of “jobless growth”.

One of the vehicles of consumerism on a global scale has been advertising, for which the electronic media has a great deal to answer for. Advertising is now a $ 435 billion mega-business, “zapping” unwary consumers with messages with machine-gun-like rapidity. Just to put human needs in perspective, it would only cost $ 6 billion to educate everyone on this planet – a true revolution which would change the face of every society. But, with advertising and marketing campaigns raising their pitch to a war footing, it is hardly surprising that instead, non-essentials occupy the attention of consumers.

People in Europe and the US spend $ 12 billion a year, or twice as much, on perfumes alone, while business entertainment in Japan accounts for $ 35 billion.

Two-thirds of McDonald’s growth is now taking place outside the US. Globally, advertising is growing a third faster than the global economy itself; in India, it has risen four times in the last decade. With some 20 million homes with satellite television in this country, the medium will truly become the people’s massage.

After listing item after item, index after index of deprivation amidst growing prosperity, even UNDP, however, stops short of advocating what can only be the solution to these anomalies. Since the resources of the globe do not permit consumption on this scale – either by the North or by elites within developing countries – equity demands, ideally, that everybody should have equal access to natural resources, irrespective of nationality or class.

On the fifth anniversary of the 1992 Rio environment conference last year, a Mexican institute released its findings on the “footprint” of nations, which measures how much area a person in the 52 largest countries occupies to meet his needs. If the world was genuinely equitable, each person should have 1.7 hectares of land and water to produce what he consumes. In fact, an average American has 10 hectares while an Indian has less than one. The study found that India, Pakistan and China were the three large countries which consumed at a level which could be reproducible for everyone in the world without endangering the life of the planet.

Since there is no mechanism that permits such egalitarianism within countries, let alone between them, a more pragmatic method would be to penalise the over-consumers. The UN is best equipped to play the role of a global watchdog in this respect, although this is bound to be fiercely contested by the US and some other Western nations. All use of natural resources could be taxed and with this fund, there would be enough to meet the basic needs of the world’s poor, estimated in Rio at some $ 125 billion a year. A carbon tax on fuel emissions is one such instrument.

Use of the global commons, like the atmosphere by aircraft and sea channels by ships, should also attract taxes for the damage they cause. Most controversial of all is a proposal by the eminent US economist, James Tobin, to place a tiny tax on the $ 1.3 trillion that is speculated in across world markets every day and does not constitute productive investment of any kind. The problem is that the US, which is the world’s biggest polluter with a quarter of carbon dioxide emissions, is bound to resist such moves tooth and nail: it has in case defaulted on its contributions to the UN, which is the only agency capable of enforcing such global justice.

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