Monday, 19 May 2008

Economic Hamster Wheel

Update To summarize the verbiage below, I thank Jimmy Johnson.

Andrew Coyne over at Seriously, WTF? (heh) makes a good point about all the hand wringing surrounding the ideal that middle class earning power hasn't progressed in the last 25 years. He shows that earning power may not have increased, but the buying power of the average dollar has increased. He shows a nice chart showing the percentage of households owning common items over the last 20 years. These common items were one time luxuries.

This can be extended to groceries as well. The selection and availability of foreign (formerly exotic) foods available year-round is staggering. Especially considering that in the winter, vegetables used to be limited to potatoes, rutabagas, onions and squash. Anything other than that was an exotic vegetable with the corresponding price attached.

The middle class is awash in "wealth" when it comes to foods and commodities available to it.

So why do we in the middle class feel the pinch? Why do we instinctively shout "hell yeah!" when headlines tell us we are at the same income level we were 25 years ago?

I keep coming back to consumerism. We are all in a race to "get ahead", and the only marker that matters is wealth relative to your friends and neighbors. But the fact of the matter is, we can't all get ahead. When everyone compares themselves to the average, and increase their share of the wealth over time, the average moves, the goal posts get set further out. So while you try to get that big fat raise, buy that fancy wide screen TV, and install that granite counter-top in the kitchen, your neighbor is doing it too. And all us Jonses help establish the new average where granite counter tops and big screen TVs are the norm in the middle income lifestyle.

I think this plays out in the widening gap between the rich and the poor. The definition of poor stays relatively the same. Yes; many poor have former luxuries, like cable TV, a microwave, indoor plumbing, etc. But middle class has more of these former luxuries (second or even third cars, 2000+ square foot homes, air conditioning, etc.) and as such the definition of middle class has moved.

Don't get me wrong, there is an obscene concentration of wealth at the high end of the spectrum. What it means to be rich, uber-rich, ultra-rich mega-rich whatever also changes. But the pressures of "getting ahead" still play out at that level too. "You only have 1 yacht Dave? I just bought my third, and am considering my fourth so I have one in every major sea...." This only illustrates that the markers for poor, middle income and rich are on a logarithmic scale. It takes money to make money, and the more you have the faster you earn more. There is a point where you can earn money faster than you can conceivably spend it, when you hit that magic marker, you're on that part of the curve where it starts accelerating. Your level of thriftiness adjusts that marker considerably.

So what does it all mean in the end? Bluntly, that endless consumerism is no-win game. First off, nothing ever is endless, and man-made things tend to end sooner. Even the universe won't expand forever.

What do we do about it? Fuck if I know. Identifying the problem doesn't mean that the solution is obvious (or even exists). But I have this sneaky suspicion I'm going to live long enough to see this hamster wheel spin off its supports, and that the impact is going to be messy.

1 comment:

Ken Breadner said...

What do you do? You redefine your comfort level so it doesn't take your neighbour into account at all, and go from there.
Not only do I think you'll live long enought to see the hamster wheel spin off its supports...I think it's wobbling *now*.