Global Agenda: The Great Rip-off

More and more consumers are becoming ever more distrustful of businesses and resentful of their treatment by them.

demonstrators protest against consumerist culture _370 (photo credit: Ben Hartman)
demonstrators protest against consumerist culture _370
(photo credit: Ben Hartman)
We, that is the developed or “Western” world, are in the throes of a massive socioeconomic upheaval.
This is caused by the financial-economic crisis and is, at the same time, a driver of the later stages of that selfsame crisis. This column has discussed various aspects of the overall upheaval, mostly from the financial and sometimes from the macroeconomic perspective. This time, the focal point is the interplay between social and economic behavior, from the point of view of the consumer.
It should be remembered that the consumer is the critical player in the economic crisis. In macroeconomic terms, the problem of the American economy can be summarized in a single statistic: The share of GDP that comprises private consumption grew, in the quarter-century beginning in 1980, from 64 percent to 71%. That sounds innocent enough, but it must be remembered that the extra 7% of GDP going to consumption had to be paid for, and, unfortunately, there was no concurrent rise in domestic production, so most of the extra consumption came from imports and was paid for by borrowing. Thus the “innocent statistic” conceals both the chronic deficit in trade and in the balance of payments, as well as the huge rise in borrowing that ultimately triggered the financial crisis.
The best explanation of the cause of the crisis is that it was caused by people buying things they did not need, with money they did not have, financed by loans they could not repay. Now let’s zoom in on the individual consumer within this macro-economy.
Why did he or she behave in this way? One possibility, which is certainly true for some people, and most likely has at least partial validity for most people, is that people like to have more “things” and have their own wish list of items they would like to buy. When the opportunity is provided to obtain more of these things, using someone else’s money, the temptation becomes overwhelming and the individual persuades himself/herself that he/she will manage, somehow, to repay – or at least roll over – the accumulated debt. This approach draws heavily on the relatively new discipline of behavioral economics and flies in the face of traditional economic theory, in which economic actors, including consumers, are assumed to behave rationally and therefore to avoid accumulating huge debt loads.
However, there is an alternative approach that views the consumer not as the main perpetrator but as the victim – almost a puppet. Whose victim? Who is the puppet-master, in this view? The simple answer is “the banks” because they “persuaded” the consumers to borrow the money they offered them. They were the satanic devils tempting the innocent households on the path to financial ruin. Simplistic and one-sided as this view is, it contains more than a grain of truth. Indeed, the revelations that have emerged over the five-plus years since the crisis broke have provided ample evidence proving that the financial firms – banks, investment houses, et al – were often satanic, but also stupid, greedy and short-sighted. These are not characteristics usually associated with Satan, but there you go.
But the banks were far from being the only firms that preyed on consumers and victimized them. On the contrary, much of the non-financial sector was as bad, or worse, in its behavior toward its customers, and this behavior continues to this day. In true Orwellian fashion, the systematic ripping off of consumers by retail-oriented firms has been marked by the development of a special terminology, in which words mean the opposite of what they normally imply.
Thus any reference to “service” has come to mean that the level of actual service has declined and will most likely decline further, and/or that the same level of service now costs more. There are endless examples of this phenomenon at work, and everyone has their own pet hate, so one will suffice.
Virtually anything relating to air travel falls into this category, so that the “travel/flying experience,” which was once considered interesting and even romantic, is now stressful, sometimes downright traumatic and always expensive. The joke that airlines will soon start charging for use of the toilets on the plane is not funny because it pinpoints the heart of the problem: If the supplier of a service can put the potential user in a position where he must use it, the supplier will then take maximum advantage of his opportunity. All the sweet talk about being there to serve the client, and of the customer being the most important person in the business, is merely a facade to fool the sucker into paying less unwillingly.
Perhaps the ultimate buzz phrase in this business newspeak is the term “customer-centric.” This suggests putting the customer at the center of the firm’s activities – and so he or she really is, just not in the way the patsy thinks. The customercentric business is not there to look after the customer or promote his interests, but rather to find as many ways as possible to sell him goods and services that he does not need, at prices and on terms that do not favor him – and if he does not have the wherewithal to make the purchase now, then the vendor will “facilitate” his getting a loan to make the purchase possible.
Inevitably, Lincoln’s dictum that “You can’t fool all the people all the time” is coming into play to a steadily greater extent. More and more consumers are becoming ever more distrustful of businesses and resentful of their treatment by them. The backlash is developing across the developed world and is finding expression in rising support for both left-wing and populist right-wing parties. Economists decry these emergent attitudes as anti-business and therefore inimical to economic growth. So they are, but it will be pointless for the corporate sector and its captive economists to shed crocodile tears when the embittered public throws out the economic baby with the dirty business bathwater.
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