Sunday, September 28, 2008

Hyperconsumption and the global financial crisis

For many years, I have warned people against the misdeeds of hyperconsumption; for many, daily life is centered on purchasing increasingly luxurious goods and services, first of all for one’s pleasure, a fleeting satisfaction. In fact, the evanescence of contentment procured by consumption is also what has allowed excessive consumption to rise.

Once purchased, the new object integrates with existing possessions and the pleasure of ownership quickly fades; a new desire swiftly surfaces, exacerbated by the omnipresent advertising. Abraham Maslow rightly said: «Human beings always want something. » In addition, when one lusts for a new object, it is invariably a little more luxurious than the one it replaces, since the characteristics of the latter are taken for granted, they no longer procure the expected pleasure. This is what I call inflation of consumption.

To feed this limitless flow of consumption, people must either draw on their income or their savings, or get into debt. The very rich, the ones middle class people wish to emulate, can more easily satisfy their cravings without getting into debt, to a degree; the inflation of consumption phenomenon also applies to them.

As for the middle class, consumption’ main engine and banks’ key clientele, a recent Léger Marketing survey shows that it has become impoverished, worse indebted. In a report published September 15 2008 by Statistics Canada one can read : «Households had 19.6 cents of debt for every dollar of net worth and $1.25 of debt for every dollar of personal disposable income.» And the situation is worse in the United States. This is precisely what has caused the global financial crisis that we now live.

To fuel their craving for consumption, people have borrowed on the added value of their property, at often excessive interest rates and without the lender verifying the borrower’s ability to repay. It is understandable that the budget balance is fragile; it may be compromised by the slightest glitch, illness, job loss, etc., resulting in even a slight decrease of income flow, or by inflation in the price of an essential commodity, gasoline for example. This is what happened in the United States.

In 2007, many people were unable to meet financial obligations, especially the repayment of loans contracted, the sadly notorious subprime mortgages. This payment default, multiplied millions of times, has undermined several U.S. financial institutions. Unable to recover the money lent, they in turn were unable to repay their creditors, much less guarantee their depositors’ money, thus causing a rush to withdraw invested savings before banks, they fear, run out of cash. This has created a liquidity crisis and the «domino» effect did the rest.

Evidently, other factors have made the crisis worse, many investors borrowing to create leverage being one and speculation another, but those are subjects on which I will not dwell today; my goal was to demonstrate the link between hyperconsumption and the global financial crisis ... which I have now achieved.

Friday, September 12, 2008

Wild fluctuations in the price of gasoline

In Le prix de l’essence laisse songeur, an article published Thursday September 11 in La Presse, journalist Hélène Baril states: «During the last week, the price of a litre of regular gasoline has fallen by almost 4 cents in Toronto and only 0.6 cent in Montreal. » The article goes on reporting justifications from various industry representatives, which you can read by clicking on the above hyperlink.

Nonetheless, I believe that the consumer is tired of these explanations, particularly in the wake of the scandal which has hit the oil industry last summer, as reported in a column entitled Quebec gas companies charged with price fixing published by CTV Thursday June 12: « Gasoline retailers in four Quebec regions have been accused of price fixing, the federal Competition Bureau announced Thursday. The alleged scheme involved 13 people and 11 companies in the Quebec regions of Sherbrooke, Magog, Victoriaville and Thetford Mines, Commissioner of Competition Sheridan Scott told reporters at a Montreal news conference. » Other media have reported that the scheme could also involve other regions: Les prix étaient discutés pour d’autres marchés.

It is pointless to endlessly rehash our constant frustration vis-à-vis those facts; appointed authorities have done a good job, let justice take its course, hoping that the Court judgement will deter such dishonest and illegal practices.

To give consumers a tool, some small form of protection, against the perpetual yo-yo that has become the price of gasoline at the pump, I will instead reveal the existence of a resource and make two suggestions.

I have recently discovered a Web site, Essence Montréal , « a real-time forum where consumers can post current gasoline prices in the city of Montreal and its suburbs. »

This site needs our collaboration to convey accurate and reliable information to people. I invite you to take a few minutes of your time every day to report the price of gasoline at the pump in one or two service stations in your neighbourhood.

On the home page, you can also subscribe to a newsletter by entering your email address: « The Essence Montreal newsletter will consist of e-mail alerts which will be sent out to our subscribers whenever there is a suspected large increase in gas prices in the city of Montreal and its suburbs. » Thus, you will at least be able to fill up before being surprised by a swift and unexpected price increase.

Consumers often underestimate their collective power. Yet, if my suggestions bear fruit, in the long run, surges in gasoline prices could translate into an equally sudden desertion of service stations, until the price decreases. I won’t pretend that our efforts would lower the price of gas, but they could at least put an end to wild fluctuations.

Sunday, September 7, 2008

Consumption and technology

My next book, whose publishing (in French at first) is planned for winter of 2009, will focus on consumption and technology; here’s a glimpse of its content.

In our hyperconsumption society, technological development is essentially dictated by commercial considerations, the first of which being the necessity for manufacturers to differentiate their products from their competitors’.

The iPhone, launched in Canada in July 2008, is a fitting example of this assertion. Far be it from me to denigrate this gadget which obviously appeals to a very specific market segment; otherwise, how can one explain the endless launch day queues in front of stores for the privilege of being among the first to own this marvel? Its design undoubtedly meets aesthetic expects and its many functions, too numerous in fact for the average user, allow its users to justify their purchase from a utilitarian standpoint (functional expects).

The iPhone’s appeal lies elsewhere. It has to do with the image, the myth I should say, Apple built around its latest creation, as it did for other products, the iPod for instance; as the latter, the iPhone is a cult object, a status symbol (symbolic expects), yet even, for some people, a possession which allows them to enhance a somewhat weak self-esteem (aspirational expects).

Despite the fact that competing products, such as the Touch Diamond (HTC) and the Instinct (Samsung), offer very similar designs, features and functionalities, the iPhone’s exclusive image allows Apple to sell it at a price slightly higher than competing products’, because the unconditional, the true aficionados, are less sensitive to price, as long as said price remains within a range whose boundaries Apple has undoubtedly pinpointed (financial expects). One can therefore say that technological development has shifted to a commercial exchange paradigm.