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.

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.

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.

Comparing the price of gasoline between Montreal and Paris

I wish that with each new rise in the price of gasoline, some people would cease to comfort consumers telling them that gasoline is still much less expensive in Canada than in Europe.
On August 30 in Paris, one could find regular gasoline (SP95) at 1,399 € per litre (French Ministry of economy) while on August 29 in Montreal, the price of the same fuel ranged between $1.389 and $1.394 (Quebec’s Régie de l’énergie)
Using the August 30 conversion factor, 1.5996 dollar for 1 euro (Royal Bank of Canada), some might say that the price in Paris is actually $2.24; this calculation is completely wrong and misleads people.
The $2.24 is only valid for a Canadian visiting Paris, whose salary is paid in Canadian dollars, buying gasoline for a rental car. The French are paid in euros; 1,40 € is for them what $1.40 is for us.
In other words, the price of gasoline is exactly the same in Paris and Montreal, apart from the daily variations which exacerbate so many Montrealers.

Consumption and commerce are essential

In my writings and my public position, I criticize several aspects of consumption, especially excesses on the part of consumers and speculation on the part of sellers. However, I am in no way against the consumption and I do not preach in favour of self deprivation or hard core simple living. These solutions are so extreme that they can do nothing but put off most consumers… rather than encourage them to consume more sensibly. On the contrary, I believe that, subject to responsible practices on both sides, consumption and commerce are essential in two ways. They are first of all mandatory from an economic perspective. In fact, strong domestic consumption is what has so far saved Canada from the recession in the United States since the summer of 2007. According to the Conference Board of Canada, «Consumers Help Canadian Economy Overcome the U.S. Twin Shocks».

Consumption is just as essential from a human standpoint. Everyone wants to have fun, consume, acquire goods and use services that make life more enjoyable, things that go beyond the strict necessities of life.

In my most recent book, « Consommation et luxe, La voie de l’excès et de l’illusion » (Consumption and luxury, The path of excess and illusion), I stress the essential, universal and anthropological nature of luxury consumption, resting my argument on Shakespeare and Lipovetsky.

Trade and consumption have been an essential part of human development, they have existed for millennia. It would be idealistic to attempt stopping such activities in the twenty-first century.

The shopping center was born in the 1950s. Much like motorways, population migration to the suburbs made essential construction of this new mode of distribution: the shopping mall. Mega shopping centers are simply an evolution of retailing; they are increasingly places both of necessity and pleasure.

Doesn’t the Quartier Dix30 plan to open a Mega private health care clinic, something many Quebecers feel to be a necessity? Furthermore, their commercial offer goes well beyond the traditional commercial function; these new commercial centers are referred to as Life Style Shopping Centers.

The Quartier Dix30 , the largest Life Style Shopping Center in Canada, recreates the illusion of a Main Street in old days villages, an artery mainly intended to be functional, as it centralized shops people needed. These new malls’ main function is symbolic; it is also designed to give you a sensory experience.

Apart from «Main Street» and the Theatre, many other shopping malls incorporate all other aspects of Quartier Dix30: free indoor and outdoor parking, a variety of restaurants, cinemas, and so on. What is so special about a Life Style Shopping Center? As for a perfume or a luxury restaurant, packaging and communication make the product.

Positioning and selling Quartier Dix30 as an entertainment center is inspired by Lipovetsky’s pleasure-purchase logic: «Today, even the consumption of material goods tends to switch to an experiential logic, shopping in general bathing in a recreational and hedonic atmosphere» (G. Lipovetsky, Le bonheur paradoxal. Essai sur la société d’hyperconsommation, Paris, Gallimard, 2006, p. 60).

Some will say that architects of this project only encourage consumption, and they will be right. However, we are not victims but accomplices of the consumer society; it’s up to us to consume better and less. Furthermore, these promoters help make people dream in a world that really needs; Quartier Dix30, it’s not a shopping mall, it’s a recreotouristic center in which rich people and less affluent ones can find what they want.

Purchasing behaviour in open-type Mega shopping malls is not the same as in a traditional closed-type mall. The latter promotes shopping, walking, often without a specific purchase in mind, even walking for health purposes, as some walking clubs practise this activity in winter. People who spend time in malls say that they get pleasure from these visits; they will even stop for coffee at one of many indoor terraces found in these places. Some people living in the city cannot understand what pleasure there is in this activity; as far as I’m concerned, I see no difference between having coffee and mingling with people in such places or doing so one of Montreal’s many cafes.

This type of behaviour can also be observed on the «main street» of a Life Style Shopping center such as Quartier Dix30. However, behaviour changes radically in shops that stand away from this central point. People who go into these shops often have a specific purchase in mind, they have made their choice of product and point of sale on the Internet or in a promotional brochure; they go directly to selected store, do their shopping and then often leave the mall.

In large cities such as Montreal, trade has rather developed in a linear fashion, Ste-Catherine Street for instance; much like a mall, some of these commercial streets even feature a canopy that protects consumers from bad weather while shopping, Plaza St-Hubert for instance. More recently, commercial spaces have flourished in Montreal’s underground, Montreal’s Indoor City.

Consider this map of Montreal’s Indoor City.

According to the Observatoire de la Ville intérieure, «The indoor city is a set of buildings connected by interior walkways, belonging to distinct owners, offering a diversity of functions, namely public transportation, shopping malls, office space and leisure activities, where the use of public space has been settled by an agreement with the municipal authorities». As of December 31 2004, Montreal’s Indoor City featured 1,366 shops of all types and 477 restaurants of all categories.

What difference is there really between Montreal’s Indoor City, Plaza St-Hubert, Ste-Catherine Street, a portion of which is to be pedestrianized in summer 2008, and the Quartier Dix 30? The answer is simple: NONE!

Why then criticize Mega shopping malls?

Results of the mini survey about Mega shopping centers

Since the televised debate on «Il va y avoir du sport», on the theme «For or against Mega shopping centers», some expressed their surprise seeing me present the positive aspects of Mega shopping centers.

It is rather curious because I have never been moralizing towards consumption; as I write in my blog presentation, «I claim myself to be a moderate critic of consumption. While I recognize the benefits, even the necessity, of a measured and responsible consumption, I want to denounce its pernicious effects and questionable practices. »

I am thus especially pleased to have participated in this show because it was an opportunity for me to clarify my position with regards to consumption.

One must also not forget that this kind of televised debate is planned to polarize the debate… to better entertain the audience; the producer most certainly does not want participants in the debate to present the pros and cons of an issue, which would have been my preferred position.

Finally, the debate having been focused on issues related to the environment, ecology and urban development, little analysis was made of the shopping center itself.

In my next column, I will thus further clarify my position on consumption and Mega shopping centers. For now, here are the results of last week’s mini survey.

Results take into account responses from the English and French blogs, 82 people in all; statistically speaking, this number of respondents is low. The error margin is thus higher than the norm: 11% at a 95% confidence level, the proverbial 19 times out of 20. As with all such «question of the day» type surveys, now found in several media, the sample has not been selected according using a probabilistic methodology.

Clicking here will allow you to see a graph presenting, in percentages, responses obtained, as well as the minimum and maximum based on the error margin.

Given this 11% error margin, one can say that people are almost equally divided on the question «For or against Mega shopping centers? » Nothing wondrous!

In the midst of those "Against", one can find amongst others druids of the environment and hard core apostles of simple living, for whom shopping malls, Mega or not, are dens of vice. There are however a number of people who do not like the concept of «Mega Center», as I was saying in Nathalie Villeneuve’s excellent article «Les limites de la démesure» (The limits of excessiveness).

Climate is obviously a drawback and purchase behaviour is different from what one can observe in traditional closed mall type centers.

In my next column, I will elaborate on this issue in addition to clarifying my position on consumption and Mega shopping centers.