Australia is in the midst of a flat-screen TV crisis, says Clive Hamilton. Driven by an insatiable desire for "stuff", we spend more time chasing money and less doing the kinds of things that would really make us happier and more fulfilled — spending time with friends and family, getting involved in the local community, and developing our skills and creativity. Greed and materialism are making us miserable.
But there’s no evidence that people in affluent countries like Australia are greedier or more materialistic than in the past. The major reason we buy more stuff is because stuff has become cheaper. The increase in working hours is not being driven by an increasing desire for stuff but by increases in the cost of things like housing and services.
According to Hamilton there "has been a relentless ratcheting up of desire". As a result, we’re working harder and borrowing more. And when we’re not working, we’re shopping. Shopping has become the national past-time, he says. Many people "would not know what to do with their lives if they could not shop."
It’s a familiar story. Since the late 1990s there have been at least four books released with the word ‘affluenza’ in the title. In Britain, the United States and Australia, authors have jumped on the affluenza bandwagon and denounced society’s decent into the misery of overwork and overconsumption.
Data on time use from the Australian Bureau of Statistics (ABS) does not show any increase in the time Australians spend buying "stuff". In 1992 Australian men spend an average of 17 minutes a day buying goods. In 2006 they spent an average of … 17 minutes a day buying goods. For women it was 30 minutes in 1992 and 28 minutes in 2006. Older men spent more time purchasing than younger men — but that’s probably not because greed and materialism increase with age.
You’d expect young, single Americans to be at the epicentre of the affluenza trend. But data released by the Bureau of Labor Statistics (BLS) shows that this group actually spent less in 2004-05 than their predecessors did in 1984-85. In 2004-05 dollars, never married American adults aged between 21 and 29 spent $23,866 in 84-85 and only $22,744 in 04-05. The categories of spending which increased most were housing (up from $5,652 to $7,249) and education (up from $1,012 to $1,760). Spending on food, apparel and services, cars and trucks and travel and trips all went down.
Elizabeth Warren and Amelia Warren Tyagi found a similar pattern for families. In a 2005 article for the Boston Review, they compared BLS statistics for 2000 with those for the early 1970s. According to Warren and Tyagi, a family of four spent 21 percent less on clothing, 22 percent less on food and 44 percent less on major appliances.
One area where spending increased was on cars. The average cost of a new car increased from around $16,000 to $22,000. But looking at the data more closely, Warren and Tyagi found that the average amount a family of four spent per car was 20 percent less than in the 1970s if you include insurance, maintenance and other costs. Cars have become more reliable and American families are keeping them for longer.
For all the talk about our insatiable desire for televisions, there doesn’t seem to be a strong relationship between household income and having multiple televisions in the home. According to ABS data, households in the top income quintile are no more likely to have three or more television than those in the third quintile.
While we might not be spending more of our incomes on stuff, we definitely are buying more of it. As Hamilton says, many things that were once luxuries are now regarded as necessities. The reason for this is simple — most stuff is getting cheaper. The chart above shows how the cost of appliances has fallen over time. Expressed in terms of the hours of work needed for purchase, household appliances such as dishwashers have fallen steeply in price since the 1950s. With falling prices, there is no need to invoke rising levels of green or materialism to explain increases in consumption.
Critics like Hamilton are right about another thing too. Many people still don’t think they have enough money and are working more to get it. Female labour force participation has increased sharply in recent decades. Increases in paid work by women are linked to higher levels of consumption. For example, Warren and Tyagi found that part of what drove increased spending on cars was the increase in the number of cars per household. When both members of a couple work, it is harder to get by with only one car. Especially if you can’t afford to live somewhere with access to good public transport.
So why are people in countries like the US and Australia working more? Why don’t we feel that we have enough money? One reason is the cost of housing. According to critics like Hamilton, we spend more on housing because we’re buying bigger, more luxurious houses. But according to Warren and Tyagi (who wrote their essay before the US housing bubble burst), "Over a generation, the average number of rooms in a home increased by seven percent as average mortgage expenses increased by 69 percent — at a time when other family expenses were falling."
When people buy a house, they not just buying a building to live in. A large part of what determines prices is the quality and quantity of services and amenities available in the neighbourhood. Parents are buying good schools for their children, safe parks for them to play in, access to trains, buses or (if they’re especially wealthy) ferries. Many of these things are paid for by other people’s taxes. And as stuff gets cheaper, people are willing to spend an ever increasing share of their incomes in order to get access to a good neighbourhood. It’s not hard to see where this leaves jobless families and those with chronic disabilities.
To simplify drastically, the Baumol effect arises when productivity growth is more rapid in the goods-producing sector than in the service sector, and particularly in the provision of ‘human services’, including health, education, culture and recreational services … Since labour and capital are mobile between sectors in the long run, wages grow at much the same rate in both sectors, so the price of services has to rise relative to the price of goods.
This effect helps explain how taxes can increase while access to government funded seems to decline. As service providers, governments are caught in a trap. Doctors, nurses, teachers, psychologists, welfare to work consultants and train drivers are all increasingly expensive. It’s tempting to reduce costs by relying more heavily on user-pays. But the more people are expected to pay for their own education, aged care and transport, the less inclined they are to pay high taxes. Add in the aging population, the rising cost of social security and the availability of new technology in health care and you can start to see the scale of the problem.
The affluenza myth is both self indulgent and dangerous. It’s self indulgent because it allows affluent, educated people to blame the world’s problems on the consumption habits and psychological weaknesses of less educated, households. And it’s dangerous because it distracts attention away from serious social problems such as the lack of affordable housing for low income earners and the problem of raising taxes to fund redistributive policies in the future.
Update: Mark has more at Larvatus Prodeo. There’s a lively discussion in the comments thread.