Several years ago during an economic downturn, Range Rover, a British maker of sports-utility vehicles, ran an ad campaign in USA Today. It announced its formula for ending the recession: "Buy Something." Range Rover wanted you to buy their vehicle, but in any case, purchase something. "Buy a microwave, a basset hound, theater tickets, a Tootsie Roll, something." Anything to get the economy going again.
Range Rover no doubt had simple economics in mind when telling consumers to buy something: Buying increases demand, which will increase supply and therefore create jobs. With the level of economic understanding that is commonplace among American consumers, buying things = supporting jobs of those that sell and manufacture them. On the surface, it well appears that way: Candy sales during the recession are surging, creating jobs and making record profits comforting woeful Americans (see NY Times and Las Vegas Review-Journal articles). Indeed, the NYT article is even titled, 'When Economy Sours, Tootsie Rolls Soothe Souls'. Clearly, this shows how buying something is good for both you the consumer and for the economy. But is that really all there is to it?
Lurking beneath the surface, money paid for the immediate comfort also has an opportunity cost. A dollar spent on candy today could be $1.05 in one month if it had been saved. That $1 of savings in a banking institution could have helped a new candy maker get a loan to buy manufacturing machinery and create many jobs in your own town. It could also have helped buy a share of stock in a candy company, that would have used the investment capital to open a new processing plant and made your $1 worth $3 in returns. Or it could have gone toward a US treasury bond, helping the government raise money for services such as medical care for the uninsured candy-eater that goes into diabetic shock. It could even have gone toward buying a locally grown organic apple, helping the struggling apple farmers that live next door.
As a general rule, "people are greedy and impatient", as Dr. Bob wrote. (I laughed out loud at that when I first read it.) To this end, a large part of the consumer base is also uneducated or under-educated in basic economics. These consumers are the ones especially targeted by marketing for impulse items: they're ready and willing to buy and consume things they don't need or really value. The immediate comfort and help for the economy that Range Rover suggests has an appeal to that very audience. Using economic logic that is not wholly untrue, they have influenced the masses to the ready 'solution'- an effective marketing tool indeed.
The greedy impatient masses may be moved to do their part by increasing demand, but for it to work helping the economy, the companies they help must be able to raise capital in order to increase short term and long term supply of their products. Without that, the demand will go back to equilibrium and the economy will end up no better off. Those consumers who think purchases through and plan them are unlikely to be moved by "Buy Something" advertising, even though they might have the passing thought that the things they do buy are helping the economy out. The latter group may well be the savers/investors. The knowledgeable and prudent consumers are able to step in to provide capital and pave the way for long term exansion of the economy. They are able to do this in several key ways: Saving in a bank or other financial institution or even in a piggy bank, and buying stocks and bonds. Money in a savings account is money available to provide loans for capital investment, perhaps for a worker to buy a home in a candy factory town or a small candy business to open a new store. Perhaps people will eventually take their savings out with interest to spend on a big-ticket high-end item such as a Range Rover or invest in a child's college education that otherwise they could not afford. Stock and bondholders help the candy company raise capital outright and potentially increase their own wealth in the process as the company expands, thus helping the economy and taking advantage of mass consumerism at the same time.
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