A Question of Economic Freedom: The Mindless Spend Trend


We live in a time when economic freedom is considered to be an important basis for virtually all other individual freedoms as well as for personal and global prosperity. But have you ever stopped to think what forces may be influencing your personal spending choices? When we go into a store or online to make a purchase, what is it that makes us decide to spend?

In many cases, our decision will be the result of a genuine or perceived need or desire for something. The impulse to spend may itself have arisen from an advertisement, or from a range of innate inclinations—such as the motivation to give a gift. 

Whatever the origin of our decision to spend, one thing seems certain: that the final decision of when to spend—and on what—is ours, and ours alone.

But is it? While even the most persuasive of advertisements cannot extract our cash without our complicit agreement, it appears that a significant proportion of our spending is mapped out in advance with a high degree of predictability. 

It is widely known and accepted, of course, that seasonal holidays will create a spike in consumer spending. But when we stop and think about it, these are often spending events that we have been born into, as the result of what we might call the conscious or unconscious acquiescence to a sense of tradition.

While we may think that we are the gatekeepers for our own expenditure, this may be largely an illusion. It could well be the case that when we plot our annual budget over the course of a year, we find that we are actually making our most significant outlay at times that we ourselves have not determined, but that have been predetermined for us on the basis of tradition alone, and our identification with it.

The three months before Christmas, for example, is the period when many retailers make more than half of their annual sales and profits. In the United States, it has been calculated that a quarter of all personal spending takes place during the Christmas holiday shopping season, spiking on pre-Christmas discounting bonanzas such as Black Friday, Cyber Monday, Green Monday, and Super Saturday. That's a lot of our hard-earned money spent in the name of Father Christmas. Add to this Valentine's Day, Easter and Halloween, and it becomes clear that a large part of our spending is highly predetermined.

This phenomena is not just evident in the West. In China, consumers spent billions during Golden Week last year, with reported outlay ranging from $59.2 billion to as much as $180 billion. Golden Week is a national holiday that allows people in China to take seven consecutive days off from work or school. This week-long holiday has its origin in one day, October 1, 1949, when the People's Republic of China (PRC) was inaugurated. On that day an official victory celebration and ceremony was held in Tiananmen Square. Mao Zedong, a founding father of the PRC, raised the first Communist national flag of China before thousands of people at the square. 

To this day portraits of Mao are still displayed during this season. Once established, the holiday was extended to a full week in a bid to boost domestic spending—which it has—as an estimated 593 million Chinese people opted to travel during that week last year. Of that number, an estimated six million headed overseas to spend approximately $7.2 billion.

Regular, predetermined spending gluts are certainly useful for boosting the economy and for government budget planning. In the UK, for example, 5 percent of all Gross Domestic Product (GDP) is expected to come from retail sales each year. Thus we find religious, national, ideological or other traditions forming a part of the functioning of the same system—of which government is also a part. We accept this because we know no other way; these institutions are passed down through the generations. In fact, we are carried by the wave of this infrastructure from the time we have our first piggy bank. 

Nevertheless, there is an inherent irony. For a society that so highly regards individuality and self-determinism, it seems somewhat incongruous that our spending habits are predetermined by generations of tradition—tradition which, in some cases, we may not ever have stopped to question.

How much might our spending habits change if we were to examine our traditions more closely and choose them more mindfully? How much might our lives change?

Daniel Tompsett



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Economic Issues: The Beast in the Machine


Ensuring the health of household finances is likely to be high on the agenda for most of us. In the post-financial-crash world, we have all developed a heightened consciousness that money is the essential oil keeping the machine running.

Much the same is true of central governments. In the seven years since the financial crisis hit, Western nations have demonstrated a resolute focus on crisis management and on kick-starting their economies through a regime of quantitative easing, market stimulation and austerity. The result has been that many of these economies are now starting to yield slow growth and increased market stability. 

However, these measures will not solve the inherent problems that caused the crisis in the first place. One of the challenges to maintaining political and public attention for that goal is that the financial system is complex—massively complex. For governments holding office for finite terms, the primary objective is often economic stability, not disruptive overhaul.

Those initiatives that have been implemented to deal with the systemic problems have struggled to touch the surface of addressing real reform. Such initiatives have included the encouragement of challenger banks—the new breed of post-financial crash banks set up to challenge the largest established retail (high street) banks who lost credibility in the crash—and an unrealized desire to create a totally effective regulatory regime since the crisis.

Scandals such as the rigging of the London Interbank Offered Rate (LIBOR) by a number of investment banks, would suggest that we still have a long way to go to achieving real reform. Connected to hundreds of trillions of dollars worth of financial contracts, ranging from personal loans and credit cards to complex derivatives, LIBOR is one of the most important interest rates in global finance. The daily setting of LIBOR by the banks themselves determined the rate at which they were prepared to lend to each other. The breadth of the scandal became evident in 2012, and involved bankers from various financial institutions corruptly providing information on the interest rates they would use to calculate LIBOR. The scandal demonstrates just how chronically corrupt key elements of the system are.

Ironically, estimates indicate that in 2011 close to half (49%) of the world's adult population did not even possess a bank account. Yet even if we don’t all actively participate in the mechanics of the global financial system to the same extent, we are all impacted by it—especially when it breaks down. Philanthropic and microcredit initiatives do demonstrate a more outward focus, but efforts to bring about total reform have clearly failed, suggesting that the heart of the system is much less like a machine that can be fixed, and far more like a dynamic, wild force of nature beyond our control.

As the world begins to move on, there also appears to be a growing acceptance that the system will never be caged by regulation, only temporarily stabilized or momentarily tamed to allow us to secure our own short-term gains. Perhaps this is a beast that cannot be tamed because doing so would first require taming ourselves. At its heart is the systematized right of every individual to compete for self-gain, such that the wealthiest 1% own 48% of the wealth, while millions suffer poverty.

No matter where we are positioned in the wealth chain, scarcely anyone can escape from the fact that products and markets are designed to gratify consumer desire only momentarily, to ensure the essential return to market for renewed gratification. Therefore, in a very real sense, we ourselves are as much consumed as consumers.

Estimates for 2014 suggest that the number of adults with bank accounts had already grown to 62%. It may well be that government will be able to increase our integration within the financial system. However, based on its inherent flaws and inexorable link to our own flawed nature, should that really be the goal? Would it not be a far better solution if we could be released from its grip?.

While it might not be immediately apparent how this could be achieved, there are relevant principles from ancient sources that might seem simple on the surface, yet offer the potential for radical economic change if we would only apply them. The challenge there is that human nature is not predisposed to tame the beast in the machine. Because the beast in the machine is us. 


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