The Consumer Class

Our world is one of contrasts. While 1.7 billion people earn enough to be classified as members of the consumer class (users of items including televisions, telephones, and the Internet, along with the culture and ideals these products transmit), as many as 2.8 billion people including Pakistanis struggle to survive on less than $2 a day, and more than one billion lack reasonable access to safe drinking water. Yet providing adequate food, clean water, and basic education for the poorest could all be achieved for less than people spend annually on makeup, ice cream, and beverages.

Private consumption expenditures—the amount spent on goods and services at the household level—topped $20 trillion in 2000, up from $4.8 trillion in 1960. Some of this four-fold increase occurred because of population growth, but much of it was due to advancing prosperity in many parts of the globe. Production efficiencies of the 20th century have driven much of the consumption boom. Modern industrial workers now produce in a week what took their 18th century counterparts four years. In the semiconductor industry, production efficiencies helped drive the cost per megabit of computing power from roughly $20,000 in 1970 to about 2 cents in 2001. Global spending on advertising reached $446 billion in 2002, an almost nine-fold increase over 1950.

According to a survey on Consumer Spending and Population, by Region, in 2000 it is found that 5.2% of world population in United States and Canada has 31.5% share of world consumption expenditures. Out of 6.4% of world population in Western Europe has 28.7%, 32.9% in East Asia and Pacific has 21.4%, 8.5% in Latin America and the Caribbean has 8.5%, 7.9% in Eastern Europe and Central Asia has 3.3%, 22.4% in South Asia has 2.0%, 0.4% in Australia and New Zealand has1.5%, 4.1% in Middle East and North Africa has1.4%, and 10.9% Sub-Saharan Africa has1.2% share of world consumption expenditure.

The health status of women and children in Pakistan is awful—eight babies are born every minute, one mother dies every 20 minutes and about 15 of them suffer from morbidity every 20 minutes, about 50 percent women are suffering from malnutrition and anemia. Less than 20 percent of them are receiving help during delivery and about 25 percent of children are being born under weight. The vision of reproductive health in Pakistan is less costly than the amount spent on smoking.

Smoking contributes to around 5 million deaths worldwide each year. In 1999, tobacco-related medical expenditures and productivity losses cost the United States more than $150 billion—almost 1.5 times the revenue of the five largest multinational tobacco companies that year.

Time pressures are often linked to the need to work long hours to support consumption habits—and to upgrade, store, or otherwise maintain possessions.

In 2002, 1.12 billion households—about three quarters of the world's people—owned at least one television set—Pakistan had 4 million TV sets with only 2,823,800 registered. Some 41 million passengers vehicles rolled of the world's assembly lines in 2002, five times as many as in 1950. The global passenger car fleet now exceeds 531 million, growing by about 11 million vehicles annually. Consumers across the globe now spend an estimated $35 billion a year on bottled water and consumes 33 million liters (35 million quarts) a year in Pakistan.

In 1999, some 2.8 billion people—two in every five humans on the planet—lived on less than $2 a day (Pakistan falls within this category with Per Capita Income as $492). In 2000, one in five people (2 in 5 people in Pakistan) in the developing world—did not have reasonable access to safe drinking water. 2.4 billion people worldwide—two out of every five (and in Pakistan, 3.5 in every 5)—live without basic sanitation. Providing adequate food, clean water, and basic education for the world's poorest could all be achieved for less than people spend annually on makeup, ice cream, and pet beverages.

When the annual expenditure on luxury items in the world are compared with funding needed to meet selected basic needs we see that Annual Expenditure on products like makeup, perfumes, ice cream and beverages.

Consumer goods and services are often sold on the premise that they make life easier and more fulfilling. But too often, beneath the surface of these claims, lay hidden costs. Automobiles are often advertised as bringing freedom to their owners, yet in reality, the average adult urbanite now spends 50 minutes a day behind the wheel. As consumers upgrade, store, or maintain possessions, they are also likely to experience time pressures linked to the need to work long hours to support consumption habits.

If a person is very poor, there is no doubt that greater income can improve his or her life. But once the basics are secured, well being does not necessarily correlate with wealth. Most governments make ongoing growth in the gross domestic product (GDP) a leading priority, under the assumption that wealth secured is well-being delivered. Yet undue emphasis on generating wealth, particularly by encouraging heavy consumption, may be yielding disappointing returns. Overall quality of life is suffering in some of the world's richest countries as people experience greater stress and time pressures and less satisfying social relationships, and as the natural environment shows more and more signs of distress.

By redefining prosperity to emphasize a higher quality of life—rather than the mere accumulation of goods—individuals, communities, and governments can focus on delivering what people most desire. Indeed, a new understanding of the good life can be built not around wealth, but around well being: having basic needs met, along with freedom, health, security, and satisfying social roles. Asif J. Mir, Organizational Transformation

Cutting out a Sustainable Economy

The choice of who allocates resources is crucial. We see spectacular examples of government mismanagement. The market should be left free to allocate resources. Markets alone can assemble and convey essential information about security and value. Prices and profits will work to maximize production and minimize resource use.

Market mechanisms are sufficient to protect forests, for instance. Growing scarcity will drive up the price of wood, reduce consumption, as well as prompt landowners to plant more trees in anticipation of higher prices.

Traditional economics asks how to produce what for whom. Sustainable economics examines these same questions, but includes future generations in the ‘for whom.’ It asks how irreplaceable resources—water, air, soil, and fish and wildlife—can be adequately conserved. It also recognizes that economic mechanisms that do not efficiently and equitably satisfy human needs are not likely to be sustainable.

Sustainable economics analyze issues complicated by politics, ideology, and nationalism. It tries to ascertain what works to make resource use more efficient. How do people behave in relation to their, natural resources? How does a country’s economic system alter its prospects for survival? Measuring national performance in food security, energy efficiency, environmental pollution and equity can form the beginnings of an answer.

The issue is not socialism versus capitalism; it is the efficacy with which economic systems achieve their intended ends. Ideally nations could be graded for degree of market orientation and assessed for changes in resource use. But no one has invented a grading system for economic philosophy or environmental sustainability. It is instructive, nonetheless, to categorize nations as centrally planned or not and to assess their resource-use efficiency. A centrally planned economy is one that through price controls, state ownership, or allocation of capital effectively, managers more than half of a nation’s industrial and agricultural production.

From the end of World War 11 until a few years ago, centralized state planning has served as a model for almost half the world. Newly independent developing countries faced with the choice between centralized control and market orientation usually chose the former. That their foreign ruler had been capitalists turned them against market systems, while the tradition of colonialism eased the transition to tight central control. In the postwar era, many military states and even most market-orientated nations also expanded the role of government in the day-to-day management of their economies.

The world today is at a turning point in economic management. The abrupt Chinese shift to market mechanisms is the most dramatic example, not only because of the vast number of people affected, but because of the reform’s spectacular early successes. Many African nations, plagued with agricultural decline, have begun to extend market incentives for agriculture. Latin Americans, burdened with debt, have moved to sell off state-owned companies. Meanwhile the Soviet Union, its confidence in uninterrupted growth shaken, is debating the need for economic reform. Ironically, although Western governments have also begun to sell off state-owned concerns, they increasingly subsidize private agriculture, restrict trade, and permit concentration of economic power in industrial conglomerates.

The efficiency with which nations produce food and consume energy provides a useful indicator of their progress toward sustainability. Countries of all political stripes seek to avoid excessive dependence on food imports. Air and water pollution and land degradation are closely associated with agricultural production and energy-use efficiency. Thus, if market pricing and competition provide greater efficiency, both economists and environmentalists have a stake in the changing role of the market in the world’s economies.

Some environmentalists reject both markets and bureaucratic planning as incapable of dealing with the crisis of sustainability. Putting a sober twist on an old joke: ‘In capitalism, man exploits man; in socialism, it’s the other way around,’ they say both exploit nature. But important differences exist between systems, as shown by comparing their efficiency in agricultural production.

Agricultural production can critically affect the consumption and disruption of resources—water, wood, and air. Soil erosion and deforestation can result from low agricultural productivity if new, marginal lands are pressed into production to make up for lost potential. Overuse of chemicals can cause water pollution. Efficiency is consequently an essential ingredient of agricultural sustainability. Economists define efficiency, roughly, as maximizing output while minimizing input. When farmers produce a given value of grain with a least-cost combination of land, labor, fertilizer, and machinery, production is efficient. When grain production increases faster than consumption of the inputs, productivity and the outlook for sustained production improve. When productivity declines, a society is headed for trouble. Inflation, the need for costly imports, even famine can result.

Land and labor productivity, two partial but important measures of performance, reveal several advantages of market orientation. Crop production per hectare is generally higher in market-orientated countries. Of course, factors others than the economic system affect these ratings, such as rainfall levels, inherent soil fertility, and farm price policies that may either encourage or discourage farm efficiency. Japan’s population pressure, for example, has pushed it to increase land productivity, but this explains only about a third of the more efficient record it has than the Soviet Union. The remainder is attributable to policies that, among other things, keep prices high, encourage larger numbers of people to farm, and keep farm size low. Similar policies have placed market oriented Hungary even higher in land productivity.

Ranking nations by agricultural labor productivity shows a dramatic advantage for market economies. European countries enjoy labor productivity rates often double of countries like Poland, Cuba and Lithuania.

Labor productivity naturally tends to be higher when farmers earn high incomes, which in turn indicates higher levels of development, a central goal of economic policy. Strictly regulated prices reduce profitability for farmers, and deprive them of capital to invest in machinery and fertilizers to raise productivity.

Land productivity says little about the ‘total factor’ productivity of an agricultural system, which also takes into account inputs of labor, fertilizer, and machinery or animals. Efficiency can be distorted and productivity diminished by poorly crafted policies. For example, high price subsidies and protective trade barriers account for part of the relatively high land productivity in Japan. Consumers bear the cost of these distortions, paying almost three times the import price of food commodities.

Total factor productivity is relatively easy to determine in a perfectly competitive economy. Ideally, price signals instruct farmers on how much to spend on production, and they maximize their earnings by choosing the least-cost combination of labor, land, machinery, and fertilizer. According to microeconomic theory, they produce at the level at which the cost of their last, or marginal, unit of production—their most expensive ton of grain—just equals the price they receive. They maximize profits in this case, making efficiency and productivity almost synonymous. In non-market economies, on the other hand, prices of resources usually do not reflect their scarcity, and so resources must be allocated by plan, a fact that directly affects productivity.

In Europe resource efficiency in agricultural sector is frequently undermined by heavy farm production subsidies, both with trade barriers and direct budgetary expenditures. The United States is by no means unique among market-oriented countries in failing to adjust agricultural policies properly.

Common Market countries’ agricultural policies drive prices one fourth above world market levels on most products. Such subsidies hurt not only domestic consumers but also exporters of developing countries who could produce more efficiently and sell cheaper. The policies have the aim of preserving and sustaining the farm sector and its way of life. Cut the goal could be equally well served without the damage caused by price distortions if governments substituted direct income transfers for agricultural price supports.

Western nations, nonetheless, have long satisfied basic and fiber needs, and government policies have played a major role in this success. When policies such as minimum price supports are introduced in order to ensure food security and stabilize markets—this is, when supports are set below international market levels—they can be useful. When supports exceed world market levels, however, they interfere with trade, stimulate environmentally disruptive over production, waste taxpayers’ and consumers’ money. These distortions, like their more pervasive counterparts in planned economies, have political motivations that may well be worthy. But their impact on environmental and economic sustainability cannot be ignored. Ultimately, they become counterproductive.Asif J. Mir, Organizational Transformation

The Pounding Head of Poverty

Future trends show that the world poverty is decreasing and we are nearing the era when the poor of today will live the standard of the average rich of today. Contrary to this trend, in Pakistan poverty levels are going further up. Although many Pakistanis have greatly improved their standard of living since 1947, yet over 30 percent of them—around 42 million people—still live below the poverty line. The gap between the rich and poor has widened with some gaining financial comfort while others are finding it impossible to permanently escape from destitution.

Poverty is hunger. Poverty is lack of shelter. Poverty is being sick and not being able to see a doctor. Poverty is not being able to go to school and not knowing how to read. Poverty is fearing the future, living one day at a time. Poverty is losing a child to illness brought about by unclean water. Poverty is powerlessness, lack of representation, and freedom.

Poverty has many faces, changing from place to place and across time, and has been described in many ways. Most often, poverty is a situation people want to escape. So poverty is a call to action—for the poor and the wealthy alike—a call to change the world so that many more may have enough to eat, adequate shelter, access to education and health, protection from violence, and a voice in what happens in their lives.

For many, lack of access to income-generating activities, coupled with lack of basic services in education and health, is the determining factors behind acute poverty. In Pakistan, lack of access to credit, training in income-generating activities, basic social services, and infrastructure are critical factors behind the persistence of substantial poverty, especially in underserved rural and urban areas. Poverty levels also differ depending on where people live. The metropolitan poverty rate differs greatly between suburbs and the central city.

At the Millennium Summit in 2002, major development organizations looked at development goals, which had been agreed at international conferences and world summits during the 1990s, and distilled them into eight goals with eradication of extreme poverty and hunger at top. The Goals were formed in response to what was seen as uneven development progress, where globalization benefits millions, but poverty and suffering still exist.

This is scarcely surprising considering that those who live below the poverty line and that any supplementary income from working children becomes unavoidable for their families to make ends meet. We have to understand as why children go to work. If parents don't send their children to work I am sure factories will not be able to consume them. No mother likes her child to go for work. It is financial crisis, which forces. Our understanding should be little more practical as no parents want their children work at the age when children are to study and play.

The stress on a gradual approach towards eliminating child labor is the correct one. At the same time, poverty alleviation efforts must be stepped up, so that the loss of an earning member of the family is not felt, so actually and over an indefinite period of time.

Poverty is no longer just a matter of calories or of pricing a consumption bundle. It has to do with the poor defining and achieving their well being themselves and living a life in a participative society where the State is an enabling rather than a hindering institution. It is not that income or consumption level is unimportant. It remains at the core of any definition of poverty. But we must view it as an input as much as an outcome. It is an input which contributes towards well being. But just as important are public goods – health care, clean water, literacy, and healthy environment.

Pakistan's rural sector accounts for more than 70 percent of employment, and roughly two thirds of rural employment is in agriculture. Less than a third of rural households get loans, only 10 percent of which are from institutional sources. Pakistan's credit institutions are not helping the country accelerate agricultural growth and reduce poverty.

To improve performance in the rural economy and efficiency in financial institutions, rural credit markets must be liberalized.

Produce and price controls must be replaced by prudent regulation and supervision, combined with policies to stabilize the economy. Commercial banks must operate in a competitive environment. They must be allowed to set interest rates for rural lending that cover their transaction costs. Credit must be made available to support productivity growth for agricultural smallholders and small producers of the rural non farm sector, where Pakistan's growth potential lies. Credit must be made available to women and to the rural poor for consumption smoothing and for sustainable income generating activities.

Policy should be directed at developing a market based financial system for rural finance, but because of market failures to support disadvantaged groups, a special priority program may be needed to get credit to women, smallholders, and the rural non-farm sector.

Subsidizing interest rates is not the way to help marginal borrowers. Instead, they can be helped through fixed cost subsidies and self-selected targeting. NGOs should be encouraged to help, keeping in mind such success stories as the Grameen Bank in Bangladesh and Badan Kredit Kecaratan (BKK) in Indonesia.

Pakistan needs to make the policy choices to help it translate economic gains into real poverty alleviation for its citizens. It needs social protection, human development, and a well-coordinated rural strategy. Issues of governance are at the heart of many of the difficulties encountered in mitigating poverty and broadening access to social services for the poor. Asif J. Mir, Organizational Transformation

The McWorld raiding the Culture

Today’s global economy has a tendency to insulate consumers from the various negative impacts of their purchases by stretching the distance between different phases of a product’s lifecycle—from raw material extraction to processing, use, and disposal. Yet at the same time, social challenges accompanying economic globalization call for innovative forms of political mobilization across international borders. Shifting to more sustainable patterns of consumption and production worldwide will require pursuing new ground rules in order to forge a global economy based on protecting cultural values.

What we see is the onrush of the economic, technological, and ecological forces mesmerizing peoples everywhere with fast music, fast computers, and fast food—one McWorld tied together by communications, information, entertainment, commerce and especially the culture.

Today, the global spread of McWorld is rapidly bringing the consumer society of USA to the rest of the planet. The globalization of the consumer economy is closely linked with the general economic boom and growth in the movement of goods, services, and money across international borders, which accelerated during the 1990s.

McDonald’s operates 30,000 restaurants in 119 countries and serves 46 million customers each day. Its total revenue was $15.4 billion in 2002. On opening day in Kuwait City, the line for the McDonald’s drive-through was over 10 kilometers long. McDonald's has also spread expeditiously across Pakistan in almost 5 years with 18 restaurants in major cities. Strangely, there is no McDonald’s outlet in Peshawar and Quetta. McDonald’s costs the same in Pakistan as in the US, and given the per capita GDP disparity between the two countries, it is the cheapest food in one country, while being one of the most expensive in the other.

Pizza Hut also operates a chain of outlets in Pakistan and planning further to invest approximately 1 billion rupees in expansion. The money is being used to open 20 new outlets.

Coca-Cola sells more than 300 drink brands in over 200 countries. More than 70 percent of the corporation’s income originates outside of the United States, and its net revenues reached $19.6 billion in 2002.

Meanwhile, corporate strategies focused on boosting consumer demand in Pakistan have lead to increases in purchases of all manner of goods, from cars and televisions to paper and fast food. While it is ethically problematic to suggest that developing countries are not entitled to have the same options for material consumption that have long been taken for granted by western consumers, the global adoption of industrial country–style consumption patterns would place unbearable strains on local cultures.

The 1990s saw the emergence of many important international agreements and commitments embracing the need to transform unsustainable patterns of consumption and production. Agenda 21, the action plan that emerged from the 1992 Earth Summit in Rio de Janeiro, called on international institutions and national governments to promote greater energy and resource efficiency, minimize waste generation, encourage environmentally sound purchasing, and shift toward pricing systems that incorporate hidden environmental costs.

The UN Commission on Sustainable Development has provided a useful annual venue for governments and others to discuss consumption and production issues. The deliberations have produced little concrete action though. There is no voice raised for conservation of social values.

At the 2002 World Summit on Sustainable Development in Johannesburg, South Africa, governments agreed to develop a 10-year framework of programs to accelerate the shift toward sustainable consumption and production. These include offering a better range of products and services to consumers, providing more information about the health and safety of various products, and establishing programs of capacity building and technology transfer to help share these gains with developing countries. The World Summit also generated more than 230 partnership agreements among diverse stakeholders.

The Organization for Economic Co-operation and Development has sponsored a series of meetings and papers aimed at encouraging governments to implement innovative sustainable consumption and production policies.

In all these forums, apart from consumption and production, no emphasis is laid on the issue of social influence. Unfortunately, the limited gains made since 1992 in shifting toward more-sustainable patterns of consumption and production have been largely overwhelmed by the continued global growth of the consumer society. The controversial lifestyle issues continue to haunt.

The breakdown of WTO negotiations in Cancún in September 2003 provided reform-minded governments and activists with an opportunity to push for bringing future trade negotiations into better balance with sustainable development concerns. The way forward, nevertheless, is not yet clear.

Several new initiatives have emerged in the corporate and financial sectors, including the United Nations’ Global Compact, which calls on participating companies to integrate nine core values related to human rights, labor standards, and environmental protection into their operations, and the Equator Principles, which call on leading banks to manage environmental and social risks in their lending operations.

The international trade negotiations can provide opportunities to push for policy reforms needed to promote more-sustainable consumption and production. All the same, WTO rules and negotiations can also be used to protect cultures and social taboos of the host countries of MNCs.

Brands like McDonald’s, Pizza Hut, Pepsi and Coca-Cola are not just cultural aggression but also an expression of power; once America lost its power these will go. It is nonetheless impossible to filter culture. In the past we hated the British raj but gradually adopted its symbols. Today we hate America and don’t want to adopt what we think is its culture. Pakistan must save its own culture to counter the onslaught. There is a need for reform in our culture, but this should not be obfuscated through this hatred or that. The only answer to the American cultural onslaught is the protection of Pakistan’s own culture. www.asifjmir.com

Emphasizing Well-being

In recent years, psychologists studying measures of life satisfaction have largely confirmed the old adage that money can’t buy happiness—at least not for people who are already affluent.

A nation is successful not when it’s rich but when its people are happy. If you are very poor, there is no doubt that greater income can improve your life. But once the basic needs are secured, well-being does not necessarily correlate with wealth. The social and psychological needs of human beings also shape our cultures, and help to determine whether our civilization is sustainable or not. Good life is redefining prosperity to emphasize a higher quality of life, rather than the mere accumulation of goods.

The Prime Minister is busy sketching up plans for making continuing increases in gross domestic product (GDP) as a chief priority of domestic policy, under the assumption that wealth secured is well-being delivered.

Whether due to curbs on hundi business as a post-9/11 scenario or owing to connoisseur planning, foreign exchange reserves (FER) of Pakistan touched highest levels ever in the previous government. With increased GDP and FERs the number of suicidal deaths also grew larger when poverty ridden people take their lives. This situation demonstrates that some link was broken somewhere. And that’s about social moorings and calls for a shift in paradigm.

The government must focus on delivering what people most desire. Indeed, a new understanding of good life can be built not around wealth but around well-being: having basic survival needs met, along with freedom, health, security, and satisfying social relations. Consumption would still be important, to be sure, but only to the extent that it boosts quality of life.

Pakistani society if focuses on well-being will involve more interaction with family, friends, and neighbors, a more direct experience of nature, and more attention to finding fulfillment and creative expression than in accumulating goods. It should emphasize lifestyles that avoid abusing our own health, other people, or the natural world. In short, it will yield a deeper sense of satisfaction with life than many people report experiencing today.

What provides for a satisfying life? The disconnection between money and happiness in wealthy countries is perhaps most clearly illustrated when growth in income is plotted against levels of happiness. In the United States, for example, the average person’s income more than doubled between 1957 and 2002, yet the share of people reporting themselves to be very happy over that period remained static.

Happiness is best predicted by the breadth and depth of one’s social connections. People who are socially connected tend to be healthier—often significantly so. More than a dozen long-term studies in Japan, Scandinavia, and the United States show that the chances of dying in a given year, no matter the cause, is two to five times greater for people who are isolated than for socially connected people.

International development professionals also now acknowledge that strong social ties are a major contributor to a country’s development. The World Bank, for instance, sees social connectedness as a form of capital—an asset that yields a stream of benefits useful for development.

Creating a higher quality of life requires us to help create new political, physical, and cultural infrastructures of well-being. Pakistan has no such infrastructure and is thus ranked 167 out of 180 countries in Well-being Index. Sri Lanka ranks 49 and Bangladesh 131. Interestingly, Nigeria ranks 133, a position better than Pakistan.

Year after year, the Human Development Index report shows Pakistan lagging behind the rest of the regional countries. Our investment in realizing the human potential remains the lowest in South Asia. The HDI report lists a shocking situation of the poor quality of life in Pakistan.

The standard tool used to measure societal health, GDP, is much too narrow to serve as a yardstick of well-being because it sums all economic transactions, regardless of their contribution to quality of life. It also ignores entire swaths of non-market activity that contribute to individual and society well-being.

A well-being society would offer consumers a sufficient range of genuine choices rather than a large array of virtually identical products. Businesses would be encouraged through economic incentives to deliver what consumers really seek—reliable transportation, not necessarily a car; or strong neighborhood relationships in lieu of a large house with a big yard. Choice would be redefined to mean options for increasing quality of life rather than selections among individual products or services.

If focused on well-being Pakistani society would ensure that everyone in it has access to healthy food, clean water and sanitation, education, health care, and physical security. It is virtually impossible to imagine a society of well-being that does not provide for people’s basic needs.

Making the transition to a society of well-being is a challenge to the new premier given people’s habit of placing consumption at the apex of societal values. All the same, any move in this direction starts out with two strong advantages. First, the human family today has a base of knowledge, technology that can be invested in well-being rather than in continued material accumulation for its own sake. A second advantage is simple but powerful: for many people, a life of well-being is preferred to a life of high consumption.

By nurturing relationships, facilitating healthy choices, learning to live in harmony with nature, and tending to the basic needs of all, the PPP Government will leave its indelible footprints in history if it shifts from an emphasis on consumption to an emphasis on well-being. This could be an apposite response to the growing number of suicidal deaths due to poverty, and to be his great achievement in the twenty-first century.