Posts Tagged ‘New York Times’
An economist and writer at the Federal Reserve Bank in Dallas tell us household consumption — not income — is the best measurement of “financial well-being.” The incomes of the top 20 percent of US households may be 15 times greater than the bottom 20 percent, but the top group’s consumer spending is only four times greater than the bottom group’s. And on a per person basis, the richest household only outspends the poorest by 2.1. to 1 (because richer households are larger on average). Writing in the Sunday New York Times, the bankers explain:
To understand why consumption is a better guideline of economic prosperity than income, it helps to consider how our lives have changed. Nearly all American families now have refrigerators, stoves, color TVs, telephones and radios. Air-conditioners, cars, VCRs or DVD players, microwave ovens, washing machines, clothes dryers and cellphones have reached more than 80 percent of households.
So there you have it. Because nearly all of the poorest households have all or most of the “conveniences we take for granted,” they really aren’t that poor. In fact, the bankers tell us, “the abstract, income-based way in which we measure the so-called poverty rate no longer applies to our society.” By their definition, the truly poor are those who don’t have the modern conveniences nearly everyone else has. In which case, that odd millionaire couple that opts out of a consumerist lifestyle would be poor. They say no to the so-called conveniences because they don’t want to add to the human and ecological toll our consumer economy extracts.
The bankers praise “a capitalist system that has for generations been lifting American living standards.” Yes, if you define standard of living by material things. We certainly do have more material things in the average rich and poor households. And I suppose that means all of us — rich and poor — are happier than generations before us? And Earth has infinite capacity to lift the world’s material living standards for generations to come? Just wondering.
In advertising circles these days, “word of mouth” has its own acronym (WOM) and trade association (WOMMA), signaling its arrival as a marketing discipline. Companies love good WOM because they believe their customers are likely to believe friends and peers who recommend their products more than any commercial source. While that marketing axiom has been around for decades, what’s changed is the dedication and technology marketers are applying to monitor and generate WOM — or buzz.
So with a raised eyebrow I read an op-ed piece in the Sunday New York Times, “Loose Lips Win Elections.” The authors, executives at a research firm, claim that John Edwards and Mike Huckabee performed better than expected in the Iowa caucuses because they benefited from what they called “word of mouth advocates” — evangelistic supporters who spoke to friends and colleagues before and during the caucuses.
Whether by chance or design, such citizen advocates created the explosive growth in support for Mike Huckabee and sustained John Edwards, even as both were vastly outspent by their opponents.
I don’t believe sophisticated presidential campaigns leave anything like this to chance. It was by design that Edwards and Huckabee got their citizen advocates out in large numbers. Good for them. As the op-ed writers noted, both candidates had to do something to counteract the much larger TV advertising campaigns mounted by their chief rivals. And they understandably chose a WOM strategy. According to the authors:
Public trust in all kinds of communication is eroding, with a notable exception: word of mouth…Our mid-December survey of Iowa voters found 38 percent saying they trusted information provided by TV ads, while 69 percent trusted “comments from friends, relatives and colleagues.”
There’s reason to believe even word of mouth will soon suffer the same credibility loss as other forms of communications. Why? Because marketers are increasingly manipulating and instigating word of mouth, as Adweek magazine explained in last week’s issue:
People, of course, have always acted as brand ambassadors by sharing recommendations with friends and associates…Now, however, these interactions have become supercharged thanks to a new breed of brand ambassadorship programs that formalize the relationship between marketers and average consumers passionate about their products. These programs “hire” consumers, via incentives and rewards, to act as part PR agents, part sales reps and part evangelists. They mix the spontaneity of buzz building with technology to instigate, guide and measure what repeat customers are saying to each other about their brands.
As citizens begin to understand how these so-called ambassador programs work, it won’t be long before many of us start doubting the credibility of certain acquaintances or colleagues who speak with unbridled fervor for a brand — whether a product or a candidate. After all, they may be receiving compensation of some sort for speaking out. I say “may” because right now there’s no guarantee these enthusiastic consumers or voters will divulge their relationship to a commercial or political entity. As Adweek explains:
The Word of Mouth Marketing Association, a trade group of agencies and marketers who use word-of-mouth marketing, has instituted an informal, but largely unenforced, industry policy that brand reps must always disclose their relationship to the product or service when promoting it.
So whether on behalf of products or candidates, word of mouth appears destined to become yet another suspect source of communication. That means the Huckabees and Edwards of the next Iowa campaign won’t be able to count on vocal supporters to sway opinion like they did this time around. And worse yet, the rest of us are left to wonder whose words we can still trust and whose opinions have been put up for sale.
If ever there was an article tailor-made for debate across America, it would be the lead story in The New York Times on Sunday: “The Richest of the Rich, Proud of a New Gilded Age.” Read it and decide for yourself whether this is an era we can look upon with great pride.
Certainly, Sanford I. Weill, retired chairman of Citigroup, does. He tells the Times, “People can look at the last 25 years and say this is an incredibly unique period of time. We didn’t rely on somebody else to build what we built, and we shouldn’t rely on somebody else to provide all the services our society needs.”
Somebody, as you might imagine, is government. I am no expert on political or economic history, but one thing government surely did in the past 25 years is roll back regulations that businesses claimed stood in the way of their ability to generate jobs and wealth for all Americans. Reporter Louis Uchitelle also cites the example of President Clinton, who in 1999 revoked the Glass-Steagall Act of 1933. The Act outlawed having commercial and investment banking and stock brokerages under one corporate roof because 74 years ago government thought this structure created too many conflicts of interest and contributed to the 1929 crash and the Depression. And who might have benefitted from Clinton’s repeal of the Act?
So it rings mighty hollow when Weill claims successful corporations like Citigroup “didn’t rely on somebody else” to reach the heights they have. I suppose he could argue that government simply got out of the way of business and that’s why the wealth of companies like Citigroup is now so great. Any way you look at it, however, big businesses have relied on government to take actions that make it possible for them to grow as fast and large as they have. Meanwhile, for only the third time in the last century (1915-16 and the late 1920s) has “5 percent of the national income gone to families in the one-one-hundredth of a percent of the income distribution,” according to economists cited in the article. Hence, the new Gilded Age is upon us.
I do believe individual leaders can make a huge difference in the fortunes of companies and societies. And they deserve to be recognized and fairly compensated. But the leaders I most admire come from a place of humility about their accomplishments and realize their great accomplishments are not theirs alone. They are quick to credit and thank others for their success (including government), not because they are excessively humble, but because it’s true. They also will tell you when they’ve been lucky, as when living through the great bull markets over the 25 years Weill speaks of.
As Paul Volcker told the Times, “The market did not go up because businessmen got so much smarter.”
I don’t have the answers for addressing the great worldwide income disparity today. But I do know the situation isn’t going to get better if our wealth leaders believe they have only themselves to thank for living among the .01 percent.