Saturday, September 24, 2016

Idealistic materialism

One of the most widely spread misconceptions of the American culture is that it is "materialistic," which is commonly understood as being obsessed with money. Even if this perception were true - which it is not - equating materialism with obsession with money is equating something with its opposite, such is virus with health or, to borrow from Orwell, slavery with freedom and war with peace.
In a literal sense, money is a symbolic representation of material resources, an abstract sign representing something material. This is the opposite of "material" and in the literal sense being obsessed with money is being obsessed with something symbolic and immaterial.
One may counter this by saying that people are not obsessed with money itself but rather with what money can buy. Fair enough. However, if this obsession with what money can buy were to be an expression of "materialism", what money can buy would have to be material. To be sure, some things that money can buy are material, such as food, clothing, shelter or cure of illness. The latter can be quite expensive in the US of A and even bankrupt some people. But material things are not how most people spend their money. Most people spend their money on symbolic representations of who they "wannabe."
Take for example housing, singularly the largest personal expenditure category according to the BLS statistics - over 34% of average annual expenditures nationwide. To put this number in a perspective, food accounts for less than 12%, gasoline and clothing - for about 4% each, and health care - for less that 7% (http://www.bls.gov/cex/csxann13.pdf). Housing, as most other goods, combine both material and immaterial or symbolic aspects - shelter from the element and symbolic representation of one's social identity or status. So how much is each?
One way to determine it is to compare the cost of home ownership to the cost of renting. According to the same source, the average cost of home ownership is about $6.3k per year, and the cost of renting is about $2.9k. This means that people pay on average, about $3.4k a year for "ownership" - which is a symbolic category. This represents 117% of the cost of material good (shelter). In reality, that number is much higher because rental prices are much higher as they would have been if most rental units were cooperatively owned. For example, I used to pay about $600 a month for a cooperatively owned 4 bedroom apartment, comparing to about $1,200 - $1,500 in commercial rent for a similar unit in that area. Based on that, the actual cost of shelter - if arranged for utility maximization - is about 50% of the current rent or about $1.5k per year on average. The "ownership" premium is thus $4.8k per year or 320% of the actual utility cost.
Of course, the same applies to other goods and services - clothing, transportation, consumer electronics etc. If the above calculations are indicative, people spend about 25% of their money - or about $12k per year on average - on material goods, and 75% ($35k per year) on symbolic ones, representing their social identity or status. For high earning households, those percentage are even more skewed toward the symbolic spending. The material needs of a billionaire are not that much different from those of a minimum wage worker. It therefore can be assumed that some 99% of the income of the top 1% is spent on symbolic "goods" - mainly social status and power (mansions, jets, yachts, politicians, whores etc.)
In short, Americans spend most of their money - some 75% on average- on immaterial and symbolic purchases which they are bamboozled into buying by the mythology of "ownership" and other marketing brainwashing. Only about the quarter of their spending is directed toward maximization of material utility.
This leads to the following conclusions:
1. People in the US can reduce their spending by about 75% without suffering any decline in the material standards of living, if the overarching goal of consumption is utility maximization rather than social identity and status expression.
2. Since marketing is one of the main mechanisms promoting spending on social identity and status, eliminating marketing altogether would actually maximize material utility.
3. Nearly the entire wealth of the top 1% can be confiscated without jeopardizing the material well being of the owners. The confiscated wealth can be used to maximize material utility such as public transportation, cooperative housing, or public health care.
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