Can spending become an addiction? Are we trying to create a generation of "must have" individuals who are so accustomed to having what they see advertised that they buy it even though it must go on a credit card or other installment payment? Is "easy credit" a means of turning buying into a habit? Through skillful advertising one entire industry, cigarettes and tobacco, created an environment where cigarettes were consciously or unconsciously associated with the wealthy, successful or chic. Who couldn't be impressed as a young person when their movie star idol, male or female, casually lit a cigarette at the appropriate point on the silver screen? It doesn't take long for that kind of conditioning to develop a smoker. Look at the effects of the addiction to tobacco and the cost to society as we try to eliminate smoking today. There was a time the tobacco companies actually gave cigarettes to service men and to students on college campuses to promote their usage. The overall effect was huge dividends for the seller but had some dreadful long-term consequences! Could this be happening in our buying habits today ?
When I watch Apple bring out new high tech products with advertising that makes the new product appear to be an absolute necessity to keep current in today's lifestyle, it is understandable that kids "must have one, too." That need is not limited to the actual kids by age. My over 21 grandchildren and their parents also are in the consumer population. My youngest grandson, now 10 years old, has grown up with electronics, designer label clothing and the most popular family cars. He has been using his smart phone as far back as I can remember. What this will lead to when he becomes an adult, I will probably never know but I believe the "conditioning" brought about by good, successful and costly, advertising must be working. Does all this lead to a generation which will have a false sense of the value of staying up with the Joneses?
This is not an attempt to condemn any new products, and certainly not the thing we call "credit buying." As a self described student of economics, I know the need for growth in our economy. And, as a practical engineer and company manager, I know new products are the life-blood of any corporation. However, I have to question if we are being too successful in leading people into a financial trap to stay abreast of innovation at all costs.
Doesn't anyone talk about saving rather than spending today? As a child, I was taught to save a portion of my allowance. During World War II, we bought "saving stamps" which became War Bonds when we had accumulated enough 10 cent stamps. Being taught as a child to restrain from spending all of my allowance had become a habit by the time I got my first working income as an early teen. Passing out grocery store handbills once a week or shoveling snow off sidewalks and driveways never made one wealthy but the habit to save was reinforced even though it was a meager amount -- even for a teenager. There were far fewer choices for a young person's money in those days and there certainly were fewer products to want but there was much more emphasis on saving than on spending.
Advertising certainly has a major impact on our buying habits today. We all know name brands are an extremely important part of today's lifestyle. It hasn't been that long ago that a newspaper reported the story of some young kids stealing the NIKE shoes from another young person who was wearing them. They had shoes, but they were not NIKE brand and all the professional basketball players wore NIKES. We still have the fixation with labels today and it is driven by name recognition and measured in sales dollars. My youngest son's family, all six of them, have Green Bay Packer sweat shirts with other matching Packer gear paid for at twice the cost of unbranded similar gear. But, they live and work in Wisconsin and proudly support the Packers. They also have University of Wisconsin gear of similar cost and purpose because my son and his wife are graduates of UW-Madison. Oh, and by the way as a side note, they also have University of Arkansas gear because Grandpa (me) is a Razorback from the class of 1964. It is interesting to me as I write this because I have only a few physical items that allude back to my affiliation with the 1960s era football teams. But I did contribute to the problem of supporting the consumer attitude by buying the Razorback gear.
When I watch the business channel on television and read the reports of how many million cars and trucks are being sold each year, I know it is good news for the automakers. The investing community's concern, however, comes when they look at the actual interest rates being charged, the lengthy duration of the loans, and the "underwater" resale value of the vehicles before the loans are paid off. Can a buyer actually afford a 72-month loan when so few qualify for the low, advertised interest rates ? Apparently not many buyers of cars pay cash these days.
Ford Motor Company may be thinking far ahead with their all aluminum body F-150 pickups which will make disposal easier and more profitable for the future because there could be a lot of used trucks if the current sales rates continue. The upfront cost of the restyled body will be a factor to deal with -- in the future.
Borrowing money to go to college is routine today, but the question of payback is another topic. Does it pay to borrow for college if the degree doesn't produce a job with a salary high enough to repay the loan?
Do we, as a society, actually gain by borrowing for everything today and mortgaging our future?
Only time will tell.
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Editor's note: Leo Lynch is an award-winning columnist. He is a native of Benton County has deep roots in northwest Arkansas. A retired industrial engineer, he is a former Justice of the Peace and can be contacted at [email protected].
Editorial on 01/13/2016