What to spend your money on

There’s been a lot of talk over the past … innumerable generations on the subject of wealth inequality. The reason I hesitated in my opening sentence there was that I was originally going to write “years, ever since the austerity measures post-banking crisis began to take shape.” But then I immediately realised that I was entirely wrong; wealth inequality has been around for as long as there’s been wealth to distribute.

I’m not against wealth inequality per se, if you’ll allow me the opportunity to clarify that. If people work hard and earn a decent salary because that recognises their skills and position, then we will have a tiered wage system and so be it. People should be rewarded for their skills, and we as a society shouldn’t begrudge someone with particular skills from earning a decent wage that reflects their abilities. What is a respectable wage is something I shall happily defer for another day, as we shall otherwise be here for a substantially longer period of time; everyone should have a wage that allows them to live, not just to exist. My last comment on that side of the discussion is that I don’t  believe in the principle of footballers, lawyers, and bankers receiving massive – HUGE – salaries for a specific role. Yes, they are all skilled, and have invested training and received an education, so earning a good salary in return for a quality service is all fine in my book. But hundreds of thousands – millions, even – per year for being a footballer? A generous salary and a guaranteed bonus at the end of the year for being a banker? I wouldn’t mind so much if the bonus was related entirely to performance; that would, at least, guarantee a level of expectation in the field that things like morality are essential not optional.

I recognise that I am not be going far enough with that argument, however, so let me outline my own personal thinking so far on this rather thorny subject more widely, as wealth inequality covers a large field.

I have recently spent a few days in London with a friend, and while we were there, we took a walk round Harrods to see the Christmas area and just generally explore what the shop had to offer. It’s a stunning building over eight floors, and I am in awe at the design, the variety, and the quality of the goods in there. I’m also slightly terrified at the prices; a packet of three pencils was available for £9.99, a single pen was a fiver, and a bar of chocolate £6 … and that’s just the everyday items I managed to look at before passing out in horror. When I was brought round with smelling salts, I needed to be restrained as I was immediately terrified that every inhalation was costing me a fiver.

When a friendship bracelet is on sale for £140 and a men’s Cartier watch is available for £18,000 (I can get a decent watch for twenty quid, and it keeps time just as well, feels comfortable on my wrist, and I’m not terrified of wearing it because I’ve not just wasted eighteen grand on a mechanical timepiece), something is surely inverted with our society. Isn’t it? Or am I missing the point? I’m all for people paying a decent sum of money for something that will last, but aren’t we being fleeced through our own stupidity or pride or avarice when we’re being asked to spend 140 quid on a piece of string that tries around our wrist? I got a bracelet from Camden Market recently for a fiver, and I will give you the remaining £135 if you could tell the difference between the one I’ve got and the one from Harrods. Aren’t we just paying, after a while, just to have a status symbol around our wrist or neck?

These examples form part of our peculiarly awful modern decadence, This isn’t the decadence of fin de siecle Paris or 1920s Berlin, which produced some great art amongst all the drinking and decay. Rather it’s the decadence of early 21st century Dubai. A society so mindless and cash-rich at the top that all it can produce is trophies for consumerist barbarians. When we can excuse ourselves for spending that much on something I could buy for a few pence down the local market, and can’t find a better use for eighteen grand or the sixty thousand pounds you’re setting aside for that Louis XIII Le Mathusalem bottle of cognac, then the world surely has gone mad.

Certainly, many consumers could be better educating themselves on money matters. According to the 2014 Financial Literacy Survey of 2,016 adults, conducted by the Harris Poll for the National Foundation for Credit Counseling, 41% of respondents gave themselves a grade of C or worse on their knowledge of personal finance.

Or consider the survey TD Bank released earlier this month, showing that 69% of 2,031 American millennial adults (ages 18 to 34) have never taken a financial course, seminar, or workshop. Americans’ knowledge of financial issues doesn’t necessarily get better with age either. Only 20% of retirement-age Americans were able to pass a basic quiz on how to make their savings last throughout retirement, according to a 2014 study from the American College of Financial Services, which surveyed 1,019 adults ages 60 to 75 last summer, all of whom had at least $100,000 in household assets.

In other words, a lot of people are woefully deficient in their knowledge of money matters – a fact you might want to remember the next time you plan to splurge or take out a loan without thinking things through in order to fund an extravagance.

Going back to relative income levels and wealth distribution, in a 2011 YouGov survey, the amount of “responsibility” a worker had was chosen as the most important factor in how much people “ought to earn”. How well a worker did the job came second in the poll, which asked respondents to choose up to three answers.

But public opinion on what people deserve may not be reflected in labour market reality. The UK median salary is £27,000 per annum. Luke Hildyard, of the High Pay Centre, a think tank which argues the gap between high and low earners is too wide, says the idea that successful firms thrive due to “great individuals” at the top gives executives “too much credit”.

Why do we buy more stuff than we need, and why are we willing to pay far above the odds for this stuff? I mean, when you really stop to think about it, what thinking would compel somebody to spend money on things they didn’t actually need in the first place, or to upend their expectations of what is reasonable to spend because of the amount they bring home? I can buy a decent mango for £1 from my local shop, and it’s bloody lovely. Why would I then spend £3.50 on an anaemic mango from Borough Market or £4 from Harvey Nichols if I had a higher salary? Surely the more sensible option is to buy the cheaper, still decent mango, and have more money to spend on other things? Or perhaps accept a slightly higher tax rate to give additional discretionary spend on things that are important to us; the NHS, education, scientific research, to give but three examples. If we could successfully answer these questions, we could more easily free our lives and our resources for more important pursuits.

But this can be difficult. It forces us to admit weakness in our lives, and challenges us to think differently. After all, we earn our money, so why shouldn’t we live according to our means, right? Well, yeah; if you’re a doctor with life and death decisions in your hands, then you must be paid well; but does that mean others should live on the poverty line (or, indeed, below it) because they’re on the bare minimum wage and survive by using food banks? And if the answer to that question is “no,” then how do we resolve it? Well, I’m no expert, but first let’s look at why we spend money in the first place on “things”.

1. We think it will make us secure. Our logic goes like this: if owning some material possessions brings us security (a roof, clothing, reliable transport), owning excess will surely result in even more security. But after meeting our most basic needs, the actual security derived from physical possessions is much less stable than we believe. They all perish, spoil, or fade. And they can disappear faster than we realise.

2. We think it will make us happy. No many people would admit they search for happiness in material possessions. We buy bigger houses, faster cars, cooler technology, and trendier fashion, sometimes hoping we will become happier because of it. Unfortunately, the actual happiness derived from excess physical possessions is fleeting at best.

3. We are more susceptible to advertising than we believe. On average, we see 5,000 advertisements every day. Every advertisement carries the same message: your life will be better if you buy what we are selling. We begin to hear this messaging so many times and from so many angles, we begin to subtly believe it. This is not a complete condemnation of the marketing industry. This is simply a call to realise their messaging affects us more than we appreciate.

4. We hope to impress other people. In a wealthy society, envy quickly becomes a driving force for economic activity. Once all of our basic needs have been met, consumption must become about something more than needs. It becomes an opportunity to display our wealth, our importance, and our financial success with the world.

5. We are jealous of people who own more. Comparison seems to be a natural state of our humanity. We notice what other people are buying, wearing, and driving. Our society encourages these comparisons. And all too often, we buy stuff we don’t need just because people in our friendship circles have done the same. A culture fixated on praising excess will always misdefine true success.

6. We are trying to compensate for our deficiencies. We mistakenly look for confidence in the clothes that we wear or the car that we drive. We seek to recover from loss, loneliness, or heartache by purchasing unnecessary items. We seek fulfillment in material things. And we try to impress other people with the things that we own rather than the people that we are. But these pursuits will never fully satisfy our deficiencies. Most of the time, they just keep us from ever even addressing them.

7. We are more selfish than we like to admit. It can be difficult to admit that the human spirit is hardwired toward selfishness and greed, but history appears to make a strong case for us. We seek to grow the size of our personal kingdom by accumulating more and more things. This has been accomplished throughout history by force, coercion, dishonesty, and warfare. Unfortunately, selfishness continues to surface in our world and our lives even today.

A controversial argument with regard to the inequalities in income is the trickle down effect, favoured by some economists. The theory is to let the free market work independently and cut the high rates of income and corporation tax. Thereby entrepreneurs are incentivised to expand, more employment opportunities will arise, and the multiplier effect will allow the income to trickle down to the poor. There are flaws to this theory as not all poor people will have the adequate skills to do the jobs created, and the poor people who cannot work will be hit the most. As well as that, some people will still suffer from absolute poverty.

There is a cognitive dissonance being played out here in our lives and our society. We respect and encourage pay to be representative of our skills and abilities, but some are also resentful of the fact that not everyone has equality of income – which isn’t possible, as people are individuals and deserve to be treated as such. It then becomes, however, a dirty word to question the material accumulation of “things” and “over-spending” on these things. “How do you define over-spending?” people ask. I can answer that well enough; when people spend more money on something than others earn in a day or a week or a month and / or can’t afford to feed themselves without going to a food bank or having to beg, borrow, or steal to stop themselves from going hungry. When we live in that kind of two-track society, then there is something wrong with individual views of consumer growth and societal views of what makes us as a culture successful.

My final point; this isn’t a socialist point I’m making, as I’m no socialist. It’s a moral point, a defence of caring about more than just yourself, and a desire to improve your own live and the lives of others. We shouldn’t be afraid of, nor ashamed of, being proud of our own achievements and wanting to be rewarded for them. But precisely because we deserve that recognition means that we should move out from behind our own individualism and think about how best to create a culture where, instead of wanting to spend £19,000 on a watch that tells the time just as well as a £20 one from your local market, we’re just as proud of the second choice and decide to invest the remainder of that money into something more worthwhile for ourselves, our families, our friends, our neighbours, our communities – even strangers, perhaps.

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