Globalisation, consumption and green consumerism.
Consumption has been a part of the history of humankind. But the industrial revolution that shifted production from home to the factories has radically changed the structure of production from subsistence to mass production for profit. The industrial revolution has not only shifted production from home to factories, rather the structure of production from subsistence to mass production for profit. It ultimately gives rise to a consumer society. Human needs and desires have grown with technological innovations and rise in purchasing power. In the last 100 years or so, the level of mass consumption beyond basics has been exponential and is now a fundamental part of most economies. Luxuries once upon a time have turned into necessities and also the socio-cultural habits have transformed. These in turn have altered the very nature of the economies.
Globalization has come to dominate the world since the nineties. Increased reliance on the market economy and renewed faith in the private capital and resources, in terms of the process of liberalization has started in many of the developing countries.
Globalization has also brought in new opportunities to developing countries. Greater access to developed country markets and technology transfer promise improved productivity and higher living standards on an average in terms of rise in the consumption levels.
Leslie Sklair (2002) argues that consumerism is the essential component of the global capitalist project. The ideology of global capitalism is to persuade people to consume not simply to satisfy their biological and other modest needs, but in response to artificially created desires in order to perpetuate the accumulation of capital for private profit. In other words, to ensure that the global capitalist system continues for ever. The ideology of consumerism pronounces that the meaning of life is to be found in the things that we possess. "To consume, therefore, is to be fully alive, and to remain fully alive we must continuously consume."
The imperative of capitalist globalization implies that people have to be taught how to consume, in the special sense of creating and satisfying induced wants, the effect is perhaps most easily visible in developing countries. Globalization is projected as a great leap of human evolution in a march from nations to global markets. Markets are regulating not just our economies but also our lives. However, inequalities in consumption are alarming. Globally, the 20 percent of the world's people in the highest-income countries account for 86 percent of total private consumption expenditures--the poorest 20 percent a minuscule 1.3 percent. More specifically, the richest fifth:
* Consume 45 percent of all meat and fish, the poorest fifth 5 percent.
* Consume 58 percent of total energy, the poorest fifth less than 4 percent.
* Have 74 percent of all telephone line, the poorest fifth 1.5 percent.
* Consume 84 percent of all paper, the poorest fifth 1.1 percent.
* Own 87 percent of the world's vehicle fleet, the poorest fifth less than 1 percent.
Rising Income levels and Consumption in India
Households are transiting from low income to high-income categories in India. This would imply a consumption boom in the offing. Private consumption will play a major role in shaping the course of economic growth in India. The household component of consumption as per the latest estimate of NSS, 1993-94 is 59.7 percent of total private consumption as given by the CSO and, more importantly, this component for various reasons has steadily reduced in the past 10 to 15 years.
On an average, the growth of private consumption has improved in the 1990s vis-a-vis the 1980s. During the 1990s, there have been two phases viz., the high growth phase from 1993-94 to 1996-97 and low growth phase from 1997-98 to 2001-02. The growth in overall consumption expenditure declined marginally from 6 to 5.8 percent between the high growth phase and the low growth phase. Within consumption expenditure, while the Government Final Consumption Expenditure grew up from 4.5 percent a year to 8.4 percent, Private Final Consumption Expenditure (PFCE) growth slid from 6.2 percent to 5.3 percent. Despite a favourable shift in dependency ratios, rising income levels, growing middle-class, falling prices and a kick from the rise in salaries and wages of government employees, the growth in private final consumption expenditure fell from 6.2 to 5.3 percent between 1994 to 1997 and 1998 to 2002.
The National Accounts provide disaggregated data for 37 consumption categories. Although, the overall PFCE is available for 2001-02, the disaggregate data is available only up to 2000-01. Thus, percentage of high growth in PFCE was restricted to a few sectors to begin with and has become more concentrated in the recent years. The nine PFCE segments that were able to maintain their high growth performance include communication, refrigerators, washing machines and so on; hotels and restaurants, beverages, LPG, coffee and tea. The number of PFCE categories that registered growth between 5 to 10 percent a year increased from 12 to 14 between the high and the low growth phase, but their weight in aggregate PFCE fell from 33.6 percent to 29.4 percent in the corresponding period. Purchase of transport services, electricity, education, sugar and gur, spices, potato and tubers, oil and oilseeds are the key consumption categories that continued to grow at 5 to 10 percent a year throughout the post 1993-94 period. The PFCE categories that transited from zero to 5 percent growth category to 5 to 10 percent growth category includes footwear and glassware, tableware and utensils. Cereals and bread, fruits and vegetables and pulses (with a combined weight of 24 percent in total PFCE) moved from zero to 5 percent growth category to negative growth category between the high and the low growth phases.
The growth buoyancy in some consumer categories and growth deceleration in others is a consequence of a number of factors. The negative growth in cereals and bread, tobacco, pulses and fruits and vegetables reflects the change in consumer preferences away from these items. However, within food items, a shift has taken place from cereals, pulses and so on to beverages, coffee, tea and other processed foods that have higher income elasticity. Two conclusions can be drawn from this analysis. One, on the positive side, a low-share, high-growth combination augurs well for sustained growth, because of the low levels of current penetration. On the negative side, the sheer bulk of the slow- growing segments will keep the role of private consumption as an engine of growth somewhat restrained.
Within the overall PFCE, some consumption categories like white goods, beverages, transport equipment, communication witnessed double-digit growth rates and maintained their growth buoyancy from 1993-94 onwards. According to GOI (2001) while factors such as access to cheap credit, favourable demographics, low prices and attitudinal changes will keep the consumption ticking in some categories, a boost from government consumption should not be expected. The impact of rise in salaries and wages has already petered off.
India's per capita income and consumption levels are about half those of China's. But it's growth at the margin that always drives powerful macro and market trends. And the Indian consumption story is, first and foremost, one of accelerating growth off a low base. The potential comes from the structure of the Indian Economy (GOI, 2001). Private consumption currently accounts for 64 percent of Indian GDP--higher than shares in Europe (58 percent), Japan (55 percent) and even China (42 percent). India's transition to a 7 percent growth path in recent years is very much an outgrowth of the emerging consumerism of one of the world's youngest populations.
The overall rates of economic growth of 6.5 percent per year in the Ninth Plan (1997-2002), 7.7 percent per year in the Tenth Plan (2002-2007) and 8.1 percent per year in the Eleventh Plan (2001-2012), are accompanied by growth rates of per capita household consumption, which is the analogue of the NSS measure of consumption, of 4.3 percent per year, 4.8 percent per year and 5.3 percent per year in the successive plan periods. These are derived from the assumed structure of growth, which yields annual rates of growth of food grain, other food and nonfood as 3.2 percent, 5.8 percent and 7.5 percent respectively in the Ninth Plan. It remains similar at 3 percent per year and 6 percent per year respectively. In case on non-food, the growth rate is assumed to be 8 percent per year in the Tenth Plan and 8.5 percent per year in the Eleventh Plan. This structure of consumption growth in conjunction with the group specific household shares for 1993-94 determines the overall household share of total consumption in the three successive plan periods. The changing pattern of growth in the successive plan period results in a gradual lowering of the household component. It was 59.7 percent in 1993-94, and as a result of the changes in structure of growth, it is projected to go down to 55.6 percent in Ninth Plan; 53.5 percent in the Tenth Plan; and 50.1 percent in the Eleventh Plan. As a result, the rates of growth of per capita household consumption are assumed to be significantly lower than the corresponding growth rates of per capita private consumption.
A Paradigm Shift to Green Consumerism
Runaway growth in consumption in the past 50 years is strenuous on the environment seen never before. There are no two opinions about the fact that consumer behaviour is one of the major contributors to the earth's environmental problems. The goods and services purchased every day can easily be linked directly to chemical pollution, waste production and habitat destruction. But is there a way that consumers can help the planet rather than hurt it? Technology and economic growth have impacted consumption, waste generation and energy use patterns and consumer purchasing decisions can affect these changes.
People around the world are increasingly becoming aware of the importance of environmental protection. In view of this, consumers have gradually developed a preference for products with green attributes and environment-friendly, leading to the rise of so-called green consumerism. While the rising demand for green products offers new opportunities, this "consumer power" can be a potent force in stimulating the private sector to adopt more eco-friendly business practices.
The proportion of green consumers who actively seek out and buy green products is on the rise, accounting for more than 20 percent of the population in the US and the UK, and around 50 percent in western Germany. While green product information is increasingly available and included among the criteria for consumer purchases, some have even considered a green lifestyle fashionable. Studies have shown that the younger generation is relatively more concerned about environmental protection, and green consumers usually have higher incomes and are better educated. As such youngsters and higher-income groups have gradually become major buyers in the consumer market; the influence of green consumers will impact not only on demand patterns, but also on the development of product standards and regulations.
More importantly, an increasing number of consumers are willing to pay more for products with green attributes, and the price premium enjoyed by green products could be, for instance, as much as 20 percent in the US market. All these reveal that there is an increasing opportunity in overseas markets stemming form green consumerism.
Key impacts of green products:
* Consumers have been asking for green products, i.e., there has been a clear rise in demand for such products.
* Businesses have looked into the green process--generating corporate environmental profiles, monitoring and evaluating green performance, and improving corporate image as a result.
* Green products have also increased competition among businesses to generate more environmentally friendly products.
* Eco-labeling networks that monitor and evaluate green products have been developed in many countries. These networks have done life cycle analyses to understand the impact of products.
* Governments have also taken several measures that have supported and facilitated such moves by the business.
* Green consumerism creates a balance between the expectations of consumer behaviour and business profit motives. Certain points of relevance from the viewpoint of industry to be noted are:
* Markets don't wait for slow movers. Business that innovate and respond quickly to consumer demands survive best.
* Everyone has a part to play, at various levels of administration, manufacture and use.
* All products have an environmental impact, however small. The idea is to reduce it to the minimum.
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Overcoming Consumerism site http://www.verdant.net/
Coke spotlight, http://www.cokespotlight.org/
McSpotlight site monitoring McDonalds and featuring information on the McLibel trial. http://www.mcspotlight.org/home.html http://alt.venus.co.uk/markthomas/welcom.html Word Development Movement http://www.wdm.org.uk/
The World Bank http://www.worldbank.or
Table 1: Share in total consumer expenditure of decile groups of population by place of residence Deciles of Residence Percentage share in total population consumer expenditure 1972-73 1977-78 0-10 Rural 3.8 3.5 Urban 3.5 3.2 10-20 Rural 5.3 4.9 Urban 4.7 4.5 20-30 Rural 6.3 5.9 Urban 5.7 5.4 30-40 Rural 7.0 6.5 Urban 6.0 6.3 40-50 Rural 8.0 7.5 Urban 7.7 7.1 50-60 Rural 8.5 8.3 Urban 8.1 8.4 60-70 Rural 9.6 9.6 Urban 10.1 9.4 70-80 Rural 11.8 11.4 Urban 11.4 12.5 80-90 Rural 14.3 14.1 Urban 15.2 14.2 90-100 Rural 23.4 28.4 Urban 27.6 29.0 Deciles of Residence Percentage share in total population consumer expenditure 1983 1987-88 1993-94 0-10 Rural 3.8 4.0 4.1 Urban 3.4 3.4 3.4 10-20 Rural 5.2 5.3 5.4 Urban 4.6 4.6 4.6 20-30 Rural 6.2 6.2 6.4 Urban 5.5 5.4 5.4 30-40 Rural 6.9 6.9 7.1 Urban 6.7 6.1 6.4 40-50 Rural 8.0 7.8 8.0 Urban 7.1 7.1 7.3 50-60 Rural 9.0 8.8 8.9 Urban 8.2 8.3 8.4 60-70 Rural 9.9 9.8 10.0 Urban 10.3 9.6 9.8 70-80 Rural 11.7 11.6 11.6 Urban 11.4 11.6 11.8 80-90 Rural 14.4 14.2 14.0 Urban 15.0 15.1 12.0 90-100 Rural 24.7 25.3 24.3 Urban 27.9 28.9 27.7 Source: Data NSSO Reports Table 2: Projected Growth in Per Capita Household Consumption in the State (Percent per year) State Ninth Plan Tenth plan Eleventh Plan (1997-2002) (2002-2007) (2007-2012) Andhra Pradesh 4.75 5.26 5.83 Assam 4.62 4.81 5.47 Bihar 4.04 4.58 4.99 Gujarat 4.43 4.94 5.52 Haryana 4.38 4.68 5.32 Himachal Pradesh 3.41 4.36 6.00 Jammu & Kashmir 3.53 4.51 6.20 Karnataka 4.61 5.04 5.65 Kerala 5.01 5.31 6.03 Madhya Pradesh 4.06 4.57 5.04 Maharashtra 4.79 5.17 5.80 Orissa 4.99 5.41 6.00 Punjab 4.79 5.05 5.74 Rajasthan 4.08 4.47 4.97 Tamil Nadu 5.05 5.47 6.08 Uttar Pradesh 3.62 4.18 4.47 West Bengal 4.55 5.00 5.59 Other states /UTs 2.39 3.27 4.87 All India 4.29 4.76 5.31 Source: Government of India, Ninth Five Year Plan Vol. I Table 3: Projected growth in Per Capita Household Consumption in the States (Percent per year) States Ninth Plan Tenth Plan Eleventh Plan (1997-2002) (2002-2007) (2007-2012) Andhra Pradesh 4.75 5.26 5.83 Assam 4.62 4.81 5.47 Bihar 4.04 4.58 4.99 Gujarat 4.43 4.94 5.52 Haryana 4.38 4.68 5.32 Himachal Pradesh 3.41 4.36 6.00 Jammu & Kashmir 3.53 4.51 6.20 Karnataka 4.61 5.04 5.65 Kerala 5.01 5.31 6.03 Madhya Pradesh 4.06 4.57 5.04 Maharashtra 4.79 5.17 5.80 Orissa 4.99 5.41 6.00 Punjab 4.79 5.05 5.74 Rajasthan 4.08 4.47 4.97 Tamil Nadu 5.05 5.47 6.08 Uttar Pradesh 3.62 4.18 4.47 West Bengal 4.55 5.00 5.59 Other states /UTs 2.39 3.27 4.87 All India 4.29 4.76 5.31 Source: Ninth Plan Document Vol. I
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|Publication:||Political Economy Journal of India|
|Date:||Jan 1, 2010|
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