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Consumption on a global scale: The gap widens

By Darryl D'Monte

This year's 'State of the World' report from Worldwatch places India as the country with the third largest consumer class, behind only the US and China.Yes, that's 122 million individuals with purchasing power. But they form only 12% of the total population. The rest can only gape at the tremendous disparities

It is pretty clear that one reason why the National Democratic Alliance was voted out of power was people's disenchantment with the 'India Shining' campaign and all that it implied. At a time when states like Andhra Pradesh, Karnataka and Maharashtra were reeling under prolonged drought, to harp on the bright side of life in the country was disingenuous, to say the least. In Andhra, the spate of suicides by farmers who could not repay their steep debts only compounded the resentment at being asked to celebrate when prospects appeared so dismal. Real incomes have dropped in the countryside, and with it, consumption even of foodgrains.

Things are brighter only for a small minority who have benefited by the process of economic liberalisation. These are the beautiful young men and women who can be spotted on ads displayed on TV, speeding in new cars, marvelling at the latest in white goods and forever fiddling with mobile telephones. They have well-paid jobs or professions and ample surplus income to spend on seemingly limitless consumption. What the BJP did not reckon with is the extent of alienation felt by most people who could not afford these consumer goods. With the rapid proliferation of TV, people in rural areas and the burgeoning number of poor in cities can only gape at this tremendous disparity in lifestyles and grow increasingly discomfited by it.

The enormous gap in living standards within the country has been highlighted by this year's 'State of the World' report, brought out by the Washington-based environmental think-tank, the Worldwatch Institute. If one does not stick to the conventional measure of per capita incomes in dollars, but opts instead for the purchasing power parity, which is an income measure adjusted for the buying power in local currency, the findings are quite astounding. By this yardstick, there is a global consumer class even in developing countries, where some people have purchasing power parity worth over $7,000 a year - which approximates the official poverty line in Western Europe.

India emerges as a country with the third highest number of consumers in the world, with 122 million people. The US, obviously, tops the list with 243 million, followed by China with 240 million. India has slightly more consumers than Japan and many more than Germany, France, Italy or Britain. Of course, when one measures the proportion of this class to the total population, it is a different story altogether. While US consumers form 84% of the total and 95% in Japan, they constitute only 12% in India and 19% in China. Even so, the absolute number of people with purchasing power in India is certainly something to reckon with.

As Worldwatch points out, almost half this global consumer class lives in developing countries, with China and India accounting for one in every five in the world. Taken together the combined number of 362 million consumers in these two most populous countries is larger than this class in all of Western Europe, even conceding that the average Chinese or Indian consumes much less per capita than his European counterpart. Based on the projected world population growth, the global consumer class is estimated to grow to 2 billion by 2015.

The disparity in consumption standards within the country is replicated even more starkly on a global scale. North America and Western Europe comprise 12% of the world's population, but account for 60% of global private consumer spending. By contrast, South Asia and sub-Saharan Africa, the world's two most endemic poverty-stricken regions, account for only 3.2% of such spending. In a pioneering 'Human Development Report' in 1998 which also focused on consumption, the UN Development Programme (UNDP) showed how half the world's 225 richest people had a combined wealth of over $1 trillion, equal to the annual income of the poorest 47% of the world's people. Astonishingly, the wealth of just 32 of the world's richest people exceeded the total GDP of South Asia.

While such enormous disparities show every sign of increasing with globalisation, what can be done to reduce them? The very first need is to increase the living standards of the absolute poor. Every developing country must recognise that all people have a basic human right to a certain minimum standard of well-being. In 1999, 2.8 billion were living on less than $2 a day which, according to the UN and World Bank, is required for meeting basic needs. Some 1.2 billion were living in "extreme poverty" - measured by an income of less than a dollar a day. The UN has adopted the Millennium Development Goals, which seek to halve the number of those in the world living below the poverty line by 2015. However, it is by no means clear how this is going to be achieved, given the lack of will on the part of governments in most developing countries. Besides, industrial countries are cutting back on the levels of overseas development assistance.

By far the poorest people in developing countries are subsistence farmers who do not receive a wage and therefore seldom engage in transactions based on money. They basically spend on meeting their daily needs. In Tanzania, for example, two-thirds of per capita household expenditures in 1998 went towards food. There are lessons in tackling this problem that countries can learn from India at least in some respects. One of the most effective ways to provide food security is to introduce land reforms, so that farmers have an incentive to produce more and thereby raise their living standards. States like West Bengal and Kerala have clearly demonstrated this. The public distribution system, which has been cut down drastically, also needs to be strengthened, so that it provides a safety net in times of need.

One of the features of globalisation is that certain countries are producing more and more food, but millions of people lack the purchasing power to obtain it. India itself has some 60 million tonnes of foodgrain in its buffer stocks, which entails an enormous expense in both procuring and maintaining it. Ironically, it is has often been treated as a 'problem' - an embarrassment of riches, as it were. The obvious solution would be to launch food-for-work programmes of the type that Maharashtra did several years ago. This would in one stroke provide the minimum intake of calories required for subsistence, even while reducing the burden on the country's godowns. If the work included what is sometimes called 'drought-proofing', implying the creation of water-harvesting structures and reforestation, measures which would prevent droughts from recurring every year, the benefits of such programmes would be long-lasting.

Yet another Indian experiment in this respect is the devolution of power to the panchayats, so that development programmes are devised and managed at the grassroots. Even though these local self-governing councils are often dominated by influential landlords and upper castes, the thrust towards decentralisation of power in this manner is sound. According to one calculation, the total amount of funds which could be routed through the 2.3 lakh panchayats is around Rs 35,000 crore per year or about 1.5% of India's GDP. Kerala has innovated with such decentralisation by identifying the natural resources available to clusters of villages and devising plans from the bottom up, as it were.

Finally, there is no denying the significance of the democratic framework which, despite many infirmities, still affords the poor some freedom of expression. As Dr Amartya Sen has remarked, the possibility of mass famines - such as occurred in Bengal in the 1940s -- is now ruled out, thanks to the reporting of such calamities by an ever-vigilant media. Even at the grassroots, the success of organisations such as the Mazdoor Kisan Shakti Sanghatana in Rajasthan in enforcing the right to know is, once again, a testimony to the country's observance of civil liberties.

Along with boosting the consumption standards of the world's poorest, it is necessary to examine every way of moving to sustainable consumption patterns throughout the globe. Both consumers and producers ought to be conscious that their actions should be less damaging environmentally and less harmful socially. If the biologically productive land in the world, which could raise natural resources and absorb wastes, were equally divided, each person would have 1.9 hectares to himself or herself. As things are, an average American uses 9.7 hectares and an Indian less than one hectare. Societies which have based themselves on the premise that the greater the consumption of goods and services, the better-off the country, will need to re-examine this notion. This applies as much to elites within poor countries as to industrial nations.

At an individual level, it is clear that overconsumption (and sedentary habits) can do a person no good. This is reflected in the extraordinary growth of obesity in the US and that of heart disease in India. By placing limits on consumption, paradoxically, a well-to-do person may actually enhance his well-being. There are also personal costs linked to high levels of consumption: financial debt, stress and the manner in which consumption patterns can deprive a person of time with family and friends. Working longer and longer hours to boost one's income comes at a high price. All major religions and philosophies stress moderation in preference to excess in personal behaviour. As Gandhiji put it so succinctly, there is enough for people's need, but not for their greed.

At a societal level, there is need to take another look at the institutional structures and economic incentives that promote overconsumption. As Worldwatch observes, banks coax consumers to take bigger loans, while industries use forests, water and other natural resources well beyond their rates of renewal. Such practices are sure to deprive even the present generation of certain goods and services, let alone future generations. In the richest countries, agriculture is most heavily subsidised, followed by road transport, prompting the Earth Council to state that "the world is spending hundreds of billions of dollars annually to subsidise its own destruction".

Developing countries need not follow the production and consumption patterns of industrial nations. There are now new technologies which permit a country to leapfrog to cleaner production methods which consume less materials and energy and may also be cheaper. Renewable energy systems, for instance, hold such promise. India had once set a target of meeting a tenth of its electricity from renewable sources by 2012. There could be laws compelling manufacturers to take back discarded products and recycle others. Replacing the private automobile as the preferred means of transport in cities throughout the world by public transport would not only save fuel and reduce pollution but offer citizens far more choices - particularly those who cannot drive because they are too young or too old.

Finally, the entire area of consumer choice has to be addressed. People need to be properly informed about the health implications of consuming certain products. This is why, for instance, European consumers have insisted on stores labelling genetically modified products, as distinct from their American counterparts. Globally, advertising is now a $446 billion business a year and the power of this 'hidden persuader' can never be underestimated. As we saw at the beginning of this article, there was obviously a class of rich Indians which was swayed by the 'feel-good' factor parroted by the previous government but, somewhat unexpectedly, several million more were unmoved by it.

InfoChange News & Features, June 2004