Is the commercial persuasion business saving the economy? Undermining American values? Or neither?

Posted by Rob Walker on June 17, 2008
Posted Under: Advertising,America,Consumer Behavior

Last week I read this NYT article about the latest retail data, for May. “Sales of retail goods and services rose 1 percent in May, double what economists had expected.” Wall Street rallied as on what was seen as surprisingly good news. Since reading this, and some other stuff that I’ll get to, I’ve been mulling the relationship between the consumer mood, consumer spending, and the broader impact of the business of branding. It’s going to take me a few paragraphs to draw this together — and even then I end with questions. So if you’re interested, bear with me on this.

First, it’s actually sort of surprising economists were expecting any spending increase at all, since oft-cited consumer sentiment data for May (released a few weeks ago), was the fifth straight month to show a decline in our spending “mood.” AP: “Soaring gas prices and weakening job prospects left shoppers gloomier about the economy in May, sending a major barometer of consumer sentiment to its lowest level in almost 16 years.” Etc.

Given all that gloom, you’d think spending would have fallen off a cliff.

There are plenty of explanations for why it still really hasn’t, and one of them is that consumer sentiment “data” is basically overrated: While it all sounds very official to say “The Consumer Confidence Index stands at 52.7, the lowest level since blah blah blah,” the reality is that it’s just a poll, and almost certainly more of a reflection of media coverage than a prediction about behavior.

That said, it’s an undeniable fact that prices are rising, and more consumers are squeezed. Many observers have predicted for some time now that something has to give — and if consumer spending did drop off a cliff, things could get pretty grim, since the economy as a whole depends on it. What supposedly kept that from happening in recent years, when spending rose even as wages for most remained essentially static, was the aggressive use of debt in the form of both credit cards and (often dubious) home equity loans.

I’m interested to see David Brooks recently added another potential factor to the list: a fundamental shift in American values, in the form of a “deterioration of financial mores.”

The United States has been an affluent nation since its founding. But the country was, by and large, not corrupted by wealth. For centuries, it remained industrious, ambitious and frugal.

Over the past 30 years, much of that has been shredded. The social norms and institutions that encouraged frugality and spending what you earn have been undermined. The institutions that encourage debt and living for the moment have been strengthened. The country’s moral guardians are forever looking for decadence out of Hollywood and reality TV. But the most rampant decadence today is financial decadence, the trampling of decent norms about how to use and harness money.

He names several culprits. Credit companies, payday lenders, Wall Street, the government.

My question is: What about the ad/marketing/branding business? Doesn’t it fit into this equation somehow or other?

Is it a hero because it’s been so wildly effective at keeping us spending in the 21st Century, thus boosting the economy? (Please note corporate profits up sharply since 2000, including consumer staples etc.)

Or is it a villain because it’s goaded at least people spend more than they should, and (if you buy Brooks’ views) contributing to the decay of financial values?

Or to take things in a totally different and forward-looking direction: Brooks notes suggestions for various public-education programs regarding debt and saving and so on. Do professional persuaders have a role to play in such an effort? Should they? Could they?


Further diversion may be found at MKTG Tumblr, and the Consumed Facebook page.

Reader Comments

“Over the past 30 years, much of that has been shredded. The social norms and institutions that encouraged frugality and spending what you earn have been undermined.”

Hmm. What else happened over the last 30 years? Oh, right – 20 years of GOP presidencies blithely cutting taxes, massively increasing spending and generally using a credit-card approach to Federal spending. But of course, that merits a – non-party-identified – two short sentences, half of what he devotes to the evils of lotteries. Which bring in $60 billion yearly, against the $9.3 trillion or so in Federal debt, nearly all of it run up by GOP presidencies. I wonder why Brooks doesn’t mention that.

I don’t disagree with you, Rob – I think ad agencies are pretty deeply responsible for this problem. But looking to the way this country is being run also deserves a lot more play than Brooks gives it.

Written By jkd on June 17th, 2008 @ 4:50 pm

Well, yes. It all reminds me of a Laurie Anderson line from the 1980s, to paraphrase: “I just looked at what the government was doing, and scaled it down to size.”

Brooks does make mention of the gov, and in fairness to him, has limited space. I guess my view is I don’t think it’s hard to get people to consider the government as playing a role, but I’m interested in the resistance people seem to have — consciously or not — to considering how the commercial persuasion industry fits into this. For better or worse.

I daresay that taken in the aggregate, it has a greater effect on our daily behavior than any government pronouncement might.

Just a thought.

Written By Rob Walker on June 17th, 2008 @ 7:47 pm

The article alludes to inflation by noting that the segment with the largest growth was retail sales of gasoline, which I’m pretty confident has increased in price more than 1% in the past month. In addition, the higher gas prices spill over into the wholesale cost of food, garden supplies, and other commodities that require transportation. It seems totally possible Americans are consuming less, but paying more for less stuff. I think you have valid points, but I’m not sure a one-percent bump in retail spending translates into increased consumption.

Written By McChris on June 17th, 2008 @ 11:50 pm

Rob, just a thought. Maybe the resistance comes from that deep-seated belief you discuss in your book, the idea that present day consumers see through and are inmune to the tricks of the commercial persuasion industry.

Written By Ingrid on June 18th, 2008 @ 6:20 pm