NAF
International Working Paper Series
Year 2009 paper n. 09/03
CAN INCOME TRANSFER PROGRAMS HELP PEOPLE TO FULFILL THEIR BASIC NEEDS? AN ANALYSIS OF THE FACTORS THAT INFLUENCE CONSUMPTION CHOICES OF POOR PEOPLE
Marco Cavalcante
United Nations World Food Programme
Uganda Country Office
The online version of this article can be found at:
http://economia.unipv.it/naf/
Scientific Board
Maria Sassi (Editor) - University of Pavia
Johann Kirsten (Co-editor)- University of Pretoria
Gero Carletto - The World Bank
Piero Conforti - Food and Agriculture Organization of the United Nations
Marco Cavalcante - United Nations World Food Programme
Luc de Haese - Gent University
Stefano Farolfi - Cirad - Joint Research Unit G-Eau University of Pretoria
Ilaria Firmian - IFAD
Firmino G. Mucavele - Universidade Eduardo Mondlane
Michele Nardella - International Cocoa Organization
Nick Vink - University of Stellenbosch
Alessandro Zanotta - Delegation of the European Commission to Zambia
Copyright @ Sassi Maria ed.
Pavia -IT
ISBN 978-88-96189-02-3
CAN INCOME TRANSFER PROGRAMS HELP PEOPLE TO FULFILL THEIR BASIC NEEDS? AN ANALYSIS OF
THE FACTORS THAT INFLUENCE CONSUMPTION CHOICES OF POOR PEOPLE
Marco Cavalcante[*]
Abstract
The paper analyses the factors that influence the consumption choices of poor people in rural India. Using the antiproductivist approach, the paper demonstrates that besides income, other factors, such as fashion, advertisements and social pressure, have a major influence on poor people’s choices. The lesson from this paper is that, often, people chose not to fulfill their basic needs rather than suffer social shame. Hence, in order to compensate the impact of these other factors on the consumption choices of poor people, development organizations must ensure that income-transfer programs are accompanied by sensitization programs.
JEL Code D1; I3; R2
1. Introduction
Many development organizations are piloting unconditional income transfers in a variety of different contexts, the stated purpose of which is to help people move from a condition of poverty and hunger towards well being (Gentilini, 2007; WFP, 2008; 2009). Yet a fundamental question remains: is income the only factor that is influencing people’s consumption habits?
The consensus in “mainstream literature” is that income is indeed the only factor that is influencing people’s consumption habits. The neoclassical - as well as others[1] - hypothesis is that: i) what people consume is limited by their purchasing power (i.e. they are income-constrained), ii) supply will create its own demand; iii) consumers aim to maximize utility; and iv) decisions are made rationally, which means buying at the lowest possible prices, without being influenced by other factors (since, by assumption, consumption decision are taken on the basis of full and relevant information about all market variables (Marshall, 1920; Walras, 1993).
The credibility of this hypothesis, however, has been challenged and there is a growing body of evidence against it (Ariely, 2008; Hammond, 1996; Hodgson, 1988; Simon, 1983[2]). This paper provides further evidence against the theory of rational choice, arguing that, in fact, there are several factors that determine consumers’ choices, of which income is only one.
The antiproductivist theoretical framework has been used to demonstrate my hypothesis. I will demonstrate my hypothesis through: 1) a review of the existing literature on consumption behavior (section 2); and 2) an analysis of secondary data and primary data regarding a case study from three rural villages in Tamil Nadu, India. The primary data – mostly qualitative - has been collected in three villages of rural Tamil Nadu in 2005 using the quota sampling method.
2. Literature review
Over a hundred years’ of debate concerning consumption behavior has failed to produce a common position on what are the driving factors (or at least influencing variables) of consumption. This section will present a brief history of mass consumption (2.1) as well as outline a few key factors that influence people’s decision about what to consume (2.2; 2.3; 2.4; 2.5).
2.1 A brief history of mass consumption: the desire to consume
There is significant evidence that the upper classes in ancient societies (e.g. the Romans, Greeks, Etruscans, Egyptians) had consumption patterns that were beyond subsistence levels[3]. However, it is difficult to determine the exact point in history when mass consumption started exceeding subsistence levels. More complex still is the question as to why consumption began exceeding subsistence levels – at least in Western Societies.
There are two main theories on the beginning of the so-called “society of consumption”[4]. The most popular school of thought is the “productivist” one, which sees mass consumption as having started during the 19th Century as a consequence of the industrial revolution, implying that demand was being driven by supply. The second school of thought is the “antiproductivist” one – this time, by no means a uniform theory - which sees mass consumption as having started during the late 17th or early 18th Century as consequence of changes in human behavior and choices, implying that supply was being driven by demand (Sassatelli, 2007).
According to the productivist theory, the beginning of the mass consumption beyond subsistence levels in Western countries was sparked by technological advances, especially in terms of production and transportation. A new economic model of production – commonly referred to as “capitalism” – had created a larger quantity of goods and services at lower prices, meaning increased accessibility for the population at large and a general increase in real incomes (Corrigan, 1997).
According to the antiproductivist interpretation, mass consumption beyond subsistence levels started considerably earlier than the industrial revolution (Fairchild, 1998) and it is not related with any economic model of production, but rather with an embedded human “desire for consumption” (Sassatelli, 2007). The antiproductivist school can be divided into three-sub-groups: consumerists; modernists and exchangists.
“Consumerists” argue that the factor which caused the birth of mass consumption was the status aspiration of the bourgeoisie who, by emulating the consumption patterns of the nobility, could achieve social advancement (McKendrick, Brewer and Plumb, 1982). According to McKendrick, Brewer and Plumb the bourgeoisie was driven to consumption by the marketing strategies of entrepreneurs, which encouraged status aspiration.
“Modernists”, on the other hand, believe that the factor which caused the birth of mass consumption was the growth in popularity of romanticist ethics, which were based on hedonism and the pursuit of pleasure (Campbell, 1987). According to Campbell, the new romantic ethic encouraged people’s desire to consume more, but this desire goes, beyond the good per se, it is a desire of consumption. Campbell says that we desire to desire, always wanting new things, and are caught in a constant circle of dissatisfaction.
Finally, “exchangists” argue that the factor which caused the birth of mass consumption was increased “openness” in trade and monetary exchange. According to De Vries (1993), during periods of decline in real incomes, households did not respond rationally by decreasing consumption, but rather opted to work more so that they could obtain more money to exchange for goods and services.
Tab. 1: The theses on the birth of the consumer society
Thesis / Author / Historical Cause / Century / PlaceProductivist / Industrial Revolution; Standardized and cheap goods / XX / England
Antiproductivist
o Consumerist / McKendrick / Commercialization system; Status display / XVIII / England
o Modernist / Campbell / Cultural consumption; Imaginative hedonism / XVIII/XIX / England
o Exchangist / De Vries / Households organization; Monetary exchange / XVII/
XVIII / Holland
Source: Adapted from: Sassatelli, 2007: 15
In summary, according to “antiproductivist” theories, income does not seem to have played a major role in the birth of mass consumption. This means that factors other than income must be driving people’s decisions about what to buy. I will now briefly outline some of these factors.
2.3 Fashion
The word “fashion” comes from the Latin “facio”, meaning “to make”. In 1901 the Oxford English dictionary defined “fashion” as “the process of making” (Kawamura, 2005). More recently, Simmel (1971: 296) argues that “fashion is the imitation of a given example and satisfies the demand for social adaptation”. Brenninkmeyer (1963) defines fashion as the common way of dressing in a given historical time. Nowadays, the term “fashion” is most commonly associated with a way of dressing, though it is also associated with eating habits, accommodation choices, ways of speaking, etc.
The concept of fashion (in the modern sense) was born towards the end of the Middles Ages, when people began searching for innovative habits relating to clothes, food etc. (Bailleux and Remaury, 1996).
According to Braudel (1982) and Mukerji (1983), the aristocracy in Italy began consuming luxury goods as early as the 14th Century in order to differentiate themselves from the rest of the population, thereby strengthening their power. According to McCracken (1988), aristocrats were constantly looking for ways to set themselves apart. These included, for example, legislation which imposed dress codes on particular social classes and constantly-changing trends in fashion (in order to keep ahead of the poor classes, who were trying to imitate them).
In the 19th Century, the aristocracy started losing its monopoly over “fashion”, ceding ground to the expanding rich bourgeoisie. Only in the 20th Century, however, did the true ‘democratization’ of fashion occur, when the majority of the population - at least in Western Countries - gained access to it (Roche, 1991).
According to Simmel (1971), fashion synthesizes people’s need to achieve social equity and, at the same time, to differentiate themselves from each other. Simmel argues that, on the one hand, individuals feel reassured by “belonging” to a particular social group, but that, on the other, they also like to experiment with new trends - giving freedom to their fantasy - in order to create a ‘gap’ between their social group (or class) and other groups. This constant double-need of belonging (lower class) and differentiating (upper class) – exacerbated by the concept of “emulative envy” – is the driving factor behind fashion.
Simmel also maintains that ‘weak’ individuals are more influenced by fashion because: “[it] expresses and at the same time emphasizes the tendency towards equalization and individualization, and the desire for imitation and conspicuousness” (Simmel, 1971: 308).
Spencer (1967) and Fallers (1971) adopt a similar line to Simmel. According to Fallers for example, there is a “trickle effect” that a) keeps pushing an “inferior” social group to imitate a “superior” one; and b) keeps pushing a “superior” social group to differentiate themselves and their symbols from the “inferior” one.
2.4 Advertisements
There are several definitions of “advertisement”. According to Testa (2007), advertisement is the system of communication techniques aimed to promote consumption. According to Sassatelli (2007), advertisements – as well as the other aspects of merchandizing, such as the packaging and branding – aim to expand individuals’ needs, driving them towards the decision that a particular good (or service) is fundamental to their satisfaction.
Evidence of advertisements go back as far as 4000 BC. In ancient Egypt, Rome, China, India and Arabia, advertisements on walls or rocks were used to promote events and commercial products (Testa, 2007). Over the course of history, advertisement techniques have been constantly improved – particularly since the invention of printing, in the 15th Century - until today, where we witness the use of “scientific” marketing techniques and approaches - such as socio-demographic research – in order to persuade customers to consume more (McKendrick, Brewer and Plumb, 1982).
Wall posters; street banners; media spots (covering the written media, radio, TV and internet); visual performances; shop window displays (the “spectacolarization” of goods); celebrity endorsement; songs; and creative branding exercises; these are just some of the tools used by entrepreneurs to convince people to consume their products (Codeluppi, 2006).
There are few doubts about the effectiveness of advertisement in influencing people’s choices not only concerning what to consume (for example, the choice between two brands of the same product), but also concerning whether to consume or not (Kotler and Scott, 1993).
Baudrillard (1972) argues that the needs of the individual are not innate, but rather are generated through advertising campaigns and marketing strategies. According to this author, the “production system” is the force that is generating need, the desire of desiring, that could be applied to all the products and that lead to the “system of needs”.
According to Bauman (1992), advertisement plays an important role in determining consumption choices. Advertisements present particular good (or service) as a tool for achieving the privileged status of the protagonist (e.g. a famous character) or a desirable social condition (e.g. wealth, peace). People then conclude that, by consuming the advertised goods (or services), they can easily resolve their problems and frustrations. In this way, desire supplants need. Furthermore, as they wait to consume, people experience feelings of excitement based on the anticipation of what is about to happen.
2.5 Social pressure
The desire to belong to a group, or society, makes people behave in ways that do not contradict the behavior of others. Sociologists and anthropologists have demonstrated that individuals tend to replicate schemes, which allow them to “belong” (Merton, 1957; Fabris, 1971). This phenomenon has been observed since time immemorial; ancient books such as the Bible or the Veda are full of examples. In essence, people’s choices are shaped by society, particularly by: (a) fear of exclusion, and; (b) the desire to demonstrate a decent (or high) social status.
The first, and most authoritative, scholar to study this phenomenon at length was the Norwegian economist Thorstein Veblen during the 1930s. According to Veblen (2007), people consume not only to satisfy their “biological” needs, but to show their wealth. In fact, the reputation of a person is directly proportionate to his/her economic power (i.e. the more wealth an individual has, the more he/she will be socially respected). There are two indicators for the economic power of an individual: so-called “conspicuous leisure” and “conspicuous consumption”.
“Conspicuous leisure” is typical of a feudal society. It includes: showing idleness; acquiring good manners; learning “dead” languages, and; engaging in any other activity that would demonstrate that a person can “waste” his time (i.e. without engaging in any productive activities, or work).