Overspent American: Why We Want What We Don?t Need

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Overview

The Overspent American explores why so many of us feel materially dissatisfied, why we work staggeringly long hours and yet walk around with ever-present mental "wish lists" of things to buy or get, and why Americans save less than virtually anyone in the world. Unlike many experts, Harvard economist Juliet B. Schor does not blame consumers' lack of self-discipline. Nor does she blame advertisers. Instead she analyzes the crisis of the American consumer in a culture where spending has become the ultimate social art.

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Editorial Reviews

Peter T. Kilborn
Schor's message and her inviting command of the language will strike a chord among many debt-laden middle-class readers. Her notion of reference-group competition, rooted in impressive polling and rigorous analysis, is an original contribution to understanding why people are so readily seduced by the temptation to buy. — New York Times Book Review
Publishers Weekly - Publisher's Weekly
Whereas Schor's 1992 bestseller, The Overworked American, touched a nerve among all classes of American society, her latest study is geared to middle- and upper-middle-class consumers who, in her diagnosis, are participating in a national orgy of overspending and living beyond their means. She traces this competitive, status-conscious consumption to the diverging income distribution and growing inequality beginning in the 1980s, as increasingly overworked, insecure, dissatisfied consumers, pressured by advertising and television imagery, sought to emulate the upscale lifestyle of the most affluent. An economist and director of women's studies at Harvard, Schor presents her arguable conclusion that the more TV a person watches, the more he or she is likely to spend. In counterbalance, she also reports on her nationwide survey of "downshifters," people who deliberately reduce their hours on the job in exchange for more leisure, time with family or other pursuits. In self-help fashion, she outlines nine steps individuals can take to break free of the cycle of compulsive spending. Although Schor's jeremiad lacks the impact of her earlier book, it offers trenchant commentary on Americans' overspending lifestyle and lack of savings.
Library Journal
The dual purpose of this slim volume is to describe how spending, as a process, affects the quality of life for the middle and upper classes and to show how to develop a life that puts materialism and consumerism in proper perspective. Economist Schor states that in the 1950s "keeping up with the Joneses" held sway; today, however, purchases convey status and identity with our reference groups, e.g., co-workers, media stars on television, and those with similar values, not necessarily our neighbors. Schor argues that rampant advertising and consumerism is driving an unsatisfying materialist life. She also describes "downshifters," those who reduce their income and expenditures to get off the spiral of more work to acquire increasingly expensive stuff. Unfortunately, her book's strong academic foundation is undercut by weak conclusions. Schor's The Overworked American (LJ 1/92) covered much of the same ground, and libraries that found an audience for that title will be well served by this one. -- Patrick J. Brunet, Western Wisconsin Technical Coll. Lib., LaCrosse
Booknews
Explores why so many of us feel materially dissatisfied and how "keeping up with the Jonses" has changed. The author traces America's spending problems to our class-based society and its inequalities and shows how the new consumerism hurts the public good, the environment, and the quality of life. She looks at the growing consumer backlash to escalating consumption and invites readers to examine their relationship to spending in order to break the insidious work- and-spend cycle.
Entertainment Weekly
Schor's study is a scornful indictment of consumerism -- which, she argues, has created a nation of debtors but failed to fill a gaping cultural maw.
Kirkus Reviews
Consuming more now and enjoying it less? In this heavily researched but accessible work, Schor (Women's Studies/Harvard; The Overworked American) tells us how and why this is so and what we might do about it. "See-want-borrow-and-buy" is Schor's succinct summation of American spending habits. As status and identity become increasingly indistinguishable, our very sense of worth becomes invested in what we buy. We spend billions for status. Given identical pairs of jeans, identical tubes of lipstick, we will more than likely buy, at a much higher price, the item with the designer label. Yet, such spending is self-defeating and never-ending. We no longer wish simply to keep up with our neighbors, but to emulate the spending habits of the richest 20 percent of Americans (television is the main vehicle through which we know what they buy). As their consumption increases, then, so does ours. The result of this endless game of catch-up is Americans working more, going increasingly into debt, but finding themselves no more happy or contented, in fact often a great deal less so. Further, as we spend privately our support for collective consumptionþon education, social services, public safetyþdiminishes, further eroding our sense of well-being. Itþs possible, but not easy given how natural it seems, to get out of this cycle of self-defeating consumption. Millions of Americans, whom Schor terms "downshifters," have opted to work, earn, and consume less and in the process created richer, more meaningful lives. Schor supports all of these findings with abundant, perhaps overabundant, survey data. Missing, though, is a consideration of why consumption is so deeply ingrainedin us, whatþs lacking in our collective lives that leads to such compensatory consumption. She discusses fears of downward mobility but never really develops this theme. Despite some shortcomings, this is an important analysis of who, or perhaps what, we are. It deserves and will surely gain a wide audience.
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Product Details

  • ISBN-13: 9780060977580
  • Publisher: HarperCollins Publishers
  • Publication date: 4/28/1999
  • Series: Harper Perennial
  • Pages: 272
  • Sales rank: 517,517
  • Product dimensions: 5.31 (w) x 8.00 (h) x 0.61 (d)

Meet the Author

Juliet B. Schor, bestselling author of The Overworked American and senior lecturer and Director of Studies, Women's Studies, at Harvard University, writes and lectures widely on issues of work and consumption. She lives in Newton, Massachusetts, with her husband and two children.

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Read an Excerpt

Chapter One

In 1996 a best-selling book entitled The Millionaire Next Door caused a minor sensation. In contrast to the popular perception of millionaire lifestyles, this book reveals that most millionaires live frugal lives-buying used cars, purchasing their suits at JC Penney, and shopping for bargains. These very wealthy people feel no need to let the world know they can afford to live much better than their neighbors.

Millions of other Americans, on the other hand, have a different relationship with spending. What they acquire and own is tightly bound to their personal identity. Driving a certain type of car, wearing particular designer labels, living in a certain kind of home, and ordering the right bottle of wine create and support a particular image of themselves to present to the world.

This is not to say that most Americans make consumer purchases solely to fool others about who they really are. It is not to say that we are a nation of crass status-seekers. Or that people who purchase more than they need are simply demonstrating a base materialism, in the sense of valuing material possessions above all else. But it is to say that, unlike the millionaires next door, who are not driven to use their wealth to create an attractive image of themselves, many of us are continually comparing our own lifestyle and possessions to those of a select group of people we respect and want to be like, people whose sense of what's important in life seems close to our own.

This aspect of our spending is not new--competitive acquisition has long been an American institution. At the turn of the century, the rich consumed conspicuously. In the earlypost-World War 11 decades, Americans spent to keep up with the Joneses, using their possessions to make the statement that they were not failing in their careers. But in recent decades, the culture of spending has changed and intensified. In the old days, our neighbors set the standard for what we had to have. They may have earned a little more, or a little less, but their incomes and ours were in the same ballpark. Their house down the block, worth roughly the same as ours, confirmed this. Today the neighbors are no longer the focus of comparison. How could they be? We may not even know them, much less which restaurants they patronize, where they vacation, and how much they spent for their living room couch.

For reasons that will become clear, the comparisons we make are no longer restricted to those in our own general earnings category, or even to those one rung above us on the ladder. Today a person is more likely to be making comparisons with, or choose as a "reference group," people whose incomes are three, four, or five times his or her own. The result is that millions of us have become participants in a national culture of upscale spending. I call it the new consumerism.

Part of what's new is that lifestyle aspirations are now formed by different points of reference. For many of us, the neighborhood has been replaced by a community of coworkers, people we work alongside and colleagues in our own and related professions. And while our real-life friends still matter, they have been joined by our media "friends." (This is true both figuratively and literally-the television show Friends is a good example of an influential media referent.) We watch the way television families live, we read about the lifestyles of celebrities and other public figures we admire, and we consciously and unconsciously assimilate this information. It affects us.

So far so good. We are in a wider world, so we like to know that we are stacking up well against a wider population group than the people on the block. No harm in that. But as new reference groups form, they are less likely to comprise people who all earn approximately the same amount of money. And therein lies the problem. When a person who earns $75,000 a year compares herself to someone earning $90,000, the comparison is sustainable. It creates some tension, even a striving to do a bit better, to be more successful in a career. But when a reference group includes people who pull down six or even seven-figure incomes, that's trouble. When poet-waiters earning $18,ooo a year, teachers earning $30,000, and editors and publishers earning six-figure incomes all aspire to be part of one urban literary referent group, which exerts pressure to drink the same brand of bottled water and wine, wear similar urban literary clothes, and appoint apartments with urban literary furniture, those at the lower economic end of the reference group find themselves in an untenable situation. Even if we choose not to emulate those who spend ostentatiously, consumer aspirations can be a serious reach.

Advertising and the media have played an important part in stretching out reference groups vertically. When twenty-somethings can't afford much more than a utilitarian studio but think they should have a New York apartment to match the ones they see on Friends, they are setting unattainable consumption goals for themselves, with dissatisfaction as a predictable result. When the children of affluent suburban and impoverished inner-city households both want the same Tommy Hilfiger logo emblazoned on their chests and the top-of-the-line Swoosh on their feet, it's a potential disaster. One solution to these problems emerged on the talk-show circuit recently, championed by a pair of young urban "entry-level" earners: live the faux life, consuming as if you had a big bank balance. Their strategies? Use your expense account for private entertainment, date bankers, and sneak into snazzy parties without an invitation. Haven't got the wardrobe for it? No matter. Charge expensive clothes, wear them with the tags on, and return them the morning after. Apparently the upscale life is now so worth living that deception, cheating, and theft are a small price to pay for it.

These are the more dramatic examples. Millions of us face less stark but problematic comparisons every day. People in one-earner families find themselves trying to live the lifestyle of their two-paycheck friends. Parents of modest means struggle to pay for the private schooling that others in their reference group have established as the right thing to do for their children.

Additional problems are created by the accelerating pace of product innovation. To gain broader distribution for the plethora of new products, manufacturers have gone to lifestyle marketing, targeting their pitches of upscale items at rich and nonrich alike. Gourmet cereal, a luxurious latte, or bathroom fixtures that make a statement, the right statement, are offered to people almost everywhere on the economic spectrum. In fact, through the magic of plastic, anyone can buy designer anything, at the trendiest retail shop. Or at outlet prices. That's the new consumerism. And its siren call is hard to resist...

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Table of Contents

Acknowledgments.....................................................ix
Preface...........................................................xiii
1 Introduction.....................................................1
2 Communicating with Commodities: How What We Buy Speaks 3 The Visible Lifestyle: American Symbols of Status...............43
4 When Spending Becomes You.......................................65
5 The Downshifter Next Door......................................111
6 Learning Diderot's Lesson: Stopping the Upward Creep of Epilogue: Will Consuming Less Wreck the Economy?...................169
Bibliography.......................................................175
Appendixes.........................................................197
Organizations......................................................209
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First Chapter

In 1996 a best-selling book entitled The Millionaire Next Door caused a minor sensation. It argued that most millionaires live frugal lives-buying used cars, purchasing their suits at J.C. Penney, and shopping for bargains. Apparently these very wealthy people feel no need to let the world know they can afford to live much better than their neighbors.
Millions of other Americans, on the other hand, have a different relationship with spending. What they acquire and own is tightly bound to their personal identity. Driving a certain type of car, wearing particular designer labels, living in a certain kind of home, and ordering the right bottle of wine all help create and support a certain image of themselves to present to the world.
This is not to say that most Americans make consumer purchases solely to fool others about who they really are, that we are a nation of crass status-seekers. Or that people who purchase more than they need are simply demonstrating a base materialism, in the sense of valuing material possessions above all else. But it is to say, that unlike the millionaires next door, who are not driven to use their wealth to create an attractive image of themselves, many of us are continually comparing our own lifestyle and possessions to those of a select group of people we respect and want to be like, people whose sense of what's important in life seems close to our own.
This aspect of our spending is not new-competitive acquisition has long been an American institution. At the turn of the century, the rich consumed conspicuously. In the early post-WWII decades, Americans spent to keep up with the Joneses, using their possessions to make the statement that they were not failing in their careers. But in recent decades, the culture of spending has changed and intensified. In the old days, our neighbors set the standard for what we had to have. They may have earned a little more, or a little less, but their incomes and ours were in the same ballpark. Their house down the block, worth roughly the same as ours, confirmed this. Today, the neighbors no are longer the focus of comparison. How could they be? We may not even know them, much less know the restaurants they patronize, where they vacation, and how much they spent for their living room couch.
For reasons that will become clear, the comparisons we make are no longer restricted to those in our own general earnings category, or even to those one rung above us on the ladder. Today, it is more likely that a person will be making comparisons with, or choose as a "reference group," others whose incomes are three, four, or five times their own. The result is that millions of us have become participants in a national culture of upscale spending. I call it the new consumerism.
Part of what's new is that lifestyle aspirations are now formed by different points of reference. For many of us, the neighborhood has been replaced by a community of co-workers, people we work alongside and colleagues in in our own and related professions. And while our real-life friends still matter, they have been joined by our media "Friends." (This is true both figuratively and literally-the television show "Friends" is a good example of an influential media-referent.) We watch the way television families live, we read about the lifestyles of celebrities and other public figures we admire, and we consciously and unconsciously assimilate this information. It affects us.
So far so good. We are in a wider world, so we like to know that we are stacking up well against a wider population group than the people on the block. No harm in that. But as new reference groups have formed, they are less likely to be comprised of people who all earn approximately the same amount of money. And therein lies the problem. When a person who earns $75,000 a year compares herself to someone earning $90,000, it's sustainable. It creates some tension, even a striving to do a bit better, to be more successful in one's career. But when the reference group includes people who pull down six or even seven-figure incomes, that's trouble. When poet/waiters earning $18,000 a year, teachers earning $30,000 a year, and editors and publishers earning six-figure incomes all aspire to be part of one urban literary referent group, with pressure to drink the same brand of bottled water and wine, wear similar urban literary clothes, and appoint their apartments with urban literary furniture, those at the lower economic end of the reference group find themselves in an untenable situation. Even if we choose not to emulate those who spend ostentatiously, consumer aspirations can be a serious reach.
Advertising and the media have played an important part in stretching out reference groups vertically. When twenty-somethings can't afford much more than a utilitarian studio but think they should have a New York apartment to match the ones they see on "Friends," they are setting unattainable consumption goals for themselves, with dissatisfaction as a predictable result. When the children of affluent suburban and impoverished inner-city households both want the same Tommy Hilfiger emblazoned on their chests, and the top-of-the-line Swoosh on their feet, it's a potential disaster. (One solution to these problems emerged on the talk show circuit recently, championed by a pair of young urban "entry-level" earners: live the faux life, consuming as if you had a big bank balance. Their strategies? Use your expense account for private entertainment, date bankers, and sneak into snazzy parties you haven't been invited to. Haven't got the wardrobe for it? No matter. Charge expensive clothes, wear them with the tags on, and return them the morning after. Apparently the upscale life is now so worth living, that deception, cheating, and theft are a small price to pay for it.)
These are the more dramatic examples. Millions of us face less stark, but problematic comparisons every day. People in one-earner families find themselves trying to live the lifestyle of their two-paycheck friends. Parents of modest means struggle with private school tuition others in their reference group have established as the right thing to do for one's children.
Additional problems are created by the accelerating pace of product innovation. To gain broader distribution for the plethora of new products, manufacturers have gone to lifestyle marketing, targeting their pitches of upscale items at rich and non-rich alike. Gourmet cereal, a luxurious latte, or bathroom fixtures that make a statement, the right statement, are offered to people almost everywhere on the economic spectrum. In fact, through the magic of plastic, anyone can buy designer anything, at the trendiest retail shop. Or at outlet prices. That's the new consumerism. And its siren call is hard to resist.
The new consumerism is also built on a relentless ratcheting up of standards. If you move into a house with a fifties kitchen, the presumption is that you will eventually have it re-done, because that's a standard that has now been established. If you didn't have air conditioning in your old car, the presumption is that when you replace it, the new one will have it. If you haven't been to Europe, the presumption is that you will get there, because you deserve to get there. And so on. In addition to the proliferation of new products (computers, cell phones, faxes, and other microelectronics), there is a continual upgrading of old ones-autos and appliances-and a shift to customized, more expensive versions, all leading to a general expansion of the list of things we have to have. The 1929 home I just moved into has a closet too shallow to fit a hanger. So the clothes face forward. The real estate agents suggested I solve the "problem" by turning the study off the bedroom into a walk-in. (Why read when you could be buying clothes?) What we want grows into what we need, at a sometimes dizzying rate. While politicians continue to tout the middle class as the heart and soul of American society, for far too many of us, being solidly middle class is no longer good enough.
Oddly, it doesn't seem as if we're spending wastefully, or even lavishly. Rather, many of us feel we're just making it, barely able to stay even. But what's remarkable is that this feeling is not restricted to families of limited income. It's a generalized feeling, one that exists at all levels. Twenty-eight percent of all households making more than $100,000 a year say they cannot afford to buy everything they really need. Nearly 20% say they "spend nearly all their income on the basic necessities of life." In the $50-100,000 range, 40% and a third feel this way respectively. Overall, half the population of the richest country in the world says they cannot afford everything they really need. And it's not just the poorer half.
{INS ID=TB.1.1}
This book is about why. Why so many middle-class Americans feel materially dissatisfied. Why they walk around with ever-present mental "wish lists" of things to buy or get. How even a six figure income can seem inadequate, and why this country saves less than virtually any other nation in the world. It is about the ways in which, for America's middle classes, "spending becomes you," how it flatters, enhances and defines people in often wonderful ways, but also about how it takes over their lives. My analysis is based on new research which shows that the need to spend whatever it takes to keep current within a chosen reference group-which may include members of widely disparate resources-drives much purchasing behavior. It analyzes how standards of belonging socially have changed in recent decades, and how this change has introduced Americans to highly intensified spending pressures.
And finally, it is about a growing backlash to the consumption culture-a movement of people who are downshifting, by working less, earning less, and living their consumer lives much more deliberately.
{A}Spending and Social Comparison{/A}
I am hardly the first person to have argued that consumption has a comparative, or even competitive character. Ideas of this sort have a long history within economics, sociology and other disciplines. In The Wealth of Nations Adam Smith observed that even a "creditable day-laborer would be ashamed to appear in publick without a linen shirt" and that leather shoes had become a "necessary of life" in 18th century England. The most influential work on the subject, however, has been Thorstein Veblen's Theory of the Leisure Class. Veblen argued that in affluent societies, spending becomes the vehicle through which people establish social position. The conspicuous display of wealth and leisure are the markers that reveal a man's income to the outside world. (Wives, by the way, were seen by Veblen as largely ornamental, useful to display a man's finest purchases-clothes, furs, and jewels.) The rich spent conspicuously as a kind of personal advertisement, to secure a place in the social hierarchy. Everyone below stood watching, and to the extent possible, emulating those one notch higher. Consumption was a trickle down process.
While it took Veblen to identify and describe the phenomenon, conspicuous consumption by the rich and the nouveaux riches was not new, even in Veblen's time. Spending to establish a social position has a long history. Seventeenth and eighteenth century Italian nobles built opulent palaces with beautiful facades, and within those facades placed tiles engraved with the words "Pro Invidia": "To be envied." For centuries, aristocrats passed laws to forbid the nouveaux riches from copying their clothing styles. At the turn of the century the wealthy published the menus of their dinner parties in the newspapers. And fifty years ago American social climbers bought fake "ancestor portraits" to hang in their libraries.
Veblen's story made a lot of sense for the upper-crust, turn-of-the-century urban world he inhabited. But by the twenties, new developments were afoot. Because productivity and output were growing so rapidly, more and more people entered the comfortable middle classes, and begain to enjoy substantial discretionary spending. And with this mass prosperity eventually came a new socioeconomic phenomenon-a mass keeping up process that led to convergence in the nation's acquisition goals and purchasing patterns.
The advent of mass production in the 1920s made possible an outpouring of identical consumer goods. Goods that everybody wanted, and were better able to afford, thanks to declining prices. By the fifties, the Smiths had to have the Joneses' fully automatic washing machine, vaccuum cleaner, and most of all the shiny new Chevrolet parked in their driveway. The story of this period was that people looked to their own neighborhoods for their spending cues, and the neighbors grew more and more alike in what they had. Like compared with like and strove to become even more alike.
This phenomenon was chronicled by James Duesenberry, a Harvard economist writing just after the Second World War. Duesenberry updated Veblen's trickle-down perspective, in his classic discussion of "keeping up with the Joneses." In contrast to Veblen's Vanderbilts, Duesenberry's Joneses were middle class, and they lived next door, in suburban USA. And, rather than seeking to best their neighbors, Duesenberry's Smiths mainly wanted to be like them. Although the ad writers urged people to be the first on the block to own a product, the greater fear in most consumers' minds during this period was that if they didn't get cracking, they might be the last to get on board.
In addition to Veblen and Duesenberry, a number of distinguished economists have emphasized these social and comparative processes in their classic accounts of consumer culture. These include John Kenneth Galbraith, Fred Hirsch, Tibor Scitovsky, Richard Easterlin, Amartya Sen, Clair Brown and Robert Frank. Among the most important of their messages: consumer satisfaction, and dis-satisfaction, depend less on what a person has in some absolute sense, than on socially-formed aspirations and expectations. Indeed, the very term standard of living suggests the point: the standard is a social norm.
By the 1970s, social trends were once again altering the nature of comparative consumption. Most obvious was the entrance of large numbers of married women into the labor force. As the workplace replaced the coffee klatch and the backyard barbecue as locations of social contact, workplace conversation became a source for information on who went where for vacation, who was having a deck put on the house, and whether or not the kids were going to dance class, summer camp, or Karate lessons. But in the workplace, most employees are exposed to the spending habits of people across a wider economic spectrum, particularly those employees who work in white collar settings. They have meetings with people in expensive suits, or who wear "real" Swiss watches. They may work with their boss, or their boss's boss every day, and find out a lot about what they and their families have. There were also ripple effects on women who didn't have jobs. When most people lived in one-earner households, incomes throughout the neighborhood tended to be close to each other. When so many families had two paychecks, mothers who stayed at home, or worked part-time, found themselves competing with neighbors who could much more easily afford pricey restaurants, piano lessons, and two new cars. Finally, as Robert Frank and Philip Cook have argued, there has been a shift to a "winner take all" society, in which rewards within occupations have become more unequally distributed. As a group of extremely high earners emerged within occupation after occupation, they provided a visible, and very elevated, point of comparison for those who weren't capturing a disproportionate share of the earnings of the group.
Daily exposure to an economically diverse set of people is one reason Americans began engaging in more upward comparison. A shift in advertising patterns is another. Traditionally, advertisers had targeted their market by earnings, using one medium or another depending on the income group they were trying to reach. They still do this. But now the huge audiences delivered by television makes it the best medium for reaching just about every financial group. While Forbes readers have a much higher median income than television viewers, it's possible to reach more wealthy people on television than in the pages of any magazine, no matter how targeted its readership. A major sports event, or an ER episode, is likely to deliver more millionaires and more laborers than a medium aimed solely at either. That's why you'll find ads for Lincoln Town Cars, Mercedes Benz sports cars, and $50,000 all-terrain vehicles on the Super Bowl telecast. In the process, $25,000-per-year painters are being exposed to buying pressures never intended for them, and middle class housewives look at products once found only in the homes of the wealthy.
Beginning in the 1970s, expert observers were declaring the death of this belonging process that had driven much competitive consumption, arguing that establishing an individual identity-rather than staying current with the Joneses-was becoming the name of the game. The new trend was to consume in a personal style. With products that signalled one's individuality. One's personal sense of taste and distinction. But of course, one had to be different in the right way. The trick was to create a unique image through what one had and wore, and did not have and would not be seen dead in.
While the observers had identified a new stage in consumer culture, they were right only to a point. People may no longer have wanted to be just like all others in their socioeconomic class, but their need to measure up within some idealized group survived. What emerged as the new standards of comparison, however, were groups that had no direct counterparts in previous times. Marketers call them clusters-groups of people who share values, orientations, and most importantly, lifestyles. Clusters are much smaller than traditional horizontal economic strata or classes, and can thereby satisfy the need for greater individuality in consumption patterns. Yuppie was only the most notorious of these lifestyle cluster groups. There are also middle Americans, twenty-somethings, upscale urban Asians, top one percenters, and senior sun seekers. We have urbane urbanites, radical feminists, comfortable capitalists, young market lions, environmentalists. Whatever.
Ironically, the shift to individuality produced its own brand of localized conformity. (In Chapter 2, I discuss just how detailed a profile of spending habits marketers can now produce within a cluster.) Apparently, lots of people began wanting the same "indivdual identity-creating" products. But this predictability, while perhaps a bit absurd, brought with it no particular financial problem. Seventies-consumerism was manageable. The real problems started in the 1980s, as an economic shift sent seismic shocks through the nation's consumer mentality. Competitive spending intensified. In a very big way.
{A}The Intensification of Competitive Consumption: Feeling Poor When Spending Is Rising{/A}
Throughout the 1980s and 1990s, most middle class Americans were acquiring at a greater rate than any previous generation of the middle class. And their buying was more upscale. By the end of the 1990s, the familiar elements of the American dream (a little suburban house with a white picket fence, two cars, and an annual vacation) have expanded greatly. The size of houses doubled in less than 50 years, there are more second homes, automobiles have become increasingly option-packed, middle income Americans are doing more pleasure and vacation travel, and expenditures on reaction have more than doubled since 1980. Over time new items have entered the middle class lifestyle: a personal computer, education for the children at a private college, maybe even a private school, designer clothes, a microwave, restaurant meals, home and automobile air conditioning, and of course, Michael Jordan's ubiquitous athletic shoes, about which children and adults both display near-obsession. At a minimum, the average person's spending increased 30% between 1979 and 1995. At a maximum, calculated by taking into account a possible bias in the consumer price index, the increase was more than twice that, or about 70%.
Yet by the middle nineties, America was feeling decidedly anxious. Many households felt pessimistic, deprived, or stuck, apparently more concerned with what they could not afford than what they had gotten. Definitions of the "good life" and even of "the necessities of life" continued to expand, even as people worried about how they could pay them. What was going on? The economic trend was a diverging income distribution. The sociological trend was the upward shift in consumer aspirations and the vertical stretching out of reference groups. They collided to produce a period of consumer anxiety, frustration, and dissatisfaction.
The growth of inequality dates back to the 1970s, with a phenomenal rise in the earnings of the rich and very rich. Between 1979 and 1989 the top 1% of households increased their incomes from an average of about $280,000 a year to $525,000. (They got a big tax break from Reagan, benefited from trends in financial markets, and wrote themselves bigger paychecks.) In terms of wealth, they did even better comparatively, boosting their share of the nation's financial wealth to just under one-half.
Thus, the so-called "decade of greed" was off and running. The rich and super-rich took conspicuous consumption to new levels, with Lexuses, Rolexes, Montblanc pens, designer outfits, and art collections. These visible public excesses sent reverberations through the upper part of the upper middle class, which calibrates its success by the Newport set. To compensate for the growing chasm between their lifestyles and those of the rich and famous, these upper middles too began conspicuously acquiring the luxury symbols of the 1980s-buying the high prestige watches and pens, looking for "puro lino" labels, and leasing luxury vehicles they often couldn't afford. "Feeling poor on $100,000 a year" articles began appearing in the press.
That might have been that. But the upper middle group is special. It became the new focal point. The new consumerism made it so, by orienting aspirations upward in ways I have already described.
By upper middle class, I mean roughly the top 20% of households, with the exclusion of the top few percent. In 1994, the lower income cut-off for this group was about $72,000 a year and its midpoint $91,000. The top 5% of this group, which, however, includes the super-rich, earned on average $254,000. The standard of living of this upper middle is now widely watched and emulated. It is the group which defines material success, luxury and comfort, for nearly every category below it. It is the visible lifestyle to which most aspiring Americans aspire. Even people earning far less now look up to the lifestyle of the brother-in-law who's a VP and lives in a gated community, the friends with a center entrance colonial, or, if our tastes run to the urban, a luxury apt. in a prewar doorman building on Riverside Drive in New York or in Boston's Back Bay. The average American is now more likely to compare his or her income to the six-figure benchmark in the office down the corridor, or displayed on Tuesday evening prime time. (Even in a relatively affordable town like Seattle, Frazier's apartment-and view-must cost a bundle.)
And these aspirations play themselves out in the retail sector: the furnishings, attire, and lifestyle accessories of the upper 20% are the prototypes for the less expensive versions found at Macy's, Sears, WalMart and K-Mart. (That's what the latter's partnership with Martha Stewart is all about.) Pottery Barn is similar to Williams-Sonoma. Pier I looks a lot like Bloomingdale's. Ditto Land's End and Brooks-Brothers. Designers create lower-priced lines which are still far more expensive than the no-names.
By 1991, almost everybody was gazing to the top of the pyramid. According to a study marketing professor Susan Fournier, now of Harvard Business Schoor, and her former colleague at the University of Florida, Michael Guiry, more than a third (35%) of a sample of American consumers reported that they would someday like to be a member of the "really made it group," a category which they identified as representing the top 6% of American society. (Average income for this top group is about a quarter of a million a year.) Half the sample (49%) identified the "doing very well" group as their aspirational standard, a designation which referred to the next 12% of households. Taken together, 85% aspired to be in the top 18% of American households. Only 15% would be satisfied by "living a comfortable life" or something less. Only 15% would be satisfied ending up as middle class.
But keeping up with that top quintile is not easy. Because they keep getting richer. Considerably richer than the four-fifths of the country which watches them. Between 1979 and 1994, families in the top 20% increased their share of income from 42% to 46%. Excluding the top 5% of that group (i.e. looking only at families in the 80-95% range) the rise was from 26% to 27%. And the share of income for every group beneath them fell. So four-fifths of Americans were relegated to earning even less than the people they look up to, who were now earning and spending more. And within the bottom 80% a similar process occurred. The top half did much better than the bottom half, whose comparative (and absolute) position went to hell in a handbasket. As the comfortable middle class got farther from that four-bedroom colonial, or the designer loft in San Francisco, the lower middle and working class fell even farther behind, their dream of owning any kind of home fading into the far-distant future. As the middle classes started keeping their cars a bit longer, the working class started having theirs repossessed. All down the line, the gaps between the groups just got larger and larger. And the hopes of many to participate in the new consumer economy were replaced by a daily struggle to survive.
By 1996, only one in four believed that the standard of living would rise in the next five years. Nearly half the population felt that their children's generation would not enjoy a higher standard of living than their own. The middle class was shrinking, companies were downsizing at a manic rate, economic pessimism and job anxiety abounded. Per capita consumption was rising. But consumers' expectations were rising even faster.
Unfortunately the government doesn't collect data on "the American dream and its upscaling." But survey data provide evidence for a sharp escalation over this period. In 1986, the Roper Polling organization asked Americans how much income they would need to "fulfill all their dreams." The answer was $50,000. By 1994 the dreams-come-true level of income had doubled, from $50,000 to $102,000. Upscaling had definitely taken hold. Of course, $102,00 is not everyone's dream. In a consumption system premissed on differences, dreams will also differ. And predictably, the higher one's income, the more one must have to feel fulfilled. Those making more than $50,000 said they would need more than $200,000 for total fulfillment; while lower-income people calculated that they would need only about $88,000 a year.)
{INS ID=TB.1.2}
Other surveys also indicate an expansion of desire and expectation. Asked what constitutes "the good life," people in 1991 focussed far more on material goods and luxuries than they did in 1975. Items which are more likely to be part of the good life now than then include a vacation home, a swimming pool, a color TV, a second color TV, travel abroad, really nice clothes, a car, a second car, a home you own, a job that pays much more than the average, and a lot of money. Things respondents said were less or no more likely to yield the good life: a happy marriage, one or more children, a job that is interesting, and a job that contributes to the welfare of society. Not surprisingly, by 1991, far fewer Americans thought they had a "very good" chance of achieving the good life.
{INS ID=TB.1.3}
Americans' concept of need has also clearly changed. Data from 1975, 1991, and 1996 reveal that a variety of consumer items are being seen as necessities by an increasing number of people. About a quarter of Americans consider home computers and answering machines to be necessities, a third feel the same way about microwaves, forty percent can't do without auto air conditioning, and just over half say home a/c is essential. VCRs and basic cable, which weren't included in the 1975 survey, are necessities to 13 and 17 percent of the nation's consumers. The list of things we absolutely have to have is growing.
{INS ID=AS.1.4}
Throughout the nineties, the moving target of the top 20% has continued to move. A mere car now carries a slightly downscale image, as people shift to sports utility vehicles. Urban spas, personal trainers, limousines, fancy computer equipment, "professional quality" everything, from cookware to sports equipment. And perhaps the most striking trend of all is the "trophy" house-or McMansion. These showy dwellings, which range from 4,000 to 25,000 square feet, are proliferating around the country. In older suburbs, an existing house will be razed to make way for the larger one. Outside Boston, in affluent Wellesley, the median size of a new home rose from 2,900 to 3,500 between 1986 and 1996, and the number of really big (i.e., 4000+) houses built quadrupled. Inside McMansion? A range of amenities now considerd de rigeur for affluent families-granite countertops in the kitchen, Jacuzzis, media rooms, enlarged kitchens and family room areas, three and four car garages, sometimes even home offices and au pair suites. And of course bathrooms. Lots of bathrooms.
It seems that the upscaling of "needs" has occurred disproportionately among those with more money. In my survey at "Telecom," among those who reported dissatisfaction with their incomes, the more they made, the more they say they need to reach satisfaction. In the $75,000 and up household income category, nearly two-thirds said they'd need an increase of 50 to 100% in their annual incomes to reach satisfaction, while fewer than 20% of those making $30,000 of less would need that much.
Focus groups and interviews with consumers also reveal the upscaling process. Here's downshifter Jennifer Lawson: "In the '50s, growing up in upstate New York, my parents were considered middle class pillars of the community. My father was an accountant. It's a fairly poor rural area, and most people worked in a factory or waitressed or something. My dad was actually a professional person with a sign out in front. [My parents] had one car and they drove it until it fell apart and then they bought a new one, usually a station wagon. They had a fairly modest house. We took a vacation as a family for two weeks and rented a little cabin in Maine. And drove-nobody flew anywhere. I can't remember anyone who had a second car. Everyone walked everywhere, children certainly didn't have $100 sneakers. It amazes me now that my younger brother, who still lives there and who has a job that's roughly equal to the job my dad had when I was growing up, he has three teenage daughters. And since they were about nine, they've each had their own color TV, and they have their own CD players, they all have their own telephone lines because they complain about calls not being able to get through."
A focus group participant seems less judgmental: "I used to think of the American dream as the house with the little picket fence and the two-car garage, two kids and a dog and a cat.... If you look at the old "Beaver" or the old movies, the family movies, they didn't show these huge mansions. They showed a house, maybe a three- or four-beroom house, and a little picket fence and a dog." What's different now? "Just the whole thing of more. I'm not saying that's bad and I'm not saying I'm not in that category. I'm just saying that the American dream has-I think it's expanding."
Thus, the competitive upscale consumption that began in the 1980s and the attendant expansion of the American dream wasn't invented by Nancy Reagan and it wasn't a cultural accident. It was created by the escalating lifestyles of the most affluent and the need that many below felt to meet their standards, irrespective of their financial ability to maintain such a lifestyle. In case people missed the upscaling in their own neighborhoods, workplaces, or at the mall, they could watch it on TV. Dallas, LA Law, and Beverly Hills 90210 ascended to the television norm, while the appeal of Roseanne's working class life came out of its uniqueness on television. The story of the 80s and 90s is that millions of Americans ended the period having more but feeling poorer. Nearly all the pundits missed this dynamic, recognizing only the income trends or the spending increases.
But is consumption really a competitive process? If you're like many, you don't necessarily experience it in this way. (On the other hand, if you've organized a birthday party for a child in the comfortable middle or upper middle class lately, you probably have.) A full answer to this question awaits chapters 2 and 3, but one point is worth making here. American consumers are often not conscious of being motivated by social status, and are far more likely to attribute such motives to others than to themselves. We live with high levels of psychological denial about the connection between our buying habits and the social statements they make.
Most Americans would deny that they are seeking status in the usual meaning of the word, looking to position themselves in a higher economic stratum, by their spending. In part this is because spending is highly targeted. We don't want everything in sight; we are often highly selective in our purchases. Indeed, what stands out about much of the recent spate of spending is its defensive character. Parents worry that their children need computers and degrees from good colleges to avoid being left behind in the global economy. Children, concerned about being left out in the here and now, demand shoes, clothes, and video games. (As Jennifer Lawson said of her teenage neices, without the right sweatshirts and jeans they will be "ruined in school.") Increasingly overworked, the adults need stress-busting weekends, microwaves, eating out, and "taking in" to "keep up" with their daily lives. But the cost of each of these things adds up.
{A}The Quality of Life Squeeze{/A}
Not surprisingly, as upscale competitive consumption intensified, family finances deteriorated. One indicator is the rise of consumer borrowing and credit card spending: through the 1990s, households have been taking on debt at record levels. And the largest increases have been not among low-income households, but those earning $50 to $100,000 a year. (Sixty-three percent of these households are now in credit card debt.) Debt service as a percent of disposable income now stands at 18%, even higher than during the early 1990s recession. Another indicator is the rise in worktime: hours of work have risen about 10% in the last 25 years. To finance their lifestyles, millions of families sent a second earner into the workplace, but this created a squeeze on household work and family time. Despite working all these hours, somewhere between a quarter and 30% of of households live paycheck to paycheck. With the margin of error so thin, it is not surprising that personal bankruptcies are at historic levels.
The national savings rate has also plummeted. The average American household is currently saving only 3.5% of its disposable income, about half the rate of a decade and a half ago, before the intensification of spending pressures began. In 1995, only 55% of all American households indicated they had done any saving at all in the previous year. (This figure has fallen, despite the expansion of the economy.) The French, Germans, Japanese, and Italians save roughly three times what Americans do, and the British and Dutch more than twice. Even Indian and Chinese households, most of whom are dirt poor, manage to save between a quarter and a third of their paltry yearly incomes.
As a result of low household savings, a substantial fraction of Americans live without an adequate financial cushion. In 1995, the median value of household financial assets, among those who held them, was a mere $13,000. By 1997, well into the stock market boom, nearly 40% of all baby-boomers had less than $10,000 saved for retirement. What is perhaps most striking is the extent to which upscaling has undermined savings among the nation's better-off households. In 1995, a third of families whose heads were college educated did no saving. The vast majority of Americans say they could save more, but report themselves unwilling to cut back on what one study calls "the new essentials." (This unwillingness also appears to be increasing over time.)
Thus the new consumerism has led to a kind of mass "overspending" within the middle class. By this I mean that large numbers of Americans spend more than they say they would like to. More than they have. That they spend more than they realize they are spending, and more than is fiscally prudent. And that they spend in ways that are collectively, if not individually, self-defeating. Overspending is how ordinary Americans cope with the everyday pressures of the new consumerism.
The intensification of competitive spending has affected more than family finances. There is also a boomerang effect on the public purse and collective consumption. As the pressures on private spending have escalated, support for public goods, and for paying taxes, has eroded. Education, social services, public safety, recreation and culture are being squeezed. The deterioration of public goods then adds even more pressure to spend privately. People respond to inadequate public services by enrolling their children in private schools, buying security systems, and spending time at Discovery Zone, rather than the local playground. These personal financial pressures have also reduced many Americans' willingness to support transfer programs to the poor and near-poor. Coupled with dramatic declines in the earning power of these latter groups, the result has been a substantial increase in poverty, the deterioration of their neighborhoods, and crime and drug use. People people with money try to spend their way around these problems. But that is no solution for these social ills.
One problem with the national discourse is that it is focussed on market exchanges, not quality of life, or social health. Gross Domestic Product is the God to which we pray. But GDP is an increasingly poor measure of well-being, failing to factor in pollution, parental time with children, the strength of the nation's social fabric or the chance of being mugged while walking down the street. The Genuine Progress Indicator, an admittedly crude, but relatively comprehensive measure of the quality of life has increasingly diverged from GDP since 1973, and negatively. The Index of Social Health, another alternative measure, has also declined dramatically since 1976, reaching a record low in 1996. When we count not only our incomes, but also trends in free time, public safety, environmental quality, income distribution, teen suicides, and child abuse, we find that things have been getting worse for more than 20 years, even though consumption has been rising.
{A}Jumping Off the Bandwagon: Voluntary Downshifters{/A}
Of course, not everyone is going along with the new consumerism. Or not forever. The pressures for upscale consumption, and the work schedules which go along with it, created millions of exhausted, stressed out people who started wondering if the cycle of work and spend was really worth it. And some concluded that it isn't. So they started downshifting, reducing their hours of work, and in the process earning and spending less money.
This group is opting out of excessive consumerism, choosing to have more leisure and balance in their schedules, a slower pace of life, more time with their kids, more meaningful work, and an existence in which their daily lives line up squarely with their deepest values. These are not just fast-track Yuppies leaving $200,000 jobs in Manhattan to settle in Montana, although there are plenty of those. Downshifters can be found at all income levels, from the comfortable suburbanites whose homes are paid for, to those who are counting every penny, resigned to the fact that they'll never own a home. Their jobs were leaving them drained, depressed, and wondering what life is all about. Now they may not have as much money, but they are spending every day answering that all-important question. And they are much happier. Other downshifters were compulsive shoppers, mired in credit card debt with little of value to show for it, or caught up in a competitive consumption spiral above where their means could support it. Some are kids just out of college, farsighted enough to avoid the blind alleys taken by older siblings or parents.
Downshifters are making a wide variety of worklife changes to bring what they do into synch with who they are. Many are switching careers. Others are going to part-time work, starting home-based businesses, or stopping work altogether to raise their kids. The price for doing what they want: they earn less money. For downshifters from the middle class and below, this usually means big changes. They don't shop much, make more of what they need themselves, and spend less money in the world of commodified leisure. Their kids' birthday party doesn't have a magician or a clown; it's pin the tail on the donkey and fishing for coins in the bathtub. They go to an in-state camping site instead of St. Maarten. They drive a seven year old car, or maybe take the bus to work. Their patronage of restaurants drops off precipitously. They stop going to first run movies. But for virtually all of them, these changes are worth it.
There's been a lot about downshifting in the media, ranging from the accurate to the hyperbolic, including a rash of stories about how women are rushing home in droves to be with kids. (I find that downshifters are no more likely to be women than men, by the way.) What most of the downshifting stories lack is data. Until this point, our knowledge of this trend has been mainly anecdotal. In chapter 5, I will report on a nationwide survey of downshifters I have conducted.
Of course this is not the first such movement in our history. We have had Quakers, Shakers, transcendentalists and hippies. But these were small, ideologically coherent groups. And these movements have been much more self-consciously anti-consumerist than all but a subset of downshifters. What's different about downshifters is that they are not dropping out. They're not back-to-the-land types. They don't live together. And they don't share a religion. They don't proscribe all modern acquisitions as part of a system of belief. By job category, they're actually quite mainstream-nurses and salespeople, teachers and managers. They're urban and suburban. They may well be the Joneses next door, who we've been keeping up with all these years. And they represent a striking counter-trend to the ideology which has dominated America since European settlement, an ideology which emphasized moving up, bettering oneself, rising in the social order.
Ultimately what's important about downshifting is that it involves bringing one's lifestyle into correspondence with one's values. And downshifting is happening because millions of Americans are recognizing that their lives are no longer in synch with their values, either because they have no time for the things they care about most-their children, their families or themselves; because they can't believe in the work they are doing; or because the money and the consumption/identity link has started to seem meaningless. For these reasons, downshifting often involves a process of soul-searching. It involves a coming to consciousness about a life which may well have been on automatic pilot.
{A}Beyond the Culture of Commercialism{/A}
There is accumulating evidence that Americans are growing uneasy with the new consumerism. Surveys show that many believe materialism is ruining the country, perverting our values, and damaging our children. We yearn for what we see as a simpler time, when people cared less about money and more about each other. After drugs and crime, people see materialism as the most serious problem affecting American families. In a recent book, Princeton sociologist Robert Wuthnow argues that we are ambivalent about money. On the one hand we want it, are strongly committed to success and achievement (it has been said that it is how America keeps score), and believe in hard work. At the same time, we also hold the contradictory view that money is profane, polluted, even evil. Talking about how much we have, or make, is taboo. Doing something for money seems dirty, in a way that doing it for love, personal fulfillment, or social commitment is not.
Yet our discomfort with money and materialism is hard to pin down. In part this is because consumerism as a way of life is so ingrained it's hard to recognize within us and around us. It is, in the now-famous words of George Orwell, "the air we breathe." Like air, it's everywhere, we're dependent on it, and perhaps most importantly, until it's really dirty, it cannot be seen. We experience consumer society as something natural. But it's not. As a growing number of historians have shown, the culture we live in today was created. Consumer capitalism did not triumph without opposition, but triumph it did. One measure is that by the 1990s, college students reportedly relate far more to commercials and advertising culture than they do to history, literature, or probably anything else. As University of Florida scholar James Twitchell argues, ADCULT, now is our culture.
I do not raise this point to suggest that change is not possible. Certainly it is. But the first step toward transforming America's consumer culture is to understand it better. I wrote this book in part as a reflection on the thousand and one ways our daily lives and indeed our very identities are structured and regulated by acts of spending. Because that, more than anything, is the first step to understanding why so many of us have become overspent Americans.
{/BM}
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  • Posted April 5, 2011

    Great book if you wonder why everyone is starting to look alike

    I thought the book had a lot of research to back it up. I enjoyed how Schor was able to track this trend all the back to the 1900's making it clear that this is not an old phenomenon. It was easy to read and easy to connect to with the anecdotes that proved that not only can this trend be detrimental but also possible to overcome. The graphs, though sometimes hard to understand put the numbers into perspective. I appreciate how she used psychology and sociology to back up her thesis.

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  • Anonymous

    Posted May 22, 2009

    kool

    the book was very interesting and filled with facts and numbers that just show how much americans spend on things they dont need. however, i felt that it was a bit repetative i felt like i was reading the same thing just with different numbers.

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    Posted June 18, 2009

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    Posted September 14, 2012

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