Consumption and well-being: What are we missing?

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“The consumption boom” is concentrated in the upper echelons of society. Photo: Mauricio Martínez/ UNDP in El Salvador

Slavoj Zizek tells a joke that was popular in Eastern Europe in the sixties. A man enters a grocery store and yells, “Surely you don’t have any soap, right?” The shopkeeper replied halfheartedly: “No, sir, we’re the shop with no toilet paper; the shop with no soap is further ahead.”

In Latin America, something similar is happening in discussions on progress and development, and we usually think we are the society that is “missing something”, or is “incomplete”.

We are interested in exploring the particularities of what’s desperately needed, the necessary data that will enable us to better visualize our unsustainable pattern of consumption. In other words, to examine the aspects of multidimensional poverty that we still have not been able to define.

A couple of weeks ago, the Economic Commission for Latin America and the Caribbean published new data on consumption, spending and borrowing. The initial findings are as follows:

“The consumption boom” is concentrated in the upper echelons of society. The richest 20 percent of Latin Americans accounted for roughly 50 percent of all household spending. The poorest 20 percent accounted for about 7 percent of total household spending.

Furthermore, the findings show a transition in the nature of spending. Households that once allocated most of their spending to food, now spend more and more on housing, transport, clothing and footwear.  The rise of the emerging middle classes has made this transition in consumption patterns even more pronounced.

Latin American households have become increasingly indebted, with consumer credit and credit cards representing the largest part of the burden. In Colombia, Mexico and Brazil, the ratio of household debt to income stands at approximately 30% percent, whereas in Chile, the burden of household debt represents more than 60 percent of the disposable income –a figure only comparable with that of the US. .

For the past 20 years, we analyzed the issue based on poverty lines and approximations of basic needs that are unsatisfied. Despite the sophisticated methods in dealing with exclusions, discrimination, and inequality, our metrics continue measuring education, health and housing conditions as a synthesis of “everything else” that we associate with the idea of well-being.

What would happen if instead of one single multidimensional poverty line, we could visualize a “family” of lines of well-being for households suffering from extreme poverty, moderate poverty, the vulnerable and middle classes?

About the author
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George Gray Molina is the Chief Economist at the Regional Bureau for Latin America and the Caribbean, UNDP New York.

 

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