Learning how to consume

By Jahan Alamzad

The visit of U.S. President Barack Obama to Asia at the end of last year brought a flush of varying opinions in the U.S., particularly vis-?-vis China, with that debate continuing throughout this year. Strikingly, the unified theme has been that China exports too much and consumes too little in its domestic market.

Be that as it may, the lack of any convincing analysis as to why that's the case has also been astonishing. For what basic reasons do we see that the arisen Asian economic powerhouses of the late, China and India, struggling with consumption of goods while being unwaveringly bent on exporting as the engine for economic growth?

The clue may be found more aptly by looking at molded societal fabrics instead of searching for governing economic principles and policies. In fact, comparing China and India with that viewpoint to mature Asian economic giants of Korea and Japan would provide some measure of understanding.

When I started my long stay in Korea a couple of years ago on a project, I noticed with amazement something that might seem trivial at the first glance. Many women were carrying Louis Vuitton bags, both genuine and knockoffs. When I inquired from my Korean colleagues, I was told that in one of the popular TV series, the lead actress carried a Louis Vuitton bag, and that created the fad.

The point is ― granted it can be a controversial point ― the society learns how to consume, instead of having consumption as a sense or instinct. That's why advertising and promotion campaigns provide powerful means to build consumptive appetite.

But, often enough, direct messages to encourage and create a trend for purchasing goods give way to more sublime ways that the taste for consumption is fostered. Back in the 1950s, Detroit learned the hard way that despite the auto-manufacturing binge of the post-World War II, people did not buy cars according to their income, but based on their lifestyle. Their taste was made and reinforced by what they were exposed to every day, creating a lifestyle, which in turn, led to a pattern of purchase behavior.

And, that's what is lacking in China as compared to Korea. A glance at a myriad of Korean TV channels shows the depth and significance of the entertainment industry in this nation. Coupled with the other media, say, print journals dedicated to everything ranging from fashion to home decoration, the taste for consumption in this society is built in a solid way.

That in fact is good. It creates jobs for producing those goods so abundantly consumed by Koreans, while enhancing their quality of life.

While a person anywhere in Korea not only has access to goods, but more importantly knows how to consume, a Chinese living in the central or western part of that vast country doesn't have the same learning for consumption even though goods can be offered locally. The problem is not with production or logistics, but with knowing how to consume.

So long as there are no effective means to ingrain the passion for spending on consumer goods and durable products, the domestic market cannot be relied upon as a source of economic growth. And, diverting resources domestically or increasing imports cannot be fathomed.

Becoming a consumer society, which would in fact enhance the quality of life of Chinese while tapering a host of cross-border economic issues, can be done if Chinese are given more opportunities to acquire the knowledge for consumption.

Who knows? A couple of successful daytime soap operas on Chinese TV, and maybe we will end up seeing women all over China clamoring to buy Louis Vuitton bags, denting the country's import-export imbalance!

The writer is managing principal of CA Advisors. He holds two masters and two bachelor's degrees in well-known U.S. universities and can be reached at jahan.alamzad@ca-advisors.com.