The Waste of Luxury

Like hunger and homelessness, the global trade in luxury goods is booming. Turnover fell from $254 billion in 2007 to $228 billion in 2009 – a decline that observers attributed to “luxury shame”. Rich people could still afford all the luxuries they wanted, but apparently they felt a trifle uneasy about flaunting their wealth at a time of crisis. They soon got over their unease. Sales recovered to $257 billion in 2010 and are expected to surge to $276 billion in 2011. “Luxury shame is now over,” declared marketing consultant Claudia d’Arpizio in March.

So the long-term trend still points sharply upward. This reflects the continuing polarisation of the distribution of wealth – that is, the process by which the rich get richer and the poor poorer. It also reflects the rapidly growing number of rich people in fast-growing economies like Brazil and China (already the second largest market after the United States).

The figures are misleading, in that they refer only to goods purchased over the counter – liqueurs, fashionable apparel, cosmetics, perfumes, jewelry, gold watches, handbags, luggage, etc. They do not include fancy cars, yachts and jets, for instance. Or mansions and penthouse apartments.

Estimates based on a broader definition are harder to locate. But I did find a figure of $445 billion for sales of luxury goods on the “broadest definition” in the United States alone in 2005. Extrapolating to the global level and allowing for growth, I derived an extremely rough ballpark figure of two trillion dollars ($2,000 billion) a year.

Comparisons

A couple of comparisons will help put this huge number in perspective. Annual world military expenditure is also roughly two trillion dollars. Thus, the luxury consumption of the wealthy ranks alongside military expenditure as one major component of the waste of resources under capitalism.

Now let’s compare spending on luxury goods, which is concentrated in the richest strata of the population, with spending on staple foods, which is concentrated in the poorest strata. Average per capita annual spending on staple foods is about $300 in low-income countries (population roughly 5.5 billion) and $800 in high-income countries (population roughly 1.5 billion).

There are complications in interpreting these figures. In particular, some staple crops are grown and consumed by subsistence farmers rather than sold on the market. In general, money is an inadequate measure of resources in many ways. But it can give us at least some idea of relative scales of magnitude.

And here the overall message is clear. The resources devoted to the luxuries of a few million wealthy parasites are on a comparable scale to the resources used for the basic nourishment of billions of the world’s poor. Cancelling by a million on both sides of the equation, the luxuries of one roughly correspond to the necessities of a thousand.

Serving the parasites

And yet this is still a gross understatement of the waste of luxury. We have been considering only luxury goods. What about services?

The wealthy use a wide range of services. This often takes the form of hiring workers to provide personal service, usually full time – servants. In most cases, obsequious servants are their only point of contact with the great majority of the population who have to work for a living.

I am not talking only or even mainly about servants of the Upstairs Downstairs variety. Although they still exist – cooks, gardeners, butlers and all. In fact, butling has undergone something of a revival (to butle – a colloquial verb meaning “to serve as a butler”).

The staff of the “family office” that handles the financial affairs of a wealthy family. The tutors who teach their children. The caterers who arrange their parties. The personal assistant who makes travel arrangements. The “concierge physician” who limits his practice to a handful of rich patients, who each pay a yearly retainer of $25,000. The accountant who finds ways for the rich to pay less taxes. The legal adviser. The call girl or “sugar daughter”. A tennis coach, perhaps. These too are all servants.

So in addition to the parasites themselves, society has to bear the burden of all these people who do nothing with their working time and diverse talents except serve the parasites. This in itself represents no small waste of human resources.

Environmental footprint

One of the problems with using money as a measure of resource use is that it takes insufficient account of ecological impacts. And the consumption pattern typical of the wealthy leaves a disproportionately heavy environmental footprint.

One reason is that the rich travel around the world a great deal, usually by air and often on private planes. It is common for them to maintain residences in far-flung countries, cross an ocean just to go shopping, and fly numerous guests to the venue of a celebration. Air travel harms the environment and needs to be minimized: not only do aircraft engines run on petroleum-based fuel, but they also emit particulates and gases that contribute to climate change.

The rich are also largely to blame for the fact that so many species are threatened by extinction. Apart from the depredations of wealthy hunters, wealthy consumers create most of the demand for body parts of endangered species – elephant tusks for ivory, leopard skins for fur coats, various parts of numerous species for traditional Chinese medicinal use, and so on.

Stefan