THE CONSUMER IN A DEVELOPING SOCIETYl

Revathi Balakrishnan , Univer sity of Wiscon sin-Stevens Point

~~~~~~~~~ABSTRACT~~~~~~~~~ The economic development goals and policies during the last four decades have generated changes in the developing soci eties. Their stratified econ­omies are characterized by heterogenous consumer groups and market structures. Many consumer pro­grams are directed toward urban middle class con­sumers and generally i gnore the urban and rural oor .

Third World countri es, referred to here as the "developing countri es", have certain general char­act eristics, such as relatively low per capita in­come , economi c structures with occupational con­centration in agricul ture and livestock tending, littl e urbanization , high popul at i on growth rate and low educational levels. Efforts have been underway since World War II to improve the econom­ic conditions of people in the developing societ­ies. The economic development process, init iated by the developing countries, gained momentum f rom the actions of developing countries. Economic de­ve lopment became the goal of these countries. However, there has been changes in the policies and programs over the decades of development . These dynamics have i nfluenced the welfare of the consumers in t he developing societies.

The consumers in developing societies share simi­l a r economic pr obl ems though their socio-cultural environments ar e diverse . The socio-economic en­vironment is t r ansi tional and the consumer group is s t ratified with subsistence level consumers at one end and urban elite with purchasing power to enjoy a western life style at t he other end .

Hence the objective of the paper i s l) to · review t he various force s gener a t i ng changes in the socio-economic environment, t he probl ems i n achieving broad based social goals through econom­ic growth objectives , and t heir impact on the stratified con sume r group, and 2) to identi fy con­sumer profiles to plan effective consumer programs.

INTERNATIONAL ECONOMIC DEVELOPMENT POLICIES AND THE CONSUMER

The emphasis of international economic development policies ha s changed from a trickle down theory to a bas i c needs approach over the decades. During these decades the focus on consumers has changed from consumers as wageearners, to consumers with special needs as a vulner able group and now to a focus on all poor consumers who lack access to basic goods and services .

The most prevalent view in the 1950' s and 1960 1 s was the t rickle down theory of economic develop­ment, in which development was seen purely as an

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economic phenomenon in which rapid gains from the overall growth of GNP and per capita income would automaticall y bring benefit to the masses in the for ms of jobs and other economic opportunities(l~). Th~ emphasis was on job creation and income gener ­ation. However the distribution of income and essential consumer goods production and distribu­tion were found to be inadequate.

In the next phase, the economic development proj­ects placed emphasis on subpopulations with spe­cial needs. The vul nerable gr oups such as preg­nant women, lactating mothers and preschool chil­dren were targeted for various nutrit i onal and health programs (10).

Still more recently, the underlying concept has been to ensure to the most economically and socially deprived population the material neces­sities of life, the elements of consumption a t min­imum level considered socially tolerable . While basic human needs are partly conventional and hence vary among countries, it is nevertheless argued that there are minimum levels of consumption and access to public services that are essential t o a decent livi ng, everywher e. It is ther efore pos­sible to define targets in physical units on a global basis . For example, mimimum food and hous­i~g requirements can be defined quantitatively with r eference to dai ly intake of ca lories , and s quare meters of dwelling space per person. Qual ­itatively they can be defined i n terms of the propor t ion of pr otein intake and household facili­ties such as toilets, piped water, electricity and basic f urni t ure (5).

INTERNATIONAL TRADE POLI CIES AND THE CONSUMER

Mul t inational corporations entered the Third World market for t wo reasons : l) highly populated countries s upply cheap labor and 2) highly popu­l ated countries are viable markets. Dur i ng t he trickl e down phase of economic gr owth, many Third World governments , which aspired to growth i n GNP, backed by international aid f und s opened doors for industria lization. These countries were profit­able markets to sell technology and i ndus try f or the multinationals. But such col laboration gene­rated mixed results . Multinationals provided i n­come earning opportunities to the Third World peopl e . To these for tunate few doors to improve consumption opened up . But the l abor displaced through industrialization and export oriented in­dustri a l development suffered a loss of income. During this phase of growt h a small proportion of ur ban elite with a western consumption orientat i on became both a dominant and a visible group of con­sumers. Though the economic growth of GNP was achieved, the benefits of gr owth did not trickle down to the l ower leve l s as visualized.

However the needs of the visible urban consumers are taken as prior ity needs for all the consumers in the country by the multinationals. According to Ninan, "The American company ' s calculations show that Indian soft drink market is vastly unex­plored. Annual sales ar e 60 to 80 billion cases in 1984, or two bottles per Indian per year. If the effective market (defined as those who have purchasing power) is assumed to be 150 million people, the per capita annual consumption would be around 12 bottles. " (9)

Yet, during the current basic needs approach phase, multinationals have come under criticism for neglecting the soci al goals of providing ade­quate minimum basic services and safety to their employees. The multinational corporations' poli­cies which allows the marketing of unsafe products and/or the products unsuitable for the local social-physical environment conditions among the Third World consumers have come to focus. The economic objective of growth must be re-examined for it's impact on the welfare of consumers in the developing societies.

INTERNATIONAL POLITICAL INTERACTIONS AND THE CONSUMER

According to Rolfe, "The conflict of our era is be­tween ethnocentric nationalism and geocentric technology· " (11) Conflicts between desires for political independence and aspirations for econom­ic prosperity are common among the developing countries' policy makers. Such conflicts in inter­national political interactions are illustrated in international trade and a i d negotiations. South, the developing countries, demand increased aid and free trade, while the North, the developed coun­tries are moving toward decreased aid and protec­tionism. Those developing countries, which re­ceived liberal western aid and bank loans during the trickle down theory phase, are now faced with reduced aid and pressure by IMF to reduce depen­dency. Though, in the long~· IMF policies may generate overall improvement in the economic health of many of these countries; in the short run the domestic economy is troubled':"" The~ rent pressure to accept more flexible exchange policies, to .cut domestic spendi ng and foreign trade deficits , would mean hi gher taxes, less pub­lic spending and more strict credit in the develop­ing countries (14).

ECONOMIC ENVIRONMENT AND CONSUMER PROFILES IN THE DEVELOPING SOCIETIES

In the developing soci eties the economic environ­ment can be described as stratified economy, char­acterized by disparity in income and consumption opportunities among the consumers. Economic in­vestments have paid devidends , but the dividend benefited a relatively small proportion of the consumers . Harrison sums up, "In most western minds, and in those of the majority of the Third World elites , development equals modernization and modernization equals the t r i umph of western mate­rialism. It means the devel opment of a consumer society of one kind or another. The choice of

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this model also impl ies the choice of a certain pattern of society and it leads to social polar­ization. " (4)

The conflicts between growth oriented policies and welfare oriented policies are illustrated in every sector of the economy. In the marketing sector, for example, Indian advertising agencies want international affiliations to gain an edge with global clients who wish to market their products in India (4) . However, the sophisti­cated advertising era will mean nothing to the poor consumer who deals with the bazaar economy and a barter,system. Ball s t ates, "India is now entering consumer age, with consumers demanding more products and services. Products demanded are motorcycles, cooking ranges, processed food and beverages, TV, hi-fi and video systems." (1) For the 50 percent of the population in India who live in poverty, these goods are not basic goods and services.

On the government delivery system, the complex and multitiered bureaucracy manned by the educa­ted elite, is too complex to be understood and utilized effectively by the illiterate and poor consumers . The bureaucratic elite are the power­ful middlemen in the public service delivery sys tem and thus access to basic need services is beyond the means of low-income consumers.

Inflation has been eroding the value of the cur­rencies i n the developing countries. Inflation in Egypt is around 20 per cent a year, in Mexico more than 100 per cent, and the African nations have not escaped price spiraling (7 , 12; 3). Blackmarkets have developed due to an acute short­age of essential consumer goods and at times for the illegally imported luxury consumer goods. These developing economies also have to subsidize the costs of many necessities of life to the con­sumers (7) •

Population growth in these developing countries has aggrevated the problems of unemployment, low per capita income, nightmarish urban growth, and environmental destruction ( 8) . Many developing countries do not include the population control variable in the economic progress equation . Eco­nomic growth achieved has not kept pace with the population explosion.

The social polarization that resulted from dif­ferential access to income and consumption oppor­tunit i es pr oduces a diverse profil e of Third Worl d consumers. The diversi t y in consumer groups is captured by Kapur on India , "The situa­tion i n I ndia is an ' Island Republic of India ' elite dedicated to the symbols, values and privi­leges of a consumer society in the midst of an ocean , that is 'Republic of India ' where one third of the people are engaged in the daily touch and go survival and fifty percent compete endlessly and without success to get themselves accept ed into the citizenship of 'Island of Indian Elite'." (6)

The consumer picture that emerges is one of groups of consumers with different needs , aspira­t i ons and access to resources. The conceptualized

consumer classification presented here can aid in developing effective consumer research, education and advocacy programs (Figure 1). The consumer profiles have urban-rural and income level dimen­sions and the relevant product and service orien­tations. Urban rich and upper middle class set the trend for western life-style product consump­tion. This group creates the market for high priced products and luxury goods and services. The rural rich and urban middle class follow the urban trend setters and help to introduce modern life style in the rural sector. Urban middle and lower middle class strive hard to achieve the western life-styl e product consumption. Rural middle and lower middle class struggle hard to imi­tate urban middle class consumers. The popular products among the two groups are household appli­ances, medium priced entertainment equipment, and convenience goods and services. They are the po­tential market with growing consumption aspiration. The rural middle class also introduces consumer goods representing modernization in the rural en­vironment . The urban and rural low income and poor consumers are struggling to maintain a sub­s i stence level of living; they are the isolated audience to the consumption style of rich and mid­dle class. They are striving to get basic goods and services from the market. The last two groups are those who are least benefited from "trickle down" of the economic growth and who are the main focus of the basic needs approach.

In the developing societies the economic exchange system that caters to the stratified consumer groups can also be conceptualized to have diverse structural characteristics. The market systems are classified as:

1. Organized formal markets which are visible and which utilize sophisticated western marketing methods.

2. Organized informal markets which are visible, but made up of local vendors who use tradi­tional trade practices .

3. Loosely structured barter sys t em , exchange goods and services, between families in rural sectors. The barter syst em i s i nvisible t o the extent that, no one in economic accounting and planning professions r ecognize the ex­change. But to the villagers this system pro­vides access to basic goods and services.

4. Black markets are invisible because they do not operate within the norms of l aw abiding social behavior . But they are prevelant in the Third World countries and can be very organized or loosely structured. The govern­ments struggle hard to control the exchange of goods in this market , with limited success.

The stratified consumer groups are involved in ex­change interactions in the various types of mar­kets with different frequency and intensity. For example, the urban trend setters will do most of their purchasing in organized formal markets and relatively small purchases through barter. On the other end, the rural poor consumers will deal mostly in loosely structured barter systems and

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and make relatively small purchases through orga­nized formal markets. The organized informal mar­ket, managed by the local vendors, link the modern urban sector with the rural sector.

CONCLUSION

The changes in the goals and policies of economic development have affected the consumers in the de­veloping societies. The consumers in the develop­ing societies are heterogenous groups functioning in a traditional socio-economic environment . In the developing societies the consumer problem is to make an effective consumer decision in order to obtain the best returns for the meager resources available in a transitional environment. Many consumer programs in the developing societies have effectively addressed the problems of urban rich and middle class consumers. But the problems of rural and urban poor consumers have not yet been studied adequately .

FI GURE 1 . CONSUMER PROFILES IN A DEVELOPING SOCIETY

Product/Serv t ce lncon1e level Urban Rural Orientation

Rich and upper Trend setters Fol lowers of Automobl l e, inlddlP. class for "'estern I ife urban t rend TY, hlf t.

sty I e product setters vld•o and high consul'ilptlon priced consumer

servlces and goods and l1:1ported products

Kiddle and Strugg 11 ng Strugg 11 ng Transl stars, l ower 11lddle asp i rants to asp irants for refrlgcrator,4. class achieve western t he urban med l um prt ced

I lfe sty l e • l ddle c l ass consur:ier goods product l ife sty l e and servi ces consurnpt I on

Low l ncome Per I phera I I so I ated Mlnl•um bas i c and poor audience of on 1 ookers of goods and

the trend the urban ser vices for setters •lddle and survival 11 fe style rural a t dd l e

class l i f e style

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