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consumption,in economics, direct utilization of goods and services by consumers, not including the use of means of production, such as machinery and factories (see capitalcapital,
in economics, the elements of production from which an income is derived, usually defined with the exception of land and labor. As originally used in business, capital denoted interest-bearing money.
..... Click the link for more information. ). Consumption can be divided into public and private sectors. Consumption is also viewed as a basically subjective phenomenon, with individual utility, or satisfaction, assuming primary importance. The foremost economist associated with the subjective view was Jeremy Bentham (1748–1832), whose English followers sought to measure quantitatively the utility provided by consumption. The process of consumption is central to any system of economics; Adam SmithSmith, Adam,
1723–90, Scottish economist, educated at Glasgow and Oxford. He became professor of moral philosophy at the Univ. of Glasgow in 1752, and while teaching there wrote his Theory of Moral Sentiments
..... Click the link for more information. made it the sole end of production. Production, the wholesale and retail trades, and consumption are closely linked, and the exchange of goods and services for money along the various stages from the producer to the ultimate consumer is the foundation of modern capitalist economy. In the 1930s, John Maynard KeynesKeynes, John Maynard, Baron Keynes of Tilton
, 1883–1946, English economist and monetary expert, studied at Eton and Cambridge. Early Career and Critique of Versailles
..... Click the link for more information. introduced the influential theory of consumption function, which described the relationship between consumer income and consumption. Advertising and marketing are today the chief means by which manufacturers and retailers seek to increase consumption, leading many to contend that modern consumption is often governed by false needs. Such economists as Thorstein VeblenVeblen, Thorstein
, 1857–1929, American economist and social critic, b. Cato Township, Wis. Of Norwegian parentage, he spent his first 17 years in Norwegian-American farm communities. After studying at Carleton College and at Johns Hopkins, Yale (where he received a Ph.D.
..... Click the link for more information. have tried to explain how advertising and marketing can affect consumer choices, where a number of different products are essentially the same. Contemporary economics has increasingly concerned itself with studying total consumption in an effort to implement effective government controls of the business cyclebusiness cycles,
fluctuations in economic activity characterized by periods of rising and falling fiscal health. During a business cycle, an economy grows, reaches a peak, and then begins a downturn followed by a period of negative growth (a recession), that ends in a trough
..... Click the link for more information. . Experience has shown that through taxation the modern government is often able to regulate the amount of its citizenry's disposable income, thus ultimately affecting the nation's total consumption.
See D. E. Nye and C. Pederson, Consumption and American Culture (1991).
consumptionthe process in which goods or services are used to satisfy economic needs.
In comparison with production, sociologists have paid less attention to consumption. Often it has been viewed as a ‘mere reflection of production (see UNDERCONSUMPTION AND OVERPRODUCTION).When attention has focused on consumption behaviour, the focus has generally been on ‘pathologies’ of consumption – such as undernutrition, or over-indulgence in drugs or alcohol. Only more rarely, as Warde (1990) puts it, have sociologists examined consumption ‘for its own sake’. According to Warde, a developing interest in recent years in a more well-rounded sociology of consumption has a number of sources:
- an interest in the implications of the expansion of LEISURE;
- the onset of ever more ‘specialist niche’ consumer markets associated with a move to POST-FORDISM in manufacturing;
- the privatization and recommodification of public services.
As a result of this, the new sociology of consumption has shown a renewed interest in two areas: first, the formation oftaste, the pursuit of status as an aspect of the experience of personal gratification (see CONSUMER CULTURE), and, second, the area of COLLECTIVE CONSUMPTION.
the use of the social product in the process of satisfying economic needs, the concluding phase of reproduction. Productive consumption is distinguished from nonproductive consumption, or “consumption in the proper sense” (K. Marx, Soch., 2nd ed., vol. 12, p. 716).
Productive consumption is a production process in which the means of production (for example, the instruments of labor and raw and processed materials) and human labor power (physical and intellectual strength) are consumed. In nonproductive consumption, which takes place outside of production, the objects of consumption are used or finally consumed. Thus, products are created in productive consumption and disposed of in nonproductive consumption.
There are two subdivisions of nonproductive consumption: personal consumption and consumption for the satisfaction of general social needs. Personal consumption satisfies such immediate personal needs as food, clothing, housing, education, leisure, and health. Among the general social needs of every developed society are administration, science, and defense. In these areas, consumption (excluding the consumption of the workers) involves the use of buildings and installations, stock or inventory, office equipment and supplies, instruments and reagents, and the means of defensive technology.
Depending on the type of goods consumed, one may refer to the consumption of material goods, which are physical in form, or the consumption of services. The form of consumption, or method of satisfying needs, may be individual or collective (or joint).
Material goods in the personal ownership of particular families or individuals are classified under individual consumption. Among these goods are foodstuffs, clothing, footwear, furniture, cultural and domestic items, and private residences. Collective (or joint) consumption takes place when a group of people use material goods or when people enjoy the services of public establishments in the service sphere, regardless of whether the services are free or purchased.
As the concluding phase of the social process of reproduction, consumption is organically linked to the other phases: production, distribution, and exchange. Production and consumption are an integral unit under any social system. People produce products in order to satisfy their needs—that is, in order to consume goods. Consumption cannot exist without production, but without consumption production would be pointless. The purpose of production is to serve consumption. However, in different socioeconomic formations the function of production is realized in different ways, depending on the objective goal of production. Under socialism, the function of production is realized directly, but under capitalism, it is mediated by the extraction of profit. Nonetheless, production has precedence over consumption, as is evident from the fact that production creates products for consumption, develops needs for the products produced, and channels or directs consumption, in the final analysis determining its level and structure. Consumption has a strong reciprocal effect on production, since the consumption of products leads to the creation of more products. As already established needs are satisfied, new ones emerge and develop. Thus, consumption leads to production. Things that are not consumed cease to be useful, and production of them is discontinued.
Pointing to the dialectical interconnection of production and consumption, K. Marx wrote that production “produces consumption (1) by providing the material of consumption, (2) by determining the mode of consumption, and (3) by creating in the consumer a need for the objects it first presents as products. It therefore produces the object of consumption, the mode of consumption, and the urge to consume. Similarly, consumption produces the predisposition of the producer by positing him as a purposive requirement” (ibid., p. 718).
The overall level of consumption in a particular country or historical epoch is always determined by the level of development of the productive forces. In any socioeconomic formation, consumption by particular classes and social and occupational groups, as well as by families and individuals, depends directly on distribution. The share of the social product (national income) allotted to each class, social group, or individual determines the level of consumption of each of them. The specific features of the methods of distribution also determine the income differential and, consequently, a corresponding consumption differential (seeINCOME DIFFERENTIAL). Differentiation of this kind is extremely great in antagonistic socioeconomic formations, especially capitalism. The existence of unearned incomes, as well as the possibility for the acquisition of considerable surplus value by individuals, leads to enormous differentials in the level and structure of consumption, as well as to parasitic consumption by an insignificant number of representatives of the ruling classes, while millions of working people live in deprivation and poverty (seeABSOLUTE AND RELATIVE DETERIORATION OF THE PROLETARIAT’S SITUATION). The social forms of consumption under capitalism develop primarily when they are directed at the immediate satisfaction of the needs of the ruling classes or when they give the capitalist class an opportunity to save on the costs of reproducing the total labor force. Typical of contemporary capitalism is an enormous increase in nonproductive consumption, which is related primarily to the militarization of the economy. Between 1950 and 1965 state purchases (in current prices) of goods and services for nonproductive consumption increased by a factor of more than three in the USA and Great Britain, by a factor of five in the Federal republic of Germany, and by a factor of more than six in France. In 1971 state purchases of goods and services in the USA amounted to $233 billion (27.4 percent of the national income, calculated according to methods used in the USA). Military expenditures reached $71.4 billion (8.4 percent of the national income, figured according to methods used in the USA; 11.6 percent if calculated according to Soviet methods).
Under capitalism, improvement in the level of consumption by the working people results from the development of the productive forces, but it almost never reflects a real improvement in the condition of the working people, since it often conceals a more significant increase in the intensiveness of labor—that is, in the expenditure of the worker’s intellectual and physical strength. Crises and periods of industrial stagnation ruin the small producers, who join the army of the unemployed and increase the dependence of wage labor on capital. This results in a relative and sometimes also an absolute deterioration in the position of the working class—a phenomenon characterized particularly by a reduction in the volume of consumption and by the degradation of its structure. It is important to remember that the relatively high level of consumption in the small group of industrially developed capitalist countries is linked with the redistribution of incomes in their favor through plundering and unequal exchange with the countries of Asia, Africa, and Latin America. The relatively high level of consumption in the industrially developed capitalist countries is also associated with discrimination against working women, oppression of Negroes and immigrant workers, and increasing exploitation of the working people.
Characteristic of socialism are a steady, planned increase in the level of consumption by the working people and improvement in the structure of consumption, based on the development and refinement of socialist production and on growth in the productivity of social labor. Distribution according to labor becomes the principal method of distributing resources for personal consumption. However, as social production develops, there is an increase in the proportion of material and nonmaterial goods received by the working people through social consumption funds.
Under socialism, personal consumption may be mediated by the distribution and receipt of personal money incomes. The consumption of paid-for goods, as well as the consumption of material goods bought with personal money incomes and in-kind receipts (from a private plot or kolkhoz, for example), is usually referred to as consumption on an individual budget. Under socialism, personal consumption also includes free use of schools, institutions of higher learning, hospitals and polyclinics, libraries, and other establishments.
In Soviet statistics and planning, an elaborate system of physical and cost indexes is used to describe consumption and measure its development. Network indexes of availability (for example, the number of hospital beds per 10,000 inhabitants) are often used to describe services. Of special importance are the synthetic indexes constructed on the basis of national income: the consumption fund expressed as a proportion of the national income, the volume of the personal consumption fund, and the volume of consumption resources in the national income (the sum of the consumption fund and nonproduction accumulation).
The consumption fund expresses the value of all objects of consumption actually consumed in the course of a year (or acquired by the population and establishments in the nonproduction sphere). In other words, the consumption fund represents all nonproductive consumption in material form. (Table 1, which is based on established Soviet statistical methods, shows the composition of the consumption fund in terms of the channels through which the objects of consumption reach consumers.)
|Table 1. Composition and volume of the consumption fund of the national income of the USSR (billions of rubles)|
|1 Prices actually in effect|
|Consumption (total) .................||104.5||266.6|
|Personal consumption ..............||93.9||231.8|
|Material inputs at establishments serving the public ......................||8.2||24.1|
|Material inputs at scientific establishments and in administration..............||2.4||10.7|
Personal consumption includes consumer products purchased in state trade, at cooperatives, and at kolkhoz markets; products received in payment for labor-days at the kolkhozes; or products obtained from private subsidiary farm plots. It also includes the portion of the value of housing that represents annual wear. Personal consumption, a part of the consumption fund, corresponds to individual consumption. Material inputs at establishments that serve the public constitute the fund of joint, or collective, consumption in material form. The personal consumption fund is the sum of personal consumption and material inputs at establishments serving the public. Material inputs at scientific establishments and in administration constitute the fund for the satisfaction of general social needs.
In the national income and in the consumption fund, services are considered only as material elements, and labor inputs in the service sphere (services proper) are not reflected. Therefore, to determine the total volume of goods and services consumed by the population, it is necessary to calculate the total volume of consumption of material goods and services (defined as the total volume of personal consumption in the consumption fund of the national income), the cost of all paid services, and expenditures to maintain establishments providing free and subsidized services to the population.
Steady growth in the volume and average level of public consumption is a lawlike feature of socialism. Between 1950 and 1973, the per capita consumption of all material benefits by the population of the USSR (in monetary terms) increased by a factor of approximately 3.4, and between 1940 and 1975, by a factor of 4.5. Between 1950 and 1973, the annual per capita consumption of basic foodstuffs (in physical units) increased as follows: meat and meat products, from 26 to 57 kg; milk and dairy products (converted to milk), from 172 to 315 kg; eggs, from 60 to 215; sugar, from 11.6 to 40.8 kg; vegetables and melons, from 51 to 87 kg; and fruit and berries, from 11 to 37 kg. The annual per capita consumption of bread and grain products dropped from 172 to 141 kg, and that of potatoes, from 241 to 120 kg. During the same period, the annual per capita consumption of fabrics (excluding goods for upholstering furniture and automobiles, for example) increased from 16.5 to 32.5 sq m; of knitted outer garments, from 0.3 to 2.0 articles; and of leather footwear, from 1.1 to 3.2 pairs. Between 1965 and 1975 the population was supplied with more durable goods, as is evident from the index that reflects personal consumption of these goods (calculated per 100 families), which showed an increase from 59 to 79 radios and radio-phonograph sets, from 24 to 74 television sets, from 11 to 61 refrigerators, and from 21 to 65 washing machines.
Systematic, stable growth in consumption is also characteristic of all the other socialist countries belonging to the Council for Mutual Economic Assistance (COMECON). There is evidence for this assertion in indexes showing the growth of real wages of workers and office employees. In only ten years (1960-70), real wages rose 19 percent in Poland, approximately 30 percent in Hungary and Czechoslovakia, and 43–46 percent in Bulgaria and Rumania.
The increase in the level of consumption has been accompanied by an improvement in the structure of consumption. The proportion of services in the total volume of consumption is rising, and the share of nonfoodstuffs, especially durable goods, is increasing. The proportion of the most valuable foodstuffs (meat, milk, eggs, vegetables, and fruit) is increasing, and there has been a corresponding drop, both relatively and absolutely, in the consumption of grain products and potatoes. This is a manifestation of the law of increasing requirements, which is given full scope for development under the conditions of developed socialism.
REFERENCESMarx, K. K kritike politicheskoi ekonomii. In K. Marx and F. Engels, Soch., 2nd ed., vol. 13.
Engels, F. Polozhenie rabochego klassa v Anglii. Ibid., vol. 1.
Lenin, V. I. “Po povodu tak nazyvaemogo voprosa o rynkakh.” Poln. sobr. soch., 5th ed., vol. 1.
Lenin, V. I. “Zametka k voprosu o teorii realizatsii.” Ibid., vol. 4.
Lenin, V. I. “Kapitalizm i narodnoe potreblenie.” Ibid., vol. 21.
Materialy XXIV s”ezda KPSS. Moscow, 1971.
Maier, V. F. Dokhody naseleniia i rost blagosostoianiia naroda. Moscow, 1968.
Nauchnye osnovy ekonomicheskogo prognoza. Moscow, 1971.
Shutov, I. N. Lichnoe potreblenie pri sotsializme. Moscow, 1972.
Komarov, V. E., and U. Ch. Cherniavskii. Dokhody i potreblenie naseleniia SSSR. Moscow, 1973.
V. F. MAIER