In 1990, the total USA advertising expenditure was $41 billion. International Business Machines (IBM) Corp spent $148 million.
The World Almanac and Book of Facts, 1992
IBM yesterday named WPP Group's Ogilvy & and Mather as its sole advertising agency ... @$400 million to $500 million (U.S.) a year.
The Toronto Star, May 25, 1994.
For decades, North American governments have been struggling to control public debt figures. To improve tolerance of safety net constraints, taxes and other conservative measures, the public is frequently reminded that public debt servicing costs are governments' biggest single expenditure
According to the National Debt clock, the USA's Aug 2005 figure was 7.9 trillion dollars and increasing @ 1.64 billion dollars per day. With a population of 296 million, this amounted to $26,627 per person.
In Canada, federal public debt was $621 billion in 2004 ($20,000 per person). Servicing this debt cost $37.6 billion, roughly 20% of all government spending.
In both nations, state / provincial, municipal and personal debts contribute to per capita servicing costs. When the old, young, infirm and unemployed populations are factored into the equation, the burden upon value adding activities would give even Sisyphus pause.
On another front, Canada's Dr. David Suzuki has invested a great deal of energy warning western nations of acid rain, ozone-layer depletion, the 'greenhouse effect' and the toxic environment that brought western populations' lifetime cancer rate to 1 in 3 in 1991.
These issues tend to be considered separately. The expanding economies needed to service public debt, sustain health care and defense expenditures ... oppose conservation initiatives. Environmentally sensitive - and expensive - manufacturing and energy sources are difficult to motivate when competitors lack correspondingly stringent abatement requirements. Tariff barriers - which might make 'green machineries' domestically viable, are increasingly problematic in the GATT / NAFTA era.
A paradoxical circumstance has emerged. Most people worried about environmental issues admire conservation's Reduce, Reuse, Recycle mantra, but lapse into pragmatic accommodations as soon as their own plow hits the ground. To salve consciences, we occupy ourselves recommending that others improve their habits. Our duty done, almost all of us require evidence of widespread public commitment before risking further participation.
Thoughtful governments could begin dissolving this impasse by recasting the rules defining business income. A way to amortize public debt, reduce ecological harm and frivolous resource depletion? Eliminate certain discretionary commercial activities as business expenses.
The best example is advertising. Advertising costs should be borne by owners and corporations rather than retail customers and tax payers.
Since federal, state and provincial governments tax commercial profits, eliminating advertising as a deduction would immediately yield additional revenue. This could be used to pay down public debt or invested in other ways.
Admittedly, the present volume of advertising would not continue if advertising costs could not be charged against gross incomes. However, tax revenue is the least important benefit that would flow from this change. Others include an enhanced quality of ‘commercial communication’ between producers and consumers – a discussion presently restricted to hyperbolic advertisements on the one hand and business failures on the other.
For the last half of the 20th century, the 1st world’s commercial/industrial sector has been a take no prisoners war zone. A few thousand large corporations emerged victorious from this gauntlet. Unfortunately, they are rarely content with size or market share and are continuing the quest for growth and profit. They do not seem to understand – at least they do not seem to care – that the forms of prosperity they are seized with undermine fundamental supply/demand relationships and their own future success. Who do they imagine they will sell goods and services to, when amalgamations, automation and other ‘efficiencies’ reduce a critical mass of 1st worlders to marginal or no employment?
Perhaps corporations and other commercial players have been seduced by profession sports and fabulous stories about advertising successes.
More than a little ironically, reducing frivolous commercial overheads means goods and services would cost less. This would stimulate demand, catalyze value-adding employments and improve competitiveness. Established corporations would be less able to retain market share by outspending upstart competitors.
Finally – as soon as advertising costs could no longer be transferred to customers – owners and executives would become de facto conservationists
A LEGAL ISSUE
The Tobacco Products Control Act enacted by the Federal government in June 1988 banning cigarette advertising has been ruled unconstitutional by the Quebec Superior Court. Mr. Justice Jean-Jude Chabot notes that the law "violated tobacco companies' right to free speech as guaranteed in the Charter of Rights and Freedoms.
The Globe and Mail, July 27, 1991
Does advertising fall under ‘freedom of speech’ guarantees in the Charter of Rights in Canada and the Declaration of Independence in the USA? As long as owners and corporations pass advertising costs to customers as embedded overhead costs and, indeed, to taxpayers, this is far from clear. Surely charging audiences for the costs of messages they keep receiving (whether or not they wish to hear them) is not what free speech means!
As well, advertising practices are incompatible with corporations’ ‘domestic’ terms of reference – how they treat employees and insist employees treat one another. Here the goals are co-operation, honesty, fair-dealing and collective prosperity.
The core issue is that advertising – unlike the work, materials and energy creating goods and services and their distribution – involves discretionary activities by owners and corporations. They have nothing to do with inventing, designing or manufacturing products or services. Advertisements are efforts to create, or influence, needs, wants and preferences. These activities add nothing to the quality or content of articles and services. Apologists argue that advertising creates mass market possibilities leading to design excellence and economies of scale. The fact is, we do not know whether word of mouth, the Internet, product listings in public libraries ... might not do as well or better.
In addition, so long as they are embedded in retail prices, advertising expenditures are regressive. To be sure, this only applies to items both rich and poor procure ... food, clothing, banking services, automobiles, entertainment. However, such 'staples' exhaust the purchasing options for most, even in First World nations.
More importantly, advertising intends (even if it does not always succeed) to pre-empt other modes of commercial communication i.e., consumer choice. Consumers in the grip of adroit advertising campaigns have fewer decisions to make and diminished capacity to reject marginal or superfluous products.
This state of affairs is said to have evolved innocuously from the signs, billboards, and catalogues communicating valuable product and service information in generations past. One could as easily argue that modern advertising reflects failures to consider which business expenses should be counted legitimate deductions from gross revenues.
The closest politicians and soothsayers come to criticizing commercial activities is to worry whether they are sustainable. The consensus is that they are not, but little has been done translating this into remedies on the ground. Instead, corporations find themselves increasingly empowered to initiate, rationalize, downsize or eliminate productions. Since more and more of the products and services we need are produced by corporations, and since employment increasingly depends upon corporate prosperity, political and economic power has been accumulating in fewer and fewer hands.
The politics of globalization demonstrated and accelerated the power corporations enjoy. Writing in The Globe and Mail, October 18, 2000, Naomi Klein observed:
This process of trading away democratic control in exchange for investment is not the globalization of nations; it is the ascendancy of corporate power. ...The policies that have attracted investment to Canada have made us more vulnerable than ever, more dependent on the ups and downs of other economies, less protected by a social safety net in our own. ...In a global economy where everyone is playing be these rules there is never a point when countries stop having to compete with neighbours for corporate dollars.
In the context of advertising’s illicit tax sheltered status, tolerance of globalization and free trade initiatives ignores advertising-abetted corporate complicity in their evolution. Notoriously, corporations intend to assimilate every resource, capitalize upon every opportunity - no matter what these incursions cost workers, consumers, resources or the environment. Corporations compete with one another and attempt to overcome consumer resistance within circumstances regarded as reliable and limitless. Failing corporations and marginal performers consider themselves victims of circumstances, as if they had not been dreaming of constituting these circumstances.
Successful corporations brandish similar explanations. They too are innocent bystanders in terms of pollution, global poverty, political instability. In the face of such understandings, there is little chance that problems will be perceived or significant remedies accomplished. Micro-economists regard ‘big picture’ issues as either benign or as beyond redemption. Only when corporations have particular reasons to do market research or massage public opinion ... is there much interest in what is going on globally. Once business plans have been drawn up, it is generally agreed that economics has little capacity for prediction – and no mandate to issue normative statements.
At the other end of the 'scope of consciousness' scale, scientists, academics and theologians grapple with big picture dilemmas – whether to clone or not, whether to genetically modify plants or animals ... and endlessly debate who is responsible for industrial effluents and economic inequities.
Redefining discretionary expenses (e.g., advertising) so that they are paid out of owners’ or corporations’ profits would improve producer-consumer relations and market-place discussions as well as reduce pollution and conservation problems. Such ready benefits from a simple, easily-implemented accounting change underscore the need to systematically explore the middle ground between micro and macro economic models. Middle ground standpoints are ideally positioned to identify institutional and systemic inefficiencies (their advantage over micro-economic models), while plucking babies and other valuable features from macro machinations’ wash waters.
From a middle ground perspective, community well-being provides a litmus test for advertising's commercial role and status. Advertising does not enjoy the necessity defense available to materials, labours and energies involved in the production of products and services. Goods and services can be produced without a nickel’s worth of advertising (beyond public notification of price and availability). If an interesting or relevant product or service exists, naturally occurring wants and needs are all that is required for commercial success (a truth practitioners of the oldest profession in the world can attest to).
Advertisers claim that their efforts satisfy important commercial and public needs. This is not as obviously true as for the resources, energy and work involved in the production of goods and services. According to my (very) crude calculation, North Americans spend between $300 and $500 per person per annum in embedded advertising costs. Although this is not a trivial amount, the more important issue is that modern advertising has spawned tiers of activities and costs that do not appear to have anything to do with advertising as such. For example, consumers are confronted by (and hence must support) a gauntlet of ostensibly competing, marginally-utilized retail outlets, more often than not selling identical articles produced in identical off-shore sweat shops.
There is, as well, the interest burden associated with having billions of dollars worth of goods on perpetual display in car lots, store windows, in television ads and in the fliers stuffed every day in every mail box. (How many pictures of sausages, hamburgers, computers and cars do we need to see? How many can we afford to see?)
If commerce was less dependent upon advertising, both western and emerging nations might already be enjoying inexpensive, rationalized routings of products from manufacturer to end-users.
Community-oriented rules of commercial conduct would also help consumers differentiate needs from wants. People require food, shelter, security, friendship, entertainment, sex .... If relevant products and services are available, there is no need to encourage consumption – and quality of offering is the best possible way to determine ‘market share’. This is not the way the world is working however. Contrived wants have become the mainstay of commercial prosperity, political stability and employment.
Because of this mischief, advertising activities might even be thought subversive. Individuals and corporations in the business of inculcating wants 'where no man has gone before' hope to preempt decisions as to how lives will be spent. They recommend alternatives to such commercially unprofitable activities as reading, making music, making bread, making love .... To add insult to injury, they have nurtured legislation passing the costs of these recommendations to their victims.
How is it that 1st world populations – the best educated and best informed the world has seen – tolerate such blandishments?
Part of the answer may be that consequences lie outside the micro-economic understandings most of us are seized with. As well, advertising has camouflaged itself as a legitimate activity, i.e., as a defensible charge against revenue.
What is increasingly clear is that advertising-mediated commercialism has devastating consequences. Pollution and resource-depletion issues aside, the ways new technologies could improve ordinary lives have been ignored. The obvious possibility? – define a reasonable level of creature comfort and figure out how to accomplish this much with as little personal and ecological cost as possible.
As the 21st century begins, political issues, economic inequities, terrorism, global warming ... cry out for a thoughtful review of how rich and famous nations conduct their affairs.
Without advertising's role in co-opting technological developments into political and economic hegemonies, emerging nations might already be enjoying wholesome economic lives in their own domains.
COMMUNITY BALANCE SHEETS
In the grip of micro-economic views, corporations see themselves operating within a constellation of legislative constraints and options, vying to harvest profit and growth from consumers’ wants, needs and vulnerabilities to manipulation. However, as GATT and NAFTA demonstrated during the last two decades of the 20th century, economic states of affairs cannot be counted on. Countless privately-owned and corporate businesses failed when 1st world consumers sought out offshore and cross-border bargains brought to their attention by advertisers. Small and medium-sized businesses grown dependent upon advertising for market share found themselves impotent in the face of well-heeled corporations able to 'do it better.'
More wholesome communication between suppliers, retailers and consumers would have created communities more resistant to blandishments, loss leaders and other deep pocket corporate ploys.
Why is this important? 1st world populations rarely consider harms suffered because of advertising. A bedlam of loss leaders, fire-sales, end-of-season sales, two-for-one specials ... television ads, fliers in every mail box every day ... obstructs understanding that retailing and manufacturing activities and infrastructure represent de facto public investments. Whenever new players vanquish established retailers or manufacturers, both public and private investment is forfeited. Failing investors, retailers and producers bear the brunt of the pain. They are unable to pass costs along to customers.
More subtle costs also occur. The fresh overheads of the victorious retailers are constantly being transferred to new crops of consumers. These amount to a never-to-be-amortized mortgage upon personal and community prosperity, which should be weighed against putative efficiencies and improvements of products and services.
This irony deepens when we recall that redundancy and exploitation are anathema within commercial enterprises. The right to maximize encroachments upon consumers is considered the sine qua non of commerce. To invest in yet another outlet, to attract customers from existing businesses, to take decisions consulting only the well-being of particular enterprises ... is deemed every business person's prerogative. From a middle-ground perspective however, communities so afflicted suffer inefficiency, redundancy, exploitation, hyperbole and the co-opting of natural resources and other uses of human time and energy. Standing trees are worthless. People who are not earning or spending money are even more offensive to micro-economists.
What do consumers get in return? Commercial communications intend to persuade, titillate, intimidate and distract them. The billions of dollars spent every year by 1st world advertisers reduce the volume of goods and services consumers are able to purchase. Far from being a catalyst of economic vigour, promotional activities constitute a gauntlet through which consumers and value-adding work must struggle.
Governments cannot – and should not – prohibit advertising. There were outcries when the tobacco industry was denied access to certain advertising mediums and venues. As purveyors of legal products, tobacco corporations argued that they were being unfairly singled out by being denied freedom to speak their commercial mind.
Fortunately, there is no need to sacrifice public well-being to facile 'rights talk'. Freedom of speech can only be said to exist when there is a possibility of bilateral communication. Under the present taxation model, businesses appropriate consumer dollars to support their commercial messages. Moreover, they seek to overturn consumers' one channel of commercial communication – purchasing decisions made in the light of reliable information, actual needs and spontaneous wants.
This problem is easily repaired. All that is needed is legislation transferring adverting costs to business owners. This is surely what 'freedom of speech' intends – the right to present points of view (claims of excellence of whatever 'widget' one has in hand.) All that the public owes commercial speakers is permission to make such presentations. There is no requirement for further support. Yet further support is exactly what corporations and business owners have been enjoying, on the accounting model that deducts advertising costs from gross income.
Important benefits would accrue to consumers, communities, the economy and the environment if advertising costs were paid by business owners and corporations. Product quality, efficient manufacture and delivery of goods and services, word-of-mouth recommendations ... would again become important factors in commercial success.
Until this happens, 1st world consumers will continue to be inundated with promotions of every description. Telemarketers will continue to hound us night and day. All of these costs, materials and energy vanish at day’s end, to make way for the next onslaught. The media delivering these messages have been transmogrified into vectors of half-truths and hyperbole.
Removing advertising from the list of deductible commercial expenses would begin the task or rationalizing commercial activities. Advertising costs presently devolve to individuals, to communities through the overturning of good will and still-functional infrastructure and, finally, to the world's poor.
They observe our astounding conduct. They perceive our commercial excesses as arrogant gesticulations in the face of their misery and toil. For more than half the people in the world, advertising portrays an impossible vista of how wonderful life can be.
They cannot know how desperate we have become.