A Dollar is Not a Vote

Your spending decisions don’t make a difference

You hear it in the media, from politicians, maybe even from your family members. It’s become a common expression, but it’s not just that. People really believe that when they spend a dollar (or a euro or a pound), they can influence the products sold by major companies and the views expressed by their powerful executives.

There is, obviously, some truth to this. If enough people act collectively, it can push a company to make a change. But is that really due to their spending decisions, or are other factors involved?

Consider what happens when a major boycott occurs. Sure, some people might change their purchasing decisions, but there’s also a lot of negative media attention on the company’s product or stance. Is it the decisions of individual purchasers or the media scrutiny that ultimately forces the change? I would argue the latter.

We’re told this lie about the outsized power of our spending for an important reason. In the 1970s, there was a significant shift in our culture (along with our political and economic systems) toward a set of values that deemphasized collective power and elevated the role of the individual.

The notion that personal spending decisions have economic impacts comes out of that individualist logic: if you choose to buy a more ethical product, you are sending a signal to the market — whatever that really is — which will combine with the purchasing decisions of other individuals to change the production decisions of corporations.

It’s a great myth; but it’s not the way the economy really works. Not only is the economy not a democracy, but your individual purchasing decisions mean next to nothing in the big scheme of things — unless you’re a billionaire (or very close to it).

Who Has the Power?

Unlike in the political system, where everyone can cast a single ballot, that’s not the case in the economy. If a dollar is a vote, then some groups of people have far more ballots than other groups. If we consider the United States, white people will have far more ballots than black people and other minorities; men will have more ballots than women; and, obviously, the rich will have far, far, far more than the poor.

And if we treat the economy as a democracy, consider what growing inequality means for the fairness of that democracy. The wages of average workers have stagnated since 1978, those of CEOs have soared by nearly 1000 percent, and inequality has reached levels not seen since the years leading up to the Great Depression. Yet after the most recent financial crash, the vast majority of the gains went to the top 1 percent, while the middle class is being decimated across the country as a small few join the upper income brackets, but far more fall into poverty.

This is not the picture of an economic democracy, but rather a country where an ultra-wealthy elite is further consolidating its power after previously smashing the organs of working people’s collective power — the unions — and embarking on a project to marketize every aspect of their lives while holding average incomes constant even as the prices of housing, education, healthcare, transportation, and everything else rose — in many cases, at rates far higher than inflation.

Companies Serve Wealthy Spenders

Consider this if you still think your spending decisions, as an average person in America, really make a difference: the economy of the United States — and those of many other developed countries — depends on consumption, but who does the consuming? Where are personal spending dollars coming from?

As of 2012, the top 20 percent of earners were responsible for 61 percent of all personal spending, up from 53.4 percent just twenty years earlier. Breaking out just the top 5 percent shows the inequality in spending is even worse, as they’re responsible for 38 percent of all spending — an increase of 11 percent since 1992.

Meanwhile, 39 percent of personal spending comes from the bottom 80 percent — nearly equal to that of the top 5 percent. So whose spending do you think really matters? Which customers are companies trying to target? Do they want the business of the 80 percent or the 20 percent?

The New York Times article that reported these figures is very clear: “The effects of this phenomenon are now rippling through one sector after another in the American economy, from retailers and restaurants to hotels, casinos and even appliance makers.” Translation: companies are changing their business models, but not because of the spending decisions of average people; they’re adjusting to target the wealth that’s increasingly being concentrated in the hands of the richest people.

There are plenty of examples of this, but consider a very recent one: Apple’s new iPhone lineup. After previously toying with a $10,000 Apple Watch, Apple has now pushed the price of its flagship iPhone XS to between $1,000 to $1,500, while its entry-level iPhone XR starts at $750 — still higher than the iPhone starting price just a few years ago.

And this isn’t like the Mac lineup, where there has long been a distinction between consumer and professional because the pro needs more power to complete their tasks. The two levels of iPhone have essentially the same internal specifications — the iPhone XR is even rated as having the longest battery life of the three new phones — with the difference being in the premium camera, screen, and materials used for the pricier iPhone XS. As iPhone sales growth has leveled off, Apple is taking advantage of its wealthier customer base to increase the average selling price and the profit it makes on every device sold.

Inequality Isn’t Inevitable

It’s comforting to believe that your spending matters, that if you buy a more ethical product that it will make a difference, but unless you’re super rich, there’s a very slim chance that’s the reality.

The people in power, who benefit from the status quo, have an incentive in making you feel that way. It helps to legitimatize the extreme individualism that has taken hold over the past several decades, but it also makes the economy seem fairer — when it’s anything but.

The reality is that the rich control a greater share of national income than even the peak of inequality in the 1920s, and as a result they’re the ones with the true economic power. The individual spending decisions of average people mean little to major companies when they can make so much more by targeting the elite.

A dollar is not a vote, and people need to recognize that fact as a way to understand how truly unfair and unequal the economic system has become over the last few decades. High levels of inequality are not inevitable, but until we stop electing governments that slash the taxes of the rich while cutting the public services that help everyone else, and allow major companies to keep paying low wages while their profits soar, nothing will change.