(A Paper for the Second World Congress of Business, Economics, and Ethics)

 

I.  Ethical and Economic Evaluations of Consumption

 

Consumption is one of the important components in the social reproduction circle, which also includes production, distribution, and exchange. Consumers' activities should be examined under the social context as well as the production process. Especially important are impacts of social ethics and individual morality on consumers' activities. This paper will describe a dialectical relation between ethical and economic evaluations of consumption and propose a reasonable consumption and frugality with a certain proportion as a general guideline for consumers' activities in contemporary China.

Traditional Chinese ethical evaluation, when applied to the activities of consumption, tends to view frugality as a virtue and luxury a sin. From the individual perspective, the spirit of frugality may contain excessive material desires. This constitutes the basis of self-moral discipline. On the other side, luxury implies excessive desires, which tends to shake the basis of moral personality. In terms of social aspect, frugality is a contributing factor to a good social morality since it may increase social stability, whereas luxury may weaken social coherence and therefore undermine moral atmosphere. In the political field, frugality tends to be associated with honesty, and luxury generates corruption. Based on this viewpoint, promoting frugality has been an important theme of Chinese morality.

Controversy starts when it comes to economic evaluation, which may be different from, or opposite to, ethical evaluation. Ancient Chinese economist Guan Zi pointed out that needs for consumption might drive the development of economy. His view has been echoed by many Western economists. For example, John Maynard Keynes who is perhaps one of the best known of all economists holds a similar position. While we reject the position that frugality is outdated and luxury is beneficial, we also strive to avoid simplifying the issue of evaluating consumerism and to reflect it with a dialectical viewpoint.

Under certain conditions it is possible to harmonize ethical and economic evaluation. Frugality has economic value as well as ethical value in a modern society. First of all, frugality in the production process may reduce the cost, and therefore increase profit, which is consistent with the basic principles of industrial society. Second, frugality as a moral belief provides a spiritual driving force to economic efficiency. Finally, frugality may contribute to the continued development of economy. Resource preservation is crucial to any society. China is a country with a huge population and limited resource. This requires that such resources as water, land, energy, food, and wealth be preserved as much as possible in all economic activities. Thus our economy may continuously develop. 

On the other hand, there might be some conflicts between ethical and economic evaluations. Ethical evaluation is a value-driven evaluation and it is based on people's ideas and beliefs. The emphasis of ethical evaluation is on the spiritual aspect. Economic evaluation is a factual judgement with an emphasis on efficiency and profit. It is directly associated with people's material lives. Frugality is to control desires and reduce consumption. Therefore it may not be consistent with the development of economy in general and the development of business in particular. From a social reproduction perspective, consumption functions as a medium between production and needs/markets for its products. It is a basic principle to drive economy by stimulating needs for consumption. Without consumption, products accumulate and economy gets delayed. The fundamental conflict between ethical and economic evaluations of consumption are whether consumption should be controlled and reduced or be encouraged and increased.

 

II. Impact of Morality on the Increase of Consumption and Development of Economy

 

The Academy of Macro Economy of the Chinese National Council on Planning and Development indicated in a study that the state consumption and individual consumption in China have been decreasing each year by 6 percent and 4 percent respectively. As such the level of consumption in China is much lower than the average consumption level in other countries. For the purpose of a steady development of economy, China must not only increase export, but encourage and increase internal consumption within the country. Moral guidance as well as economic and administrative guidance may play important roles in this process.

In general, people’s consuming behaviors are always influenced by their moral values. Studies show that the roles moralities play in the consumption process are broad and powerful. Human beings are social and autonomous. They are not always determined by economic interests in deciding their behaviors as consumers, nor are they merely controlled by instructions from the government. Moral values also guide people’s consuming behaviors. Consumers may or may not realize this underlying value, and they may accept this or that moral values. However the truth of matter is that moral values have a powerful impact on people’s lifestyles and consuming behaviors through public opinions, traditional habits, and internalized beliefs.

In the process of guiding consumer behaviors, economic, administrative, and moral means are mutually supplementary to each other with the moral means oftentimes being superior to the other two. Consumption can be divided into two categories: public consumption and individual consumption. Individual consumers’ needs are the most important drive for the development of economy. For example, in order to advance the automobile industry in China, individual consumers have to be willing and able to purchase cars. Administrative instructions and economic regulations might control, to a certain extent, the public consumption in the form of governmental programs and organizational purchases. The impact of the administrative guidance on individual consumers is limited. Economic factors may play a role in guiding individual consumers’ behaviors. In addition, consumers’ behaviors such as what to consume, how to consume, and the amount of consumption are associated with individuals’ characters, values, taste, and would views. An observed fact in the contemporary China is that under similar economic levels, people with different values have displayed very different consuming behaviors. Thus it is important to educate individuals to establish correct philosophy of life and moral values, and to guide their consumption behaviors with a healthy social morality. Some economists pointed out that the consumers as human beings are influenced by external sanctions such as economic regulations and internal sanctions such as moral values. I would like to argue that while moral “sanction” may be less visible than administrative and economic sanctions, its impact on consumers is more comprehensive and will last longer because moral beliefs are internalized social values and may function autonomously to a great extent in guiding people’s behavior including consumption behaviors.

The realization of administrative and economic guidance in consumption depends on the support of moral guidance. An actual consumption involves the ability of consumption and willingness of consumption on consumers’ part. While consumers’ ability of consumption such as their purchasing capacity is based on their financial or economic status, their willingness of consumption is mainly determined by their value system. These are two separate issues. Some consumers are not unable to purchase commodities or services. They however are unwilling to consume due to their established values and other reasons. In 1999 more than eighty millions state employees in China received a salary increase, and the average increase level was about 30%. However individual consumers’ purchase at the same time decreased. A popular explanation of this phenomenon is that consumers were not willing to purchase because they did not have a confidence in their financial future. This view is at most partially correct. An important reason behind that discrepancy might be due to the influence of consumers’ moral values and their psychological tendency. Risk taking, for example, was not encouraged in the traditional Chinese value system and centralized economy. Purchase with a credit balance, however, involves certain level of risk. A survey conducted in Beijing and Shanghai by the Chinese Center of Economy Watch has revealed that only 31% of respondents reported that they were interested in consumer loans while 69% of them indicated they were either unwilling to, or worried about, taking loans to purchase.

Of these who were not interested in using loans, 25 % rejected the idea of taking loans, 12 % of them stated that this practice would be inconsistent with the traditional Chinese morality, and 17 % of them stated that they were uncomfortable with using loans. If Chinese consumers did not change their old time value and psychological tendency, they might not be willing to take advantage of the credit and might therefore limit their ability to purchase. To address this issue, it should be advocated that taking a reasonable level of risk is a desirable behavior and that increasing consumption with an increased financial resource is beneficial both for the individual consumer and for the national economy. 

III. Frugality A Certain Proportion and Reasonable Consumption

 

Daniel Bell, an American writer, in his book "The cultural contradictions of Capitalism" has criticized hedonism, and his viewpoints are reasonable under the context of the United States. Unlike America, China is a developing country. The level of consumption of most Chinese people is much lower than that of most Americans and people in other developed countries. Bell's viewpoints may not be applicable to the case of China. Reasonable level of consumption should be encouraged in China so that the quality of people's life can be advanced and national economy further developed.

In contemporary China, three criteria used to judge social phenomena are where or not what is under question is beneficial to the development of social production, to the enhancement of national strength, and to the improvement of people's living standards. These criteria should be used in evaluating consumption ethically and economically. As much as possible these two aspects of evaluation should be synthesized. The goal here is to maintain a reasonable consumption and frugality within a certain proportion. As such the development of the nation will be benefited and the two types of civilizations be promoted.

In China, economists think, reasonable consumption involves three aspects. First, the level of individual consumption is close to that of social consumption; second, the volume of personal consumption is proportional to the level of personal income; and third, given that supplies of natural resources is fixed, consumption should not be excessive. Frugality is the consumption level that is a bit below the level of social consumption, personal income, and without a waste of natural resources. Excessive consumption is opposite to that. Not excessive consumption is interchangeable with reasonable consumption.

Moralists consider the question then is how to define reasonable consumption and frugality with a certain proportion. First of all, this principal value views frugality as a virtue and requires at the meantime a balanced approach. Aristotle in his Nicomachean Ethics advocated for the virtue of mean. Frugality as a virtue, when applied to consumption, should be proportional. China is a developing country with a huge population and limited resource. Frugality is therefore of a survival value. If frugality is pushed into an extreme, its side-effects will develop and people's needs for consumption will be suppressed. Thus economy will be adversely impacted. The current slow market would benefit from an increased need for consumption. Given that there is an uneven development in different regions of China and various levels of individual incomes, the criterion of proportion is also an empirical question. The answer to it must be based on the level of social and economic development of the region and the level of the individual's income. The core of this value is to shape consumers' activities, which in turn will promote the development of material and spiritual civilizations. In terms of the structure of consumption consumers desires consistent with the development of the national economy should be encouraged. For example consumers might be encouraged to invest in the real estate market and purchase their own apartments and houses since the national economy will be benefiting from a booming real estate market. In the past, Chinese people maintained a habit to use and reuse a product until it became un-reparable. Under the current market condition that new and better products replace old products at a fast pace, consumers should be encouraged to purchase new products based on their income levels, which should include not only their wages and salaries but the loans available to them as well. It should be avoided to confuse the higher level of consumption with the lower level of morality. Moral evaluation of an individual should not be based on the level of his/her consumption. As a matter of fact, upgrading consumption from a low level to a middle level and a high level is an unavoidable and desirable trend.

One consideration in actualizing this value is how to appropriately deal with various relations, such as the one between consumption using state funding and consumption using private money. Currently, consumption of luxury goods and services is often funded by state money. Many elected officials use public resource and state money for their own pleasures. These activities have contaminated the social morality and impeded local economy. As such monitoring and reducing the consumption using public funding should be a priority. The focus of frugality is to reduce this kind of consuming activity, not the consuming activities paid for by private money.

Another relation to be dealt with is the one between consuming activities among elderly and those among youth. Studies show that in more than sixty percent of families, family members under 25 years of age spend most of the family money. This X-generation is currently leading the trend of consumption, and will be the most active consumers in the near future in the market of housing, automobiles, and other luxury products. The weakness of this population is that they are not prepared for a possible slowing down of economy and a reduced level of income. They need to be taught the value of frugality. Seniors are faced with other kinds of problems. Most of them have worked hard in the past and have a reduced level of income. They tend to over practice frugality; and sometimes to the point where they do not maintain a minimal level of consumption. Some seniors' health conditions are deteriorating because of it. Seniors should be encouraged to increase their reasonable consumption to maintain a good quality of life.

In conclusion, the relation between ethical and economic evaluations of consumption is dialectical in nature in that they constitute thesis and antithesis out of whose synthesis should evolve a balanced approach. Chinese consumers should adopt a reasonable consumption and frugality with a certain proportion as a general guideline in their consuming activities.

 

【Reference】

[1]Li Yining: Ethical Issue  (Three Jointed Press1995,)

[2]Zhou Zhongzhi: Ethical Evaluation of Consumption and the Development of Contemporary China

 (Studies on Mao Zedong and Deng Xiao Ping Theories, 1999, No.6)

[3] [China] Guan Zi: <luxury>

[4]John Maynard Keynes: The General Theory of Employment, Interest and Money

[5]Wu Wei: The Restricted Factors on Consumer Loan in Contemporary China

(Liberation Daily, November 26, 1999,)

[6]Zhao Xiuyi: On Frugality

(Studies on Mao Zedong and Deng Xiao Ping Theories, 1996, No.4)

[7]Daniel Bell: The Cultural Contradictions of Capitalism

(Basic Books inc Publishers, New York1978,)

[8]Ye Dunping, Gao Huizhu, Zhou Zhongzhi, Yao Jianjian: On Dialectical Relation between Ethics and Economic

(Shanghai Education Press1998,)

( Business Ethics : A European Review 2001.3 .录入编辑：红珊瑚)