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CONSUMERISM IS PAST ITS SELL-BY DATE: Die now, pay later

The customer was always right

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In the same way that heat engines require a heat source and a heat sink, consumerism requires a goods sink. Industry takes raw materials and adds value by turning them into products, so that the added value can be taxed. The way that VAT works is that if Company A adds value to raw materials in some component parts it makes for the products of Company B, then it charges Company B VAT on the value added and passes it on to the government.

Electronic waste dump in China

Spend, spend, spend! An electronic waste dump in China

Yet Company B simply subtracts that VAT payment from the amount collected when it sells the product on. Neither company pays the VAT; they are simply unpaid tax collectors. All of the tax on the value added is paid solely by the consumer, whose position in life is to destroy the value in the goods. Suddenly the real reason for scrappage schemes can be seen – oddly, never the stated reason.

Looked at in this way, the ideal consumer is some sort of hybrid between a vandal and a sucker. Let’s look at some figures. Suppose you are paying 20 per cent tax on your earnings and you somehow earn an incremental £100. After income tax of £20 (twenty per cent of £100) and Class 1 National Insurance of £12 (twelve per cent of £100) you are left with £68. Then if you buy something that attracts (what a lovely use of language) VAT at 20 per cent, then you get goods worth about £57 (£57 plus VAT = £68 approx). Re-run the figures for someone on 40 per cent tax and he gets goods worth about £40.

If you wanted to get even poorer value, you could have borrowed the £68 instead, at an APR of 30 per cent, taking a year to pay it back. That way you pay your £57 for the goods, the £11 VAT on the goods, as well as about £20 of interest, taking your after-tax spend up to about £88. Your before-tax earnings at 20 per cent tax and 12 per cent NI have to be about £130.

The figures are approximate given assessment is extremely complicated and one could be forgiven for thinking it was deliberate. Precision is irrelevant. What is relevant is the horrifying inefficiency of being a borrowing consumer who pays for the goods, the VAT on the goods, the interest on the gross amount and then pays income tax and NI on the lot. Whoever coined the term Homo sapiens was way off the mark.

Even if the system had not crashed a few years ago, it would still be idiotic. It is actually in the interests of very few to squander energy and resources – constantly producing short-lived products that soon become landfill – when fewer resources could be used to offer everyone an improved standard of living with less energy consumption.

One thing we immediately need to do is to stop making inefficient products that have a short life. The manufacturers won’t stop and the government won’t put an end to them, but production would halt within weeks of people stopping buying them.

Apart from having to run like hell just to stay in the same place and suffering the stress of worrying how long you can keep running, the very idea that someone’s purpose in life is to destroy sticks in my throat. It lacks dignity. As Axel Jensen wrote: “The act of creation is the most important in life and when all is said and done it is the only thing that gives existence any kind of meaning.”

What we are currently doing is crazy. We haven’t always done it, and we don’t have to carry on; indeed we can’t. What is also unfortunately true is that no solution will be forthcoming from our so-called leaders considering their mistakes are part of the problem. Nor will there be a technological solution that allows the present situation to continue.

The solution must be for the consumer to take back his dignity, to re-assert his creativity and to become a customer again. He can and should take off the water skis and rely on static buoyancy to keep him afloat, instead of worrying when the speed boat towing him will run out of gas.

The benefits of not being a consumer go far beyond tree-hugging. Whilst it has undoubted environmental benefits, the dominant benefit is economic. Not being a consumer, the economic equivalent of going off-grid, actually offers a better standard of living, less worry, and gives meaning to life. Why remain a pawn when you could be a knight? More on that transformation some other time. ®

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