The Aspirational Class as Tomorrow’s Leaders

The human race is an odd species. Adaptive to immediate threats and catastrophes, we as humans have also time and again shown ourselves to be slow learners. Whether it’s the sickening loss of life from war (eg, Vietnam, Iraq-Afghanistan), hurricane disasters on America’s East and Gulf coasts (rebuilding in flood plains), or financial crises (eg, 2008-09), people keep repeating the same behaviours. We’re poor learners as a species.

One of Western society’s characteristics is the human propensity for material fulfillment. However, that quest to climb the aspirational ladder has proven to be an exercise loaded with conflicting results: material acquisition accompanied by growing consumer debt levels; a middle class with stagnant incomes; and a disenfranchised, low income stratum of people.

In his book The Affluent Society, Harvard economist John Kenneth Galbraith talked about how the economic growth model of the United States was flawed and no longer useful as the means to lift people out of poverty. Inequality prevails, and indeed the income gap is currently growing between rich and poor. Galbraith’s book was released in 1958. Fast forward to today and his core message is even more relevant. 

Yet, the beat goes on as people strive to improve their material well-being and status in society.

Witness the steady increase in middle class people with modest family incomes buying huge, expensive houses (accessorized with quartz counter tops, hardwood floors and high-end cabinets); luxury cars (eg, BMWs, Audis and Porsches) on lengthy instalment plans; vacations to tropical resorts. The list goes on.

Meet the aspirational class.

Someone who has researched this subject is University of Southern California professor Elizabeth Currid-Halkett. Her recent book The Sum of Small Things: A Theory of the Aspirational Class provides an intriguing tour from British economist Thorstein Veblen’s work on conspicuous consumption and what he called The Leisure Class in the late 1800s to today’s growing class divide, fuelled by the Aspirational Class and its efforts to reproduce wealth and upward mobility. She looks at what has changed in the intervening century in society. In particular, greater accessibility to material goods to reflect social status has improved, in turn weakening its power. The consequence is a shift towards more discrete spending that portrays status and knowledge.

It’s important to note that her book is based strictly on U.S. data. However, there are lessons to learn from her analysis and observations. Two broad trends may be distilled from her work. First, conspicuous consumption is declining among the wealthy, now that most of American society is able to do it. Second, what she calls “inconspicuous consumption” is becoming the new conspicuous consumption.

Currid-Halkett makes a number of astute observations in her book. Here are some samples:

…in the twenty-first century, social status emerges not simply from cards and watches but from inaccessible cues, information, and investments. For the aspirational class these signifiers are… more subtle, less materialistic forms of conveying status, particularly to others in-the-know.

…the lower gradient of the aspirational class [are] hipsters—those young, 20-something-year-old urban denizens working in film or screenwriting or publishing—who barely make enough money to pay the rent, let along attend the parties with the Queen of England or the head of Citibank.…information about what is cool or in the know is all they have and thus they too engage in non pecuniary means of inconspicuous consumption that allows them to define their social position. Much of aspirational class shared experience is based on information that costs money, even if it is materially invisible.

America’s aspirational class has rejected many of the material means by which status has been historically revealed. They eschewed materialism, aspiring to what they believe is a higher social and cultural platform….this dominant cultural elite prefers to engage in conspicuous production, conspicuous leisure, and inconspicuous consumption, all of which produce much greater class stratification effects than the acquisition of material goods.

As we understand what motivates how and why we consume, we also learn more about humanity, how and where it organizes itself, the implications and limitations to these decisions, and, finally, what matters to us as individuals and society as a whole.

Along a somewhat similar path, Rachel Sherman conducted indepth interviews with 50 affluent ($250,000 plus annual incomes) Millennial parents in New York City on their perceptions of wealth. Uneasy Street: The Anxieties of Affluence is a compilation of these interviews. Of particular interest, the findings include these parents perceiving themselves as being hardworking and responsible, in contrast to the undeserving wealthy who are lazy. Indeed, the guilt these Millennials have concerning their purchases prompts some of them to remove the price tags of expensive items (from food to home furnishings) so that their nannies and housekeepers don’t see them. They see themselves as middle class, despite being classified as part of the one percent, and being “comfortable” and not rich.

That’s the New York City experience, and only a subset of a large country of some 335 million people. However, the findings of Sherman’s research are interesting.

When it comes to those outside of the one percent, Millennials (ages 24-40) face a number of issues. Their plight with job insecurity and absence of pension plans (whether defined benefit or defined contributions) have long-run implications for the economy. Their aspirations to own a home (even just a small garden, starter home) is being shattered by run-away real estate prices, as witnessed through 2021.

Hipsters (23-45), the target of gentle gibes from social commentators, come in different shapes and sizes: some have the jobs and incomes to live an upscale life while wannabe Hipsters live a pretend affluent existence. At the heart of the aspirational class concept, or what some have called affluenza, is one word: Status. It’s all about people seeking—aspiring—to become something they are not, and perhaps never will be.

The key point that many social commentators and journalists miss out on is the long-term consequences of North America’s infatuation with consumer excess, whether you have the necessary income or not. And that’s something called aggregate demand, of which consumer spending plays a key role. In Canada, consumer spending drives just over 60% of the country’s economy. In contrast, such spending is responsible for almost 70% of the U.S. economy.

For the past several decades, consumer indebtedness, fuelled by insane credit card growth, enticing automotive financing deals (ie, low interest rates and very long payment plans), and extremely low mortgage rates, has reached epic levels. Canadian consumers owed $1.73 of debt for each dollar of their disposable income in 2021 (Statistics Canada). Canadians increasingly live paycheque to paycheque, with 35% feeling overwhelmed with their level of indebtedness. One third of the respondents stated that their mortgages are the most difficult to pay down, while one quarter said the same of credit card debt. The Covid-19 pandemic has only fuelled the debt problem.

Outside of North America, other countries are in on the aspiration-indebtedness game. For example, households in Great Britain owe on average over 150% of their incomes, with three quarters of this in the form of mortgages. The financing of motor vehicles has more than doubled and borrowing on credit cards has risen.

So where does this situation leave us as a society, where the paucity of political leadership—and indeed corporate leadership—is failing to provide the necessary shared vision to propel us forward to address such issues as climate change, socio-economic disparities, women’s rights, immigration, international aid and development, and indigenous people’s rights?

This is all occurring, to extrapolate from Currid-Halkett’s research findings, in a broader societal shift to a stagnant middle class (declining according to some) and an elite wealthy class that is increasingly disconnected from the rest of society. Witness Sherman’s research on trendy, well-off Millennials. What seems to get lost in this trend by politicians and business leaders is that it’s the middle class that is the source—and indeed engine—of a nation’s innovation capacity. The really rich don’t innovate. Nor do the poor. It’s the middle segment of society where creativity and ideas, based on education and knowledge, are applied to benefit a nation.

It’s a sad commentary that a segment of society, typically well educated, is innovating on ways to separate itself from the rest of society through how it consumes products and services, all in the pursuit of enhancing status and power. The implications for leadership are growing in importance as societal divisions grow and as the labour market begins a post-industrial transformation to increased automation and higher skill sets.

Is the aspirational class ready to lead?

In itself and in its consequences the life of leisure is beautiful and ennobling in all civilised men’s eyes.
—Thorstein Veblen

#Leadership #Inequality #Millennials