Factice Bottles

The Consumption of Status and Signs

The center of gravity in the production of goods has shifted from tangible to intangible assets. Communication has entered as a productive force, represented by information flows, communicated chiefly by brand symbols and images. As a result, the concept of Veblan and Giffen goods is in need of a thorough update and expansion. Semiology (the science of signs) provides a formal theory to examine behavior between producers and consumers in contemporary capitalism.

Key Terms

The Social: 1. an abstract society devoid of traditional markers of power, rank and distinction, dialectical categories of labor and capital, oppressor and oppressed. 2. the masses.

Signification: 1. the relation between the signifier and the signified. 2. the relationship between objects that determines value. 3. the connotation of the commodity or the sign.

The Genealogy of Our System (a backdrop)

Categories have collapsed. A work of art can be a commodity. A commodity can be work of art. Both commodities and art can be fashionable. The genius of Warhol is best expressed by his interpretation of the commodification of art in his Campbell's Soup can. The commodication of art then sets the stage for irrational aspects of art and fashion to transform the commodity.

As the communication of information gains hegemony in the creation and distribution of wealth, our economic system becomes less rational, equitable, predictive, and in many ways less productive. Values are more easily divorced from fundamentals. Radical gaps in income and wealth distribution have emerged fostering social unrest and anxiety. The gross developed product of nations is higher than ever, still much of the population lacks the essential resources to live in dignity.

The United States, as the worlds most advanced post industrial consumer economy, has undergone a structural change. The center of gravity of its economic system is no longer the production of finished goods, but communication and information. Entertainment (including news) is both our largest export and largest portion of the economy. Traders of information (Hedge Fund operators) are our highest paid persons. Professional "communicators" (radio and talk show hosts) and entertainers are rewarded fantastic sums of money and are endeared by worshipful fans. Yet they produce no forms of visible, concrete wealth.

New wealth is bottled up in brand symbols, images and signs. Meantime, much of the United States remains mired in poverty with a middle class deeply in debt. Physical infrastructure itself is a problem. There are major development projects underway, but they are beyond our own borders, enriching just a few major corporations, while taxing its citizens at home.

American business titans in information technology, from Andy Grove (Intel) and Charlie Sanders (AMD), to Bill Gates and Michael Dell, Larry Page and Sergey Brin (Google) were about speeding up and better organizing information. But images, video games, entertainment, Iraq and Afghanistan, redirect information and physical resources. Real progress has slowed.

Problem areas include:

- The wealth effect of financial innovators and speculators is divorced from the social. These forms of wealth creation are not to be confused with Henry Ford, Michael Dell, or Bill Gates: creative entrepreneurs, leading structural innovations that producing tangible wealth and employing thousands of people.

- CEO pay is disconnected to wages of employees and laborers

- Major corporations fail to provide living wages to many of their employees

- Celebrities and Professional Athletes sap up not only wealth but the creative possibilities of education while returning little to society. (Miley Cyrus, 15 year old with an estimated $1 billion franchise, $100 million pro-athlete contracts, de rigueur)

Our genealogy is the following:

1. In the pre-industrial world, only superfluous goods are exchanged. Vast sectors remain outside of the economy.
2. Industrial production begins, coinciding with the classical and Neo-classical, capitalistic and Marxist interpretations of the industrial economy.
3. A monopolist phase of capitalism begins whereby a fiction of competition is maintained (Seven Sisters, Big Three) and a planned cycle of consumer demand inaugurated in which functional and stylistic obsolescence play a part.
4. Global trade renews competition within major industries and corporations.
5. Between #3 and #4, an "infrastructural" mutation occurs. Communication enters as a productive force. Branding becomes the strategic element to maintain producer margins. Consumption and production become further divorced, and branding (signification) becomes a more critical factor in the determination of price and value. The onset of signification as a structural force coincides with the liberation of traditional societal markers of caste, class, race and gender. Signification fills this void and becomes a moral force. Its power is multiplied. Companies without "brands" have little pricing power. Brands convey the visible surplus of the information age.
6. Cause-Related Marketing, Social Business Enterprises and Social or Cause Based Brands emerge, restructuring the social forces of production and consumption. Competitive production-consumption yields to collaborative production-consumption (Think Craig's List, Facebook). Local business exchanges compete with Wall Street firms. Main Street businesses return with localized production and distribution.

A General Theory of Consumption

It has been maintained that the feudal system died because it could not find the path to rational productivity. By 1929, business had discovered methods to compel people to work but nonetheless narrowly escaped their own destruction. In the 1930's the effects of mass production created oversupply that lasted until wartime efforts stimulated enough demand to pull the United States from a deep depression. Thus, in the 1930's and 40's a shift occurred. Since then, stimulating, managing and maintaining sufficient levels of both investment and consumption became the key to economic growth and stability.

As labor become less a factor in production, capitalism grew more distant to traditional pricing of goods, services, salaries and wages related to use and exchange. As the earlier era of small firms competing for the organic needs of its customers gave way to corporate gigantism supported by salesmanship and advertising, the needs of consumers became fantastically expanded. Along the way a social code of consumption was born. Goods and services become symbols of identity and status, signifying conformity, sexuality and even politics.

Sign Value: A Mutation in Capitalist Production

A radical shift occurs in market orientated production when the primary cause for the production of goods is no longer to attend needs, but desires. For Jean Buadrillard, this represents more than a shift. It is a mutation. We have left the "capitalist" mode of production to arrive in the competitive era in manipulation of signs. [1]

In all the advanced economies of the world, persons live in a world of objects laden with symbolic meaning. Corporate logos form the most obvious and tactical aspect of object signification that acts in various ways. It is readable and accessible to everyone. It is a fact a code and it is closest thing we have to a universal language.

These signs, which may conform to any object, form a field of complex social relations that replace social codes formerly proscribed to caste, class, kinship, race and gender. But these signs, insofar as they do not correspond to needs, cannot create satisfaction.

Yet it is through this confusion of wants and needs as well as the creation of a social hierarchy based on signs that our system itself creates an almost unstoppable advance. Each of us, as individuals, is engaged in a positional arms race in the field of consumable objects and signs. In this way, for some, gadgets and "brands" may become more powerful motivational forces than even food and shelter.

This passage from needs to signs puts the classical economist in a conundrum. Both economic and politics alike are increasingly helpless at solving our problems through traditional means. Because now so many problems may no longer be so easily isolated within the simple interaction of pricing and supply and demand. Like currencies no longer backed by gold, objects themselves have lost there referents to use and function while the pricing of status objects have lost there reference to labor and cost of production. Status objects are a subset of the larger construct of signification.

Classical economic theory is lost when the shift of production no longer responds to needs but is a response to artificially induced desires. The system now has a different infrastructural element. MacMansions, obesity, walk in closets full of things we don't need, monster trucks and tummy tucks are just a few examples of excessive consumption that follows of desires that cannot be satisfied.

Baudrillard contends our system of consumption based on desire does not create satisfaction, as it is "the rationalization of a process whose end lies elsewhere." It is a chaotic system that Baudrillard describes as a generalized hysteria based on lack. [2]

Signification and the Structuring of Identity and Culture

There are many persons whose identity is absorbed within these codes, enabling them to confuse themselves with the products they own and desire. To purchase anything less than name brands like Prada, Gucci, a Bentley or BMW, or vacation in The Hamptons every year, well, they say, "That wouldn't be me." This may sound foolish, yet we all have brands that we identify personally with, some having a stronger attachment on us than others. Problems arise when our bonds with brands and objects become stronger than the bonds between fellow human beings and become more important than our concern and commitment to the natural environment.

Throughout history, persons that are regarded as our greatest teachers have universally condemned the overvaluation of material life and possessions. This theme is consistent across continents, cultures and centuries. Religious profits such as Lau Tzu, Buddha, Christ, and Mohammed, to philosophers such as Plato, Hegel and Nietzsche, to modern era humanitarian leaders such as Gandhi, Martin Luther King and Mandela, provide a familiar refrain: persons should be judged by their spirit, their concern for others, their capacity for works, and their character.

Just forty years ago, this critique was expressed eloquently by Martin Luther King in his famous, "I have a dream speech, "

"I have a dream that my four little children will one day live in a nation where they will not be judged by the color of their skin but by the content of their character."

Forty years later, as race has declined as a discriminatory marker, signification as a discriminating mark has entered as a powerful force. Devotion to brands as markers of distinction has become a form of psychological servitude that grips all of us, regardless of race, sex, or income. Codes of consumption are the unwritten rules of interpreting signs. A refusal to play along with the game can save a lot of money, but it does not relieve you from being subjected to its rules.

Bling: A Social Crisis in Signification

In the last decade, the term "bling" (or bling-bling) entered the lexicon of inner city African Americans to describe new, ultra conspicuous mode of signification. Primarily driven by rap artists wearing large pieces of diamond studded jewelry and other accouterments, "bling" has been more recently appropriated by mainstream culture in the United States and Europe to describe nouveau riche attitudes and conspicuous consumption.

The purchase and gauche displays of these diamond crusted jewelry pieces have been linked to civil unrest and violence in Africa, prompting persons to call them "blood" or "conflict diamonds."

Bling crudely but correctly expresses the operative logic of signs exhibited across all social classes in the developed world. It is only the latest permutation in signification, base, literal and intense, as much invidious (to inspire envy) as conspicuous. Our current consumption paradigm is also a humanitarian and social crisis. A new system of social signifiers is needed to better enable producers and consumers to communicate social values, challenging the existing code.

Branding and Globalization: The Elevation on Signification

Until recently, corporations believed branding to be secondary to the production of goods. In the mid 1980's, this view was modified when management theorists suggested that corporations primarily produce brands as opposed to products. This shift may be viewed as a natural outcome of a world where mass production created the means to produce goods that were virtually indistinguishable from one another. As a result, effective branding became necessary to keep mass produced items from becoming commoditized as the commoditization of production was the surest means to destroy pricing power and profit levels. Branding is the best defense to keep companies from competing on price and quality alone.

Phil Knight, founder and CEO of Nike Corporation has been widely seen as a leader building a global, brand based business. Knight believed that their core focus was marketing and product development and believed that manufacturing had become incidental to the process of the production of goods. Who made a product was no longer important. The important part of a product was the presentation, packaging, marketing and sales. In the mid 1980's and 1990's, no one was better at packaging and presenting their product than Nike.

As more companies shifted their focus to the production of brands and not products, outsourcing production to contractors in low wage countries was rapidly accomplished. The shift toward low wage production facilities combined with an increased emphasis on marketing and brand management. This coupling enabled traditional markups between the cost of factory production and retail prices to soar. Labor in countries like China, Vietnam, and Indonesia were so low they become almost a non factor in the total retail price of the product. The lower cost of labor allowed for more money to be spent on advertising, brand management, and celebrity endorsements, elevating the power and reach of brands.

Advertising and marketing budgets exploded, enabling sports apparel companies like Nike to pay increasingly large sums to highly visible professional athletes to endorse their products. In 1992, Nike made headlines when it was revealed that the $20 million paid to Michael Jordan to endorse their trainers was more than the entire work-force of 30, 000 persons employed by its subcontractors in Indonesia to produce them. News of this became a public relations problem for Nike, who by then was one of the most successful global brands and top selling athletic apparel maker. [3]

Against rising criticism, Nike made adjustments, raising wages in Indonesia by 25 to 30% and eventually moving all production to Vietnam. Nonetheless, the Nike model has both endured and proliferated, with nearly all major brands moving production to Asia or Latin America. During this process, social activists were quick to bemoan the disparate wages paid to factory workers in the developing world, overlooking the fact that wages paid to sales and customer service personnel at big box retailers faired hardly better. At just above minimum wage, their income failed to provide a living wage for them as well.

Still economists and management theorists alike came to defend the concept of branding goods as a way to solve "information asymmetries." Meantime, some savvy consumers began to observe something different. They understood that most mass produced goods now came from factories in the developing world, primarily represented by China. As a result, whether it is a Mattel Toy from Wal-Mart, a Nike shoe from Footlocker or a Moen faucet at Home Depot, these brands, in the minds of smart consumers, don't command the edge that they used to. In the new world of offshore outsourcing of production, the real information asymmetry was no longer solved by brands but is further confused by them.

In this new paradigm branded objects increasingly are not what they purport themselves to be. For example, the label of a famous Italian designer may in fact be more the result of the hard work of Chinese seamstress or carpenter than the vision of the cultured craftsman from Italy. Made in China and in other low wage countries by subcontractors, these brands, through powerful ad campaigns that often include sponsorships, celebrity endorsements, and slick New York ad agencies have distanced themselves from the material reality of labor and production. Truthfully, to know the product, I need to know more about the factory floor and not the advertisement.

Again, scandals have erupted, with tainted food production found in name brand packages originating from China and lead based paint found in toys sold by Mattel. These asymmetries underscore a new crisis within the production of branded items coming from contractors that are not controlled by the corporations that employ them.

Nevertheless, renewed controversies over brands may modify conditions but will not overthrow the conceptual power. To be sure, generic and private label products will continue to have their place and likely fair better in recessions than in growth periods. But branded products will remain and thrive because, when effective, they solve not only information asymmetries but provide a social currency and powerful referent between consumers that interact with each other.

Brand Taxes and Store Brands

In 2004, James Allen and James Root of Bain and Company had an article published in the Wall Street journal, complaining of a "brand tax" being placed in large, global companies.

For famous-brand companies it must feel like few of their good deeds count. Over the years, they've met demands for increased social and environmental responsibility within their operations. Now, activists say they're also responsible for what occurs outside -- everything from how independent contractors treat employees to the way suppliers extract raw materials. For CEO's of household-name companies, this starts to look like an added cost of doing business -- a brand tax, holding renowned firms accountable for links in their value chains that they don't control.

Yet as major corporations cry foul regarding excessive accountability, consider the premiums that recognizable brands can command in the marketplace. In "low margin" food production, brand names command up to a 40% premium to store brands and a 10% premium to number two brands in a number of product categories. This is stunning when one considers the fact many of the store brands are actually made by the very same name-brand manufacturers. In many cases, house brands are simply re-labeling products with the same exact ingredients as the household brand name.

Over the years, Consumer Reports has discovered some big names behind store brands by walking the aisles at an industry trade show, checking the displays, and reading through program guides that name-brand manufacturers use to promote their services to stores. Recently, the results of a double-blind nationwide taste test released by Meyers Research found that participants overall preferred the taste of private-label products over better-known national brands by 51 percent to 49 percent.

If they knew the that they were paying more for the exact same product offered by the store brand, many more consumers would likely choose store brands. Others, meantime, despite knowing that the store brand is the same exact product as the brand name, would still pay more for the brand name product, simply because they like the social connotations associated with the store brands or generics. They would be embarrassed to be seen buying them or embarrassed if friends or guests were to find store brands in their cabinets at home.

Store brands are beneath them in the same way persons of lower caste were in the past, proving social discrimination has not ended; it has only shifted from persons to things.

Status Taxes vs. Luxury Taxes (Veblen's and Giffen's)

Status, brand, or social taxes as conceived here are not to be confused with luxury taxes. Luxury taxes are closely aligned with Veblen goods, a theoretical group of commodities for which peoples' preference for buying them increases as a direct function of their price, instead of decreasing according to the theory of supply and demand.

On the lower end of the spectrum are Giffen goods, a special type of inferior good, where quantity demanded rises when price rises. A positive income effect outweighs a negative substitution effect.

These anomalies in the classical description of price indicate a breakdown in the ability of classical economics to either interpret or explain the economy. Veblen goods are hardly an anomaly, as they are part of an enlarged class of goods whose chief price differentiator is its social value (prestige) and not labor, capital, or the interaction of supply and demand.

Signification, the key structural element of value, is not limited to prestige goods. The near entirety of consumer products contain elements of signification, from canned goods, to airlines and their seat assignments, to cars, apparel, and even credit cards. While there are notable exceptions, like soil for flower beds, sand, or concrete for the slab of your home, few products today are free of social connotations.

The concept of Veblen goods is narrow and undefined. It fails to identify the true operation of status with regard to pricing. Along with traditional elements of pricing, supply and demand, competition between firms and the cost of production, social prestige (or signification) is now a chief determination to be recognized. Demand for goods and their prices may rise and fall in response to the fluctuation of prestige elements (aka "cool factors) of the product. $300.00 pairs of designer sunglasses or jeans are practically worthless if they are no longer in fashion.

Giffen goods are also not free from connotations as a sign. Giffen goods are so closely linked to survival that they may be are subject to a substitution effect when prices rise. Rice, bread, and gasoline, may be substituted for less necessary goods as prices rise. As the status of key staples change, prices can fluctuate widely. Oil prices, it may be argued, went up in part because the war in Iraq gave more visibility and recognition not just to the instability of the region but to its sign.

The Structural Price of Signification

Signification conveys the surplus value of the information age, the most legible "extra, " of the modern economy. It is an indication to where the wealth is that social needs and causes may creatively tap into, extracting and replacing less efficient uses this surplus is currently directed toward. But unlike the Marxist interpretation of surplus value extracted from labor, the surplus here is not to be taken by the state as governments have proven to be inefficient institutions to perform its redistribution.

This surplus created by branding or signification is best created and maintained by markets. The monies raised are best directed toward targeted and effective social causes. Consumers themselves should decide where the money goes. Additionally, we must understand that profits derived from the structural price of signification are not the same as traditional profits naturally rewarded to entrepreneurs and investors. Branding, particularly re-badging, re-labeling or flanker branding (a technique used by large firms to market another brand a category the firm already has a position to create an illusion of choice and competition), is too often merely a legal form of deception.

This deception of brands is effective as it is largely opaque. It plays on the fundamental needs and desires for persons to cluster in conformist groups and achieve distinction. To eliminate logos and branding at this point would deprive the world of meaning and cripple an already weak economy. For decades, advocates, activists and scholars have attempted to impart a rational basis for consumption. To no avail, consumption has only become more irrational as the need to display status through objects grows more intense.

The Social Value of Escalades and Prada

Over time consumers became aware of Detroit's re-badging (or badge engineered) tactics, particularly in those instances where it was all too obvious, like the Chevy Cavalier re-badged as a Cadillac Cimmeron. The Cavalier was awful as a Chevy. As a Cadillac, at nearly double the price, it was a complete rip-off - a clear case of a manufacturer selling a label with inessential differences in order to pad the bottom line.

Over time, Detroit's game of fictionalized of differences became more transparent and consumers increasingly chose the pure brands of foreign car makers like Toyota, Mercedes, and BMW. In contrast, to the American Big Three - Ford, GM, and Chrysler-Plymouth - Toyota (until Lexus), Mercedes, and BMW built cars in a model / series format and did not use different brands to sell re-badged models of the same essential vehicle. BMW, for instance, to this day creates differing models within a series but does not attempt to sell any of its vehicles under any other brand name, save the M series which is essentially a racing brand.

In the 1990's, Japanese carmakers began to use American re-badging techniques by creating upscale Infiniti (Nissan) and Lexus (Toyota) brands. Over the long run, it is clear American manufactures diluted their own brands by offering too many vehicles with so little differences between them.

Stand alone objects have functional and aesthetic signification but do not fit the model of structural signification that can be isolated and quantified.

A limited edition Prada bag is an extreme version of the social price of signification, as designer handbags have become a cult object for women. The surplus here that could be freed for a social purpose is dramatic. Limited edition luxury items are priced like a work of art, with the largest portion of value not tied to the creation of the product but tied to the sign. Unlike a quality work of art, a used bag deteriorates with use and declines rapidly in value. The item shown is called a "Fairy Bag." The price shown was the suggested retail price. Like works of art, there is really no structural limit to price. Bags can sell for anything, with some models commanding as much as $100, 000. Wealth here is merely transferred from status seeking bag owners to status dealing bag makers.

What is the true cost of a bag? Here is a quote from a source on the internet.

"I have friends in China who work in these factories. They have provided a greater insight into how these deals with designers work. They have also showed me how they live, work, and play. One such friend told me she pays 30 dollars a month to live in a rooming house where other factory workers live. She is 21 years old, and to poor for medical insurance..The average cost to produce these designer bags is around $6.00. Imagine spending 100-300 dollars a bag for something that cost 6 dollars to produce!"

The Destructuring of Value from Use and Exchange

Now that value has been liberated from use and function, the pricing of objects has become increasingly irrational. In a world where handbags can command prices similar to works of art, it is easy to concede to a world where talk show hosts, baseball players, and under performing CEO's may command for themselves hundreds of millions of dollars while traditional labor has almost no value at all.

Investments now also resemble fashion and art where traditional referents to fundamentals break down. Financial bubbles and panics rotate in series. First stocks, then housing, now oil. Oil is currently trading more like a precious commodity than a commodity for consumption. Housing, meanwhile, recently has been accorded the status of a pariah.

The analysis of comparative pricing reveals underlying structural problems. Consider the following: At this time Exxon could buy General Motors and Ford with less than two quarters of profit. But so could one dozen Rush Limbaugh's and a half dozen Tiger Wood's and Michael Jordan's. The mid-east oil fields, meanwhile, contain enough value today to buy the entirety of America. Meanwhile, Brad Pitt and Angelina Jolie's baby pictures sell for $14 million and still half of the world still lives on less than $2.00 per day.

But no there is no revolt or rebellion. Just scuffles between photographers and police outside of celebrity mansions.

We are in living in a period of time that Baudrillard calls "the exponential phase of speculative disorder.where the sphere of the real is no longer exchangeable for the sphere of the sign." [4] With traditional price discovery blocked by brands and images, our economic system has short circuited and cannot find equilibrium.

Solutions may be found in new forms of exchange that renew our priorities of usefulness, needs, and the real. Cause related marketing is a start toward a new market for signs and symbols that provide a reference to real needs as opposed to desires.

An Altnernative Proposal:

Social Brands: Towards a Social Brand Market

World Social Brand Market: A 30 Second YouTube Demonstration: Google Project

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