I HAVE a friend. He can be difficult on businesses. If he feels aggrieved at having been short-changed, he would spare no time, effort or money to enforce his rights as a consumer. In contrast, I resign to suffering in silence, not wanting to go to the extent my friend does for a redress. My easy way out is to stop doing business with the cheat in the future. Oftentimes, I remind my friend that, woe betide anyone doing business with him.
Sometimes I wonder if it is all worth it — pursuing a remedy for a broken promise in the sale of a product or service. Upon deeper reflection, it is customers of my friend’s ilk who help fuel a nation’s competitiveness — the ability to export more and to draw in more investments. We might tend to believe that in a globalised world the local consumer may be irrelevant to enhancing a nation’s competitiveness.
However, Michael Porter, the doyen of living management gurus, argues otherwise, in his book On Competition: “A nation’s companies gain competitive advantage if domestic buyers pressure companies to meet high standards.”
With the global economic crisis dampening export demand, countries such as Malaysia and China have come to rely on domestic consumption to shore up growth. Indeed, with 130 million middle-class consumers, China’s growth potential is significant. The size of aggregate demand is important in another way. It affords companies scale economies that help reduce production costs. Even more important are the productivity-enhancing aspects of consumer demand — the lynchpin of competitiveness.
Take the industrial revolution of the 18th and 19th centuries. Why did it begin in Britain? Robert Allen in his 2009 book, The British Industrial Revolution in Global Perspective argues that innovations that fuelled the industrial revolution — the steam engine, mechanical spinning jenny, and iron ore smelting — arose because there was a demand for them at that time. The British wanted cheaper products. However, the high wages, unlike elsewhere in Europe, that was necessary to attract workers from agriculture were a stumbling block. Hence, the British demanded innovations that could economise on the high-waged labour.
True, other factors such as property rights, cheap coal and other inventions offered a conducive environment. But, these were also present in other parts of Europe. For example, property rights were superior in France, Holland was highly urbanised and Italy and Germany possessed much of the science behind steam engines. It was home demand for cheaper and quality goods that made the equation for the great leap forward complete.
Fast forward to the present day. Uber, a taxi-hailing service, has broken the high-cost monopoly of local taxi drivers, amid the protests of taxi drivers we witness today. It came about as it filled a market demand for a cheaper and convenient taxi service. Similarly, Japanese home demand for cheaper energy consumption during the hot and humid summers led the Japanese to developing energy-saving rotary compressors that made their air conditioners even quieter. Other Japanese industries have churned out comparable innovations of international quality to serve a population that lives in tightly compact homes.
Equally, Sweden’s long-standing concern for the welfare of the physically challenged has enabled industries focused on the handicapped to gain competitive advantage. And, Denmark’s stringent environmental standards led it to develop cutting-edge pollution control technologies.
Apart from spurring innovations and pressuring companies to improve quality, trendy and fastidious consumers offer a peep into emerging market trends. Such market demand can even spark global trends, especially where a country is exporting its values and tastes.
In 1689, John Locke, an English philosopher, wrote: “In the beginning all the World was America.” He was alluding to the uncivilised nature of America then. Jump three centuries, and all the world seems to be America again! Only this time, the barbarians have now been replaced by shrewd producers and marketers who have tapped into the increasingly pervading American values and tastes for, among other things, credit cards, blue jeans, fast food, hypermarkets, off-the-rack clothing, and designer stuff. Denim, for example, has epitomised notions of American liberty when American forces across the world started wearing blue jeans since the Second World War.
The point is, how did all these world-beating products originate? It began when American folks demanded such conveniences and luxuries.
You might argue that this is a chicken-and-egg conundrum. That it was manufactured desire that fuels consumption. The issue is academic. Innovations occur because they meet a demand — manufactured or otherwise. Adam Smith, the founding father of modern economics once wrote: “Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.”
Malaysians tend to suffer in silence if they are dished out a product or service that is substandard or does not meet the hype. It is ingrained in our culture not to be confrontational. But that may not be the best thing. Not only are we short-changed, we may not be able to change the world.
So, to my friend whom I introduced at the outset, I now say, “Long live the pesky consumer!”
Datuk Dr. John Antony Xavier is the head of the Strategic Centre for Public Policy at the Graduate School of Business, Universiti Kebangsaan Malaysia