Monday, June 8, 2009

Engineering and Freedom, Part 8

click here to read part 1 
click here to read part 2 
click here to read part 3 
click here to read part 4 
click here to read part 5 
click here to read part 6 
click here to read part 7 

Classical economists assume that the “market” will most effectively regulate prices and production. 

However, markets can certainly exist outside the classic supply and demand principles. The state can, by subsidizing whole or in part the costs of some product or service, create markets.  This is what occurs when governments spend billons on welfare and industrial programmes, for example. 

Markets created by these expenditures are distinct from those under conditions of laissez-faire, because demand and supply exist without price regulation (as the costs of production and consumption are subsidized). 

Economic decision-making in the welfare state sector are subject to political, not mercantile, competition, as the many varied clients of the government organize to ensure the maintenance of their programmes and subsidies. 

This social economy is the “bread” to the “circuses” that are subsidized by the marketing economy. Advertising has provided for free, through the mass media, entertainment that few among its audience would pay for voluntarily. The very fact that it is available for free means that people will watch and listen to it: this audience is the market created by the advertising industry. 

The masses attend to mass-media product simply because it costs them little but their time to do so. There is a psychological disconnect between their consumption of mass entertainment, and the great cost of this entertainment. 

Ordinary consumers in most countries are surtaxed each time they make a legal purchase. They are also subject to a hidden tithe, the added expense of the advertising and promotion of any good or service. 

The profession of marketing has the aim precisely betraying and denying the market. Susan Strasser, a historian of the advertising industry, wrote that, 

In creating the techniques to make people want things, marketers developed principles that belied neoclassical economic theory. According to that theory, price — determined in the marketplace by supply and demand — functions as an information feedback system, telling producers how much of their product to make. When prices go up, the rational manufacturing firm (which can theoretically regulate supply but not demand) will increase output; when they go down, it will cut back on production. In actual practice, manufacturers operate on the new principle that demand could be created by the manufacturer. They initiated market research in order to procure direct market information that might make planning possible before production. Market investigation supported market creation... Furthermore, manufacturers attempted to set prices directly, not only to their own wholesale customers but also to retailers and consumers; price became, in modern jargon, an element of the `marketing mix’, an attribute of the product. With heavy investments in the machinery of mass production and in massive quantities of raw materials, no manufacturer could afford to be the passive actor of neo-classical economics... (Susan Strasser, Satisfaction Guaranteed: The Making of the American Mass Market, Toronto, Random House of Canada, 1989, pp. 27-28) 

Advertising thwarts competition in several ways. First, by inciting a conditioned response among consumer to the mass-media repetition of brand name, slogan or jingle, advertising encourages impulse-buying. Second, advertising is a costly part of doing business, an expense which does not contribute directly to efficiency or productivity. Advertising costs discourage entry by smaller, novel actors into the marketplace. 

The expense of marketing also contributes to the consolidation of industrial operations. Nearly all the major mass-media advertising brand-names belong to multi-divisional, multinational corporations. Only such large concerns can afford the vast costs of promotion and advertising. 

By subsidizing the expense of radio and television (the infrastructure, programming and advertising), consumer-goods firms have created a market for their products — the mass-media audience — that would not exist without the mass-media themselves. 

Commercial broadcasting provides entertainment, and the casual viewer or listener is estranged from the sophisticated infrastructure responsible for creating mass entertainment. He doesn’t pay for it directly (the costs of marketing being hidden in the price of the advertised goods and services), and so he doesn’t attach any monetary value to it. 

The average viewer becomes as dependent upon the mass media as the “client” of the welfare states does to his hand-out, because both offer rewards without much effort. 

The sponsorship of cultural and sports events by large corporations, which has grown steadily in recent years, is of interest here. In effect, corporate sponsorships have come to subsidize these events (often, as governments once did).  

They are popular; obviously there is a “market” for jazz festivals, certain athletic events, and so on. Yet, without the sponsorship either of government or corporations, they would be economically unsustainable. 

A corporate sponsor of a cultural event does not get, and does it expect, a profit from the expense of sponsoring it. What they hope to create is a market, not for the jazz, which already exists, but for the product and brand being advertised. Corporate event-sponsorship is just the latest twist on how business has insinuated itself on the public sphere through the subsidy of goods and services that cannot be sustained by a paying marketplace alone. 

In the past, media of communication were subsidized or otherwise held as legal monopolies by the state, a tradition which holds today for publicly-financed broadcasting or publishing in some countries. Commercial broadcasting, by definition, has always operated courtesy the subsidy of the advertising monies of industry. 

Vast new markets for radio and television were created during the earlier part of the twentieth century, not because there was such a such great demand for these media beforehand, but because the costs of the production of the home appliances necessary to consume their programme content, as well as the programming itself, were “sold” to the public at far below their actual material cost. 

The means were different, but the goal for big business of spending millions on advertising was identical to the vast expenditures governments have undertaken in the past to subsidize previous forms of media, that is, to monopolize the means of communication. In essence, advertising-financed media are propagandists for the gospel of big business, just as government-subsidized media tend to be biassed in favour of the state. 

However, commercial programming has proven far more adept at attracting the attention of the masses, because it is in the interests of the advertisers to provide for free or at low cost content that will bring viewers to watch the ads. Broadcast media have always been legally public utilities. The subsidies given them by the state and especially big business have created a demand for the programming and the requisite equipment for viewing it, that probably would not have ever existed if the full cost of the programming and the infrastructure necessary to create it were borne exclusively by the viewership. 

They were thus established as a distinct sort of utility, one subsidized not mainly by taxes or state-debt expenditure, but by the expense of advertising. Information is always been essential to the conduct of war. Generals need accurate data about the shape of the battlefield as well as the strength of the enemy. They also want to be as secretive as possible with their own activities, so as to surprise the enemy. In the twentieth century, when the conduct of war spread to the whole population, so too did the need of state to begin again to regulate the flow of information. For the junta regimes that were created to fight the Great Wars, the traditional practice of collecting accurate information was employed, but extended also to the “battlefield” of the civilian population, many of whom could have had divided loyalties. 

The censorship of information, to keep the activities of the regime secret from the enemy, was achieved by the rigid control of all media of communication, in both the Axis and Allied countries, and on both sides the general population was “censored” from understanding the enemy by liberal doses of propaganda. Modern propaganda and counter-intelligence methods were developed not by the Soviets or Nazis, but by the democratic West. 

During the First Great War, Allied governments succeeded in re-making the Germans and Austrians into “Huns,” through depictions (in the new cinema medium) of “kaisers” spearing babies on their helmets, before raping their mothers, and so on. Commercial artists were drafted to encourage the masses to sign up for battle, donate to the war cause, go to work in the factories, etc. 

Western governments also put together the first systematic internal espionage operations, to track the movements of enemy aliens. By the Second Great War, intelligence agencies in the U.S., Canada and Britain became institutionalized, and continued with the advent of the Cold War. All the countries fighting the original Great War, no matter what their relative consumer sophistication, experiencing war-induced deprivation, temporarily mocking the conditions of past civilizations. 

However, commercial advertisers drafted to work in the war cause came to understand more fully the persuasive power of propaganda, and applied it to civilian life. The 1920s thus saw a great boom in the consumer economy, guided by advertising in mass-circulation magazines as well as the new medium of radio. 

Radio had been around since the early century, mostly as a hobbyist’s tool. The medium’s spread to the civilian population was blocked by its requisition by the military governments fighting the First World War. However, radio’s technological evolution was speeded by the technological selection pressure of wartime. By the end of the conflict, radio was sophisticated enough to be used for civilian broadcasting. Unlike the mass-circulation magazine, however, the character of the broadcasting audience could not be readily discerned. 

Periodicals have subscription lists, for example, but anyone at all could be listening to a radio broadcast without a trace of who they were. There was no way of identifying just who was and who was not liking a particular programme. Thus it was difficult to sell sponsors on the popular merits of any particular programme content. Broadcast firms had to roll up their sleeves, go out and ask the public what they liked to hear. 

From this, modern marketing techniques were developed. Marketing seeks to divine the greatest amount of information from the smallest possible exposure to the general public. The goal of marketing espionage, like its military counterpart, is to gather accurate, secret information about competitive rivals, while carrying on public campaigns of disinformation in the form of advertising. 

Like traditional espionage, market intelligence requires collecting detailed information from the general public to ensure that their “loyalty” is assured. Commercial broadcasting is essentially the utilization of the media weapons used by all governments during the Great Wars, to the same end of brainwashing the general public, and reducing pressure from competitive rivals. Advertising, especially through electronic media, is as conducive to oligopoly as armaments production is to the creation of a relatively few large-scale states, and for the same reason. 

Only highly-populated societies can afford to sustain arms production indefinitely, just as only large companies have the resources to pour into the production of ads in magazines, radio and television. The costs of both advertising and armaments encourage predation in commerce and politics, so that the going-concerns have the resources to pay for their costs. 

Both arms and ads help maintain the market hegemony of large concerns simply because smaller concerns can ill afford the expense of either. Both advertising and arms have the ultimate effect of managing or denying consumer demand. The junta state does this simply by expropriating all or most resources to the creation of arms so that the means of satisfying consumer demand goes unfulfilled. 

Oligopolistic industry does so by pouring resources into media of persuasion which are aimed at conditioning the public to the normalcy of their status in the first place. These media, which are virtually all electronic means of communication, supply a market which could not be sustained by the conventional laws of supply and demand. 

The commercial development of all the broadcast media, as well as mass-circulation magazines, and most recently Internet “e-commerce,” has been undertaken by industrial concerns subsidizing a want — entertainment — in order to find a market for to advertise their wares. The logic behind the big-business sponsorship of media programming is identical, on much larger scale, to what prompts liquor and tobacco concerns to underwrite arts and sport events. 

Industry, by paying the cost of entertainment production presented through mass media, is guaranteed a big audience because the programming, and the media as well, is offered so cheap. However, if this programming, and the media that are necessary to consume it, were offered on a regular market basis, effectively there would be no market for it, because it would too expensive. In reality, the programming would not be produced at all, nor would the mass media be as “mass” in their scope as they in fact are with the advertising subsidy. 

Part 9 of Engineering and Freedom 

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