No, They Don't Need Us As Consumers

Debunking a common misconception

It has become difficult to focus on anything right now except the ongoing destruction of the United States government and the unfolding Silicon Valley coup d’etat. It has become even harder since Microsoft deleted my preferred software from my hard drive without my knowledge or consent (indicating that they already have our balls in a vice). I’ll have more to say about those things, but right now I just thought I’d give a quick post on some extraordinary statistics I came across recently.

One common argument I hear all the time is that the people at the top won’t let us go broke since they need consumers to buy their products. It’s a nice thought—we’re mutually dependent, people think, so the folks at the top have an incentive to not let things get too far out of hand. Maybe they will even realize the error of their ways and give us a raise, or perhaps a UBI. A consumer economy needs consumers with enough spending power to buy products in order to function. Makes sense, right? How can the economy keep growing if most of us are getting poorer?

But is that really true?

A couple of facts have caused me to question that narrative. It turns out that the top ten percent of US earners are responsible for fully half of all consumer spending! The rest of us combined account for merely the other half. The lowest 20 percent are hardly visible at all. Just ten years ago, the top ten percent accounted for 36 percent of all consumer spending. See the chart below.

That chart is taken from this website, which contains the gory details:

Between September 2023 and September 2024, the high earners increased their spending by 12%. Spending by working-class and middle-class households, meanwhile, dropped over the same period.

The bottom 80% of earners spent 25% more than they did four years earlier, barely outpacing price increases of 21% over that period. The top 10% spent 58% more. The top 10% is spending way more on an inflation-adjusted basis in the 2020s…The wealthy class exist in a different stratosphere and there are wide-ranging implications…

The article also points out that the top ten percent of earners own nearly 90 percent of all stocks indicating who is really benefiting from financialization, monopolies, private equity and stock buybacks even as longstanding businesses go under and workers are squeezed ever harder. Towards the end of the article, it posits that it’s only going to get much, much worse in the future.

But we can see the end result thanks to this extraordinary article from the BBC. The article is based on a report that says that a billion people in India—the largest country on earth by population—have effectively zero spending money.

Yes, you read that right—a billion people in India are effectively “economic NPCs”:

India is home to 1.4 billion people but around a billion lack money to spend on any discretionary goods or services, a new report estimates. The country's consuming class, effectively the potential market for start-ups or business owners, is only about as big as Mexico, 130-140 million people, according to the report from Blume Ventures, a venture capital firm.

What is more, the consuming class in Asia's third largest economy is not “widening” as much as it is “deepening”, according to the report. That basically means India's wealthy population is not really growing in numbers, even though those who are already rich are getting even wealthier…All of this is shaping the country's consumer market in distinct ways, particularly accelerating the trend of “premiumisation” where brands drive growth by doubling down on expensive, upgraded products catering to the wealthy, rather than focusing on mass-market offerings.

This is evident in zooming sales of ultra-luxury gated housing and premium phones, even as their lower-end variants struggle. Affordable homes now constitute just 18% of India's overall market compared with 40% five years ago. Branded goods are also capturing a bigger share of the market. And the “experience economy” is booming, with expensive tickets for concerts by international artists like Coldplay and Ed Sheeran selling like hot cakes…The report's findings bolster the long-held view that India's post-pandemic recovery has been K-shaped - where the rich have got richer, while the poor have lost purchasing power. In fact, this has been a long-term structural trend that began even before the pandemic.

India has been getting increasingly more unequal, with the top 10% of Indians now holding 57.7% of national income compared with 34% in 1990. The bottom half have seen their share of national income fall from 22.2% to 15%.

The latest consumption slump, however, has deepened amid not just a destruction in purchasing power, but also a precipitous drop in financial savings and surging indebtedness among the masses. India's middle class - which has been a major engine for consumer demand - is being squeezed out, with wages pretty much staying flat, according to data compiled by Marcellus Investment Managers. “The middle 50% of India's tax-paying population has seen its income stagnate in absolute terms over the past decade. This implies a halving of income in real terms [adjusted for inflation],” says the report, published in January.

India points the way to the future for the entire world. The top ten percent will do all of the discretionary spending, with the rest of us as merely onlookers, desperately trying to keep up with our subscriptions to everything under the sun (shelter, electricity, heating and cooling, cars, entertainment, medicine, software) and making our monthly Klarna payments for everything else (clothing, electronics, furniture, etc.). Given India’s toxic atmosphere, the wealthy even breathe different air than the masses. The capitalist Holy Grail of making people pay for the air they breathe may finally be realized in our lifetime¹. And thanks to “dynamic pricing” the cost for those necessities will be constantly updated in real time nanosecond by nanosecond to extract every last dime from us (since there won’t be any more pennies, apparently).

This is not some hypothetical future scenario, by the way. This is not cyberpunk fiction. This is right here, right now.

So, no, they don’t need us as consumers. We’ve been doing less and less of that, anyway. And increasingly they won’t need us a workers either as the report goes on to describe:

The Marcellus report also points out that white-collar urban jobs are becoming harder to come by as artificial intelligence automates clerical, secretarial and other routine work. “The number of supervisors employed in manufacturing units [as a percentage of all employed] in India has gone down significantly,” it adds.

The government's recent economic survey has flagged these concerns as well. It says labour displacement as a result of these technological advancements is of particular concern for a mainly services-driven economy like India, where a significant share of the IT workforce is employed in low value-added services sectors that are most prone to disruption.

I think these reports also pinpoint why housing is out of reach for more and more people around the world. It’s currently fashionable on the internet and in the media to blame “NIMBYs and zoning,” which implies that the “free market” will solve the problem on its own if only the damn government and pesky citizens would get out of the way and let supply and demand work their magic. They argue that the Invisible Hand will make shelter affordable for the masses through a kind of “trickle-down theory” of housing. By building more high-end homes, luxury condos, McMansions, apartment towers and gated communities, the logic goes, the wealthy will decamp to them leaving more houses and apartments available for the rest of us. Problem solved and, as always, it’s all due to less government interference!

But this theory is hard to swallow. Housing is wildly expensive all over the world right now across a broad spectrum of countries. It’s hard to believe that housing is getting more and more expensive everywhere on earth simultaneously just due to NIMBYs and zoning. However it does seem correlated with rising inequality. That is, houses aren’t particularly expensive in historical terms, it’s just that less people than before are able to afford them—that is, they are “house poor.” This was the conclusion of a recent post by Blair Fix, and the evidence presented above seems to back this up:

The American Housing Crisis: A Theft, Not a Shortage (Economics from the Top Down)

This comment from a Hacker News thread (lighly edited) makes the point more directly:

The rich are demonstrably less discerning of every marginal dollar. They will pay more for the exact same asset than someone who is only middle class or lower. This means the rich own everything, and therefore just keep getting richer, because the US abandoned any form of redistribution.

For example, Kennebunkport is a very wealthy town in Maine, including having a large vacation property for the Bush family. My father’s entire business as a half retired contractor is predicated on rich, gay, techbros moving here from California and just throwing money at him until stuff is built. He can literally double a project price overnight, and they give him a bottle of $200 wine for it. The same is true of many businesses in the area.

This is one of the reasons nobody builds lower class housing. Profit is usually percentage based. Why would you build ten starter homes and work your ass off pleasing a bunch of poor people who have to be careful with their money because even getting a loan nowadays is stupidly difficult, when you can just build a couple McMansions for the same output effort, where a bunch of rich fucks will come in and buy it in cash, for above market price, no questions asked, so you don't even have to build it well because the rich people are buying vibes and dreams, not an actual house, and they will happily eat a much higher profit margin per product.

Large income disparity means that people stop serving the lower market, because Wall Street won't invest in something that doesn't make line go up as much as just treating rich people as idiots that will pay stupid prices for things.

This “makes sense,” or at least is obvious when you remember that at a certain point of wealth, you have more money than you know what to do with, and you still cannot buy even a single extra second of time with infinite money, so spending time being discerning with your purchases is explicitly a waste.

So while it may be comforting to think that they need us as workers and consumers, and that things will eventually become so dire that they will correct themselves, the evidence of the past several decades indicates otherwise. The economy has been doing just fine with fewer and fewer of us consuming, because the rich consume more and more to compensate. The market responds by producing exclusively luxury brands, experiences and high-end products unaffordable to the masses (including housing). The rest of us are effectively shut out of the economy completely. And this is happening everywhere we look and accelerating.

The idea that the consumer economy will cease to function without some sort of redistribution is naïve. It turns out that capitalism functions just fine with a tiny sliver of the population doing all of the spending and consuming and the vast majority of people barely scraping by. We can see this clearly already in India.

As a final note, it’s difficult to see what extreme natalists who claim that lower birthrates comprise some sort of “emergency” are envisioning. They already tend to see most of us who aren’t rich as “parasites” and “useless eaters.” They make no secret of the fact that they want to replace us all with AI, like, yesterday. Yet at the same time they desperately want people to have more babies for some reason. Why? What are they thinking? What do they expect most of us to do in the libertarian techno-fedualist society that they’re currently building in the United States? Do they plan to keep us as pets? As human footstools? To use us as blood/organ/tissue donors, or what? I don’t get it².

1. Which would increase GDP, of course!

2. Libertarian economist and Mercatus Center director Tyler Cowen wrote a book years ago where he envisioned a future where the masses are housed in government-owned favelas and mollified with subsidized internet, pizzas, computer games and porn. It's difficult to believe that Musk and Thiel are that benevolent, however.