Public Services, please: Emerging Market consumers want more than consumer goods?

JK Galbraith’s ‘Theory of Social Balance’ rests on a simple premise: that a healthy society must balance the number and quality of consumer or private goods with the number and quality of public goods (such as roads, schools, or armies). He points out that in America and parts of Europe after WW2 the number, variety and complexity of private goods expanded wildly, whilst public goods often stagnated or declined. In a famous passage, which sounds like a scene from Weekend, he describes how a family can drive a luxurious, power-steering enabled car, packed with exotic goods, stored in an expensive ice cooled container, past overcrowded schools, pot-holed roads and kerbside crime and out into a countryside over-run with billboards where they can finally relax and picnic next to a polluted river.

Today if you find yourself trapped on an early morning train in New York or London, entangled with touchscreens and strangers’ limbs, you might ask whether we have made much progress. Free-market thinkers would respond that, as in the 1950s, this is an active choice; that we could choose if we wanted to pay for better public services, but we prefer to buy iPads than to buy better rail tracks. But is it this simple? The ‘choice’, after all is only posed imperfectly (at best through elections where one party argues for marginally higher taxes and public spending). There is also a rather huge and intermittently effective industry encouraging us to buy consumer goods, and very little marketing for public ones. And there are some other powerful voices denigrating politicians and civil servants and their ability to spend our money competently. It’s also not unheard of that humans make choices that they regret after, or even as, they make them. We might freely buy an ice box, ice-cream or iPad mini, but at the end of the year some people might want to trade this back for slightly safer streets or cleaner hospital wards if they were offered the chance.

The relationship between private and public goods is a particularly sensitive dynamic in emerging economies. Visit Mumbai, Moscow, or Mombassa and the disparity between private affluence and public lack can be so glaring it makes Galbraith’s original satire seem tame. In Gurgaon, one of Delhi’s richest suburbs, much of the public infrastructure, down to those policing the streets, is provided by private companies – who are increasingly struggling to provide the ‘public goods’ that the state has not supplied. Chandran Nair, author of Consumptionomics reminds us of the millions across emerging markets who have access to a cell phone but not to sanitation.

The development of developing economies is often viewed through the prism of private affluence, understandably so by commercial companies, since we are keen to understand and meet the appetite for consumer goods. But what might we miss if we view an emerging economy purely in terms of private goods?

Firstly it’s worth considering where a company could help individuals to improvise and fill in for missing public goods or infrastructure. Where, we can ask, is there a market for private goods that ameliorate or work around gaps in state-proviced education, security, energy sources or sanitation – whether this be security features on a mobile phone; cleaning products that work with limited or polluted water; or vehicles that can cope with erratic roads?

Conversely, we can think about where a lack of public infrastructure might threaten companies’ ability to sell their products in the future. There are obvious instances – a technology company’s fortunes will be closely tied to a government’s ability to provide a semi-public good such as the next generation of wireless communication networks.

More idealistically, what role could and should companies be playing in countries where the balance of private and public goods is so glaringly skewed? Is there ever a responsibility to contribute, or campaign on citizens’ behalf? Pragmatically, can a company profit from allying their brand with citizen’s own demands for public goods, as organisations like the Times of India have begun to do?

In his reflections in 1998, on the 40th anniversary of The Affluent Society, Galbraith pointed to examples of what he saw as progress in the years since his critique: notably a growing willingness to pay a premium to preserve or protect the natural environment (the sine qua non of public goods), which Galbraith contributed to himself with initiatives to remove advertising from rural American roads. It would be surprising if the evolution of emerging economies, where there are strong communal cultures, a greater exposure to the results of environmental damage and expanding opportunities for canny and principled companies, was purely a story of private over public goods.