In defence of frivolous consumption

Published: April 17, 2012

The writer is a partner at Bhandari, Naqvi & Riaz and an advocate of the Supreme Court. The writer can be reached on Twitter @laalshah. The views presented in the article above are not those of his firm

On the grand scale of things, frivolous consumption ranks pretty low — i.e., somewhere below the average cabinet member but above child rapists. The mission of today’s column is to tell you that this opprobrium is undeserved: there is nothing inherently wrong with frivolous consumption. And, dear reader, two points before you get agitated. One, read the rest of the column before blowing a fuse. Two, note the word ‘inherently’.

Let us begin by grappling with the concept of ‘frivolity’. After all, one person’s frivolity is another person’s necessity. If you can read this column, then you likely live in an English-speaking world where the object of most magazines is to tempt you into buying what Michael Lewis once famously described as “The New New Thing”. Obviously, not all of the magazine ads are frivolous. At the same time, there is obviously a point beyond which things just stop making sense.

In the particular context of Pakistan, there are three things (amongst many others) that are generally derided as ‘frivolous’: large cars, lavish weddings, kites. In my view, each of those three activities should actually be encouraged.

Let’s start with large cars. A well-optioned Porsche Cayenne Turbo costs in the approximate vicinity of Rs30 million if purchased new. Out of those Rs30 million, more than Rs20 million consists of taxes.

More importantly, a person can only buy a Rs30 million-car if he has a legitimate, disposable income of Rs30 million. And in order to show legitimate disposable after-tax income of Rs30 million, the average Pakistan first needs to show gross earnings of Rs50 million.

If we do the math, the net result is that a Pakistani who buys a new car worth Rs30 million, has first had to pay taxes of Rs40 million. Frankly, if I were the finance minister of Pakistan, I would give a pride of performance award to every poor sod who bought a new Rs30 million car because they would have paid about 80 per cent of their gross earnings in taxes.

Let us now move on to the subject of lavish weddings. In 1997, the federal government introduced a law forbidding the serving of food at weddings (though an exception was made for baraatis). Subsequently, the legal regime was revised to allow the serving of one dish at marriage functions.

My point regarding food at marriage parties isn’t the silliness of a law that flies in the face of deeply-ingrained social instincts or the hypocrisy or the waste of official resources spent in patrolling wedding functions. Instead, my query here is simpler: why would you want to stop people from serving food at weddings?

Food served at weddings is both produced and prepared locally. In other words, the chicken karahi served at a valima features a chicken that was born locally, raised locally, sold locally and turned into a saalan locally. At each step of the way, people made money. Banning or limiting food at weddings is, therefore, the same as banning or limiting local businesses. Why on God’s green earth would anyone ever do that?

The ostensible answer is that people really don’t want to spend so much money on food at weddings but are forced to do so by social pressures. So banning food at weddings is one way of giving relief to the lower classes.

This argument does have some merit. The problem, though, is that people weak enough to be coerced by social pressure into entertaining extravagantly, also get coerced by social pressure into giving lavish dowries and flouting stupid laws. Even to the extent that some people do get relief, the effect is minimal when it comes to the people most guilty of extravagant entertainment because, in their case, food costs account for a small portion of the overall wedding.

I come now to kite flying. Let us leave aside the arguments that kite flying is un-Islamic or that it results in an unacceptable loss of life and instead concentrate on the argument that money spent on kite flying is ‘wasteful’ or  “frivolous”. My response here is simple: frivolous for whom?

The bored suburbanite who splurges on kites may well be blowing up his money. At the same time, the person selling the kites to the bored suburbanite is likely to be poor and likely to use his earnings to feed an impoverished family. Where exactly is the frivolity in that?

In effect, the  ‘frivolity’ allegation assumes that some expenditures are better than others. More specifically, the assumption is that money spent on kites is inherently undesirable, as if money not blown up on kites would somehow be spent on world peace or curing cancer. This assumption is entirely unjustified because in actual fact money spent on kites is wonderful for the economy. It may come at too high a price in terms of human suffering, but that is a different debate.

Does this mean that any and all limits on consumption are unjustified? Absolutely not.

In his last book, Ill Fares the Land, the late British historian Tony Judt raged passionately and learnedly against the embrace of unfettered capitalism. His argument was that true social prosperity depended on an accepted social contract and that too great a divide between the rich and the poor had the tendency to negate that fundamental unity necessary for the survival of a society.

I agree with what Judt has to say about keeping a balance in society. However, what destroys a society is not the mere inequality between the rich and the poor, but the belief of the poor that that the rich have attained their status by abusing the political system and rigging it in their favour. Tackling the mere display of inequality, therefore, does not reduce the bedrock resentment of the disadvantaged in this society. At the same time, we already have huge economic problems in this society — problems which are not solved by continuously adopting economically stupid policies. Finally, the whole ‘frivolousness’ debate is often used to mask a dogmatic self-righteousness.

There is a middle path out there between the embrace of conspicuous consumption and killjoy puritanism. It’s about time we found it.

Published in The Express Tribune, April 17th, 2012.

Reader Comments (16)

  • Falcon
    Apr 17, 2012 - 1:00AM

    In the midst of so many depressing news, certainly a light-hearted yet insightful article.

    Recommend

  • BlackJack
    Apr 17, 2012 - 1:28AM

    What destroys a society is not the mere inequality between the rich and the poor, but the belief of the poor that that the rich have attained their status by abusing the political system and rigging it in their favour.
    High quality content, yet again!

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  • Balma
    Apr 17, 2012 - 1:35AM

    Kite flying is UnIslamic?
    Hai’n????

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  • Mirza
    Apr 17, 2012 - 1:51AM

    I like the “out of the box” thinking. The first two examples create jobs for the working people and the leftovers are given to the poor. In another way by legalizing the sale of liquor the govt can tax it as much as it wants and there would be no protests. In addition, by taking it out of the smuggler’s hands the violence and crimes would decrease. In Malaysia, the liquor is taxed many times over and the govt and end users are both happy.

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  • Shehzad Shah
    Apr 17, 2012 - 2:47AM

    I agree with with the opinion about kites & wedding dinners, but the analysis of taxes paid by a Porsche buyer is frankly quite silly (is this from SMH?). Simply on the face of it, do you actually believe that Porsche buyers in Pakistan would be paying 80% of their income in taxes?? Clearly the writer has never looked at a FBR tax return form; large purchases can be justified not merely through income but from savings carried over from previous years. In particular, there is a very convenient entry called ‘Cash in Hand’. All a smart man (or his smart accountant) with a passion for beautiful cars would need do is make sure this nifty line item is sufficiently spacious. This is easily achieved in Pakistan, often with the purchased cooperation of the taxman himself. The filer simply declares the large amount of ‘Cash in hand’ as an inheritance, or bequest from a generous uncle who also conveniently lives abroad. Of course, this is all assuming the citizen in question cannot simply get away with sheer absurdity on his tax-return, too large an assumption given the high correlation in Pakistan between Porche buyers & citizens whose poverty is seen solely on their tax returns. After all, according to his tax return our Finance Minister is too poor to pay any income tax. Yes, the tax revenue from import duties alone is significant (though a Pakistani ‘fix’ operates here as well; most car dealers declare the import of each car for ‘personal use’). I believe banning the import of luxury items is pointless when they can be milked for much needed revenue at least at the import stage. But lets not pretend that Porsche/Land-Cruiser/Range Rover buyers in Pakistan are exemplary tax-payers.

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  • Hafeez
    Apr 17, 2012 - 2:56AM

    Very impressive. Though I have problem with the idea of permitting kite flying since it not only kills but it also causes electricity break downs. But yes, I totally agree with the baseline argument that there needs to be a proper cost and benefit analysis of ever policy affecting socila or economic fabric of the country.

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  • Russianroulette
    Apr 17, 2012 - 8:04AM

    Let’s take the Porsche thought forward and rationalize how much, have individuals who registered Toyotas and Hondas and other luxury vehicles paid in taxes in the LAST 4 years! FBR complains of tax evasion… this can be a simple mechanism to identify and tax some of the right characters or at least watching what happens next could be hugely entertaining!

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  • Qasim
    Apr 17, 2012 - 11:02AM

    @BlackJack:
    @Russianroulette:
    Agree 100%; does MOF has the will and powers to catch the tax evaders in their own traps. Most belong to the class, which wants everything but is unwilling to give anything e.g. taxes or zakat.

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  • Anon
    Apr 17, 2012 - 1:55PM

    Would all the tax-paying Porsche owners please stand up?

    Anyone?

    oh!

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  • mrk
    Apr 17, 2012 - 4:51PM

    good article. Don’t know why in Pakistan you are supposed to harbor a guilty feeling on consumption. If I’ve earned my money the right way, and paid my legal dues, then I have absolute right to enjoy my money in any way that I please. Afterall, all savings basically are future consumption.

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  • BlackJack
    Apr 17, 2012 - 8:06PM

    @Anon:
    Dude – you’ve missed the point. Still let’s look at it your way – you are saying that the Porsche owner does not pay income tax. In that case, by allowing him/ her to import the Porsche, the Government is making some money out of this income (without paying duties, the car will not be delivered – even in Pakistan), whereas it wouldn’t if no car was imported. The logic still holds.

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  • Shakir Lakhani
    Apr 17, 2012 - 10:15PM

    All that the Porsche buyer has to do is to declare that all his income is from agriculture, which is not taxable (however high). No doubt, there is custom duty and sales tax at the import stage, but again, he is exempt from with-holding income tax. The government gets something when a luxury car is imported but it gets the same when crude oil or palm oil are imported. Wouldn’t it be better if the feudal, instead of importing a Porsche, invests the money in his constituency (setting up a small factory, for instance?).

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  • Meekal Ahmed
    Apr 18, 2012 - 12:41AM

    You are a lawyer, right?

    If so, why are you commenting on economic issue about which, it is plain to see, you know nothing?

    Consumption means less savings and less savings means less available for investment. So guess where the difference comes from: foreign savings!

    Is it small wonder then that we are a country ever-reliant on foreign savings to fill the gap between savings and investment — which, by the way, is equal to the gap between exports and imports?

    This dependence on foreign savings has implications for our economic sovereignty and for macroeconomic stability and balance of payments viability, generally. Every now and then because of too much consumption (and imports), we end up in the intensive care unit of the IMF, begging them to save our (thick) skins (again) from debt-default.

    Articles such as this do not help shape readers’ expectations on what constitutes prudent economic policy.

    Consumption must be taxed (as in the case of a VAT) while savings, investment and exports must be encouraged. We need to change our mind-set.

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  • alijan
    Apr 18, 2012 - 6:40PM

    Is this for real? have we reached a point where inequallty is being rationalized as good..its like the 1960′s all over!…disgusting

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  • Ayesha Khan
    Apr 18, 2012 - 6:53PM

    Disgusting! The crux of this article is that frivolous spending feeds the poor, so let the wealthy spend, but it is preferable that they spend in moderation so they can sleep without guilt at night.

    This assertion is not only wrong as far as economics is concerned, it is unabashedly elitist. Do we need more Porsches or do we need more tractors in our economy? Should we allocate our food resources to feeding those who suffer from malnutrition or should we let the wealthy waste food by the ton? Is inequality justified just because you are on the better side of it? Are we back in the 60′s?Recommend

  • mrk
    Apr 21, 2012 - 3:03AM

    It’s about what’s really can be done and not some goody-goodie talk on forcing people to save. How do you intend to tell someone who earns 3 lakhs a month not to drive a civic or not to send his/her children to elite private schools or not to wear a ten thousand rs suit? Granted these items perhaps are not luxuries to people visiting on this site, but they are luxuries to a majority of Pakistanis. But we are, more or less, are doing exactly this while calling others ‘disgusting’.

    You know what’s disgusting? our hipocricy!

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