Credit Cards and Buying Stuff Online - Essay Example

?Introduction Credit cards represent a very important backbone for modern society. Part of the reason for this is because easy credit has led to the rise of mass consumerism, and has enabled every individual to be able to afford items that were only within reach to the wealthy. Because of this, credit cards are also tied to identity – they enable people to purchase items which are an outward manifestation of one’s identity and how one feels inside. Being able to afford the right car, the right designer clothing, the right television are badges of honor for certain people. That said, there are issues with credit, including the fact that credit is often abused and there is also the risk of identity theft. That said, since credit is inextricably bound with the rise of consumerism, credit is very important to society and is not likely to recede anytime soon. This paper will explain how consumerism came about, how globalization and online purchasing has changed how people buy stuff and use credit, and what the dangers are of credit. Evolution of the Economy The economy has been evolving continually, from a period of time before mass production, to mass production, to globalization. The economic realities during the 19th Century, before the advent of mass production, was that a Puritan ethos prevailed. This means that housing was sparse, money was not spent on non-necessities, such as jewelry, eating and drinking well, and fine clothing (Bocock, 2000, p. 8). This all changed with Henry Ford. Henry Ford was the father of consumerism, because, under Ford, workers were paid better. Because workers were paid better, they had more purchasing power. Because workers had more purchasing power, there was more demand for products. Consumerism was the result of this cycle (Gabriel & Yang, 1995). Suddenly, it was not just the rich who were able to consume products which were non-necessities, but everybody could (Gabriel & Yang, 1995, p. 10). One can see how consumerism affected society by examining how much, as a percentage of a household income, was spent on necessities before Henry Ford and consumerism and how much was spent on necessities after this period. In Britain, for example, in the early 20th Century, between one half and two thirds of a British family's income was spent on food. This changed by the middle of the twentieth century, however, in that, by this time, only one third of a British family's income was spent on food (Gabriel & Yang, 1995, p. 12). With mass production came branding, and the individual's desire to purchase products with labels and designers. This was because mass production meant that similar goods were flooding the marketplace. Companies had to stand out amongst the competition. This was the beginning of competitive branding, as different designers and labels emerged, and these designers and labels lent an air of prestige to the products. For example, designers such as Ralph Lauren and Tommy Hilfiger made names for themselves, and they were able to charge a premium for their products, because their products carried this extra prestige (Klein, 2000, p. 6). Gender issues emerged during this period. The men were busy making money, and the women were busy spending the money, so the women were the ones that the marketers targeted in the era of consumerism that predated the rise of feminism (Kacen, 2000, p. 347). This all changed in the post-modern society, as consumption became a part of everyone's identity, both male and female. In the post-modern society, according to Kacen (2000), people constructed their identity with brands, figuring out who they are by the brands that they buy. The person's identity became fluid, as the person might go from being a punk, preferring to buy products that would go along with that image, and then the same person might choose a look that is more of a preppy image, and buy products that suit that image. Brands play a part in this identity construction, as well, because certain brands are popular with different segments of society, so choosing certain brands means that the individual is identifying with that particular part of society. In the meantime, the marketers and designers have helped this identity construction by selling an image that people can attain. Carrying an expensive designer purse would connote an image of wealth, and this becomes one's identity. Carrying another kind of purse might connote an image of sportiness, etc.(Kacen, 2000, p. 349). The era of consumerism eventually gave way to the era of globalization. Globalization may be defined as “an extent of internationalisation at a level where boundaries are blurred or appear close, where networks and solidarities are communicating, [and] where interdependencies are increasing” (Withal de Wenden, 2009, p. 48). Jobes (2003) states that globalization in the modern era depends upon interlocking structures for transportation, communication, computation and enforcement (Jobes, 2003, p. 74). Globalization has reached many sectors, including intellectual property, financial services, money capital, goods and financial instruments (Buttel, 2003, p. 95). Globalization is generally a positive thing, although there are also negative aspects to it as well. For instance, globalization has led to ethnic clashes and cultural misunderstandings (Hermans & Dimaggio, 2007, p. 31). While the period of consumerism began during the Henry Ford era, and really exacerbated during the 1920s era of consumption, globalization was not far behind these events. The modern era of globalization began in the 1940s, with work being redistributed around the world (Schaeffer, 2005, p. 2). That said, even in the 1920s, the world was interconnected, as the United States stock market crash had reverberations that were felt around the world (Wojcicka et al., 2003, p. 1). Globalization accelerated in the post World War II era. This was evidenced by the fact that the United States began producing goods that were principally consumed in Europe and Japan, including most of the food that was being consumed in these two countries (Schaeffer, 2005, p. 2). This period of globalization led to jobs being shifted around the world, as the economy and employment shifted from being concentrated inside the UK to outside the UK, as more businesses outsource employment overseas (Schaeffer, 2005, p. 2). Globalization was led by the United States. They gave foreign aid to allies, and military aid to Western Europe and Japan, giving aid that amounted to $2 trillion between 1950 and 1970 (Schaeffer, 2005, p. 2). Because of this aid, Western Europe was able to rebuild after World War II. This funding also helped these countries buy military goods from the US. The United States government also encouraged globalization during this era by allowing high tariffs on the United States' allies. This meant that the United States was encouraged to invest in Western Europe, and it also meant that jobs were going overseas, as labour was cheaper (Schaeffer, 2005, p. 3). The United States also encouraged globalization by encouraging and instituting exchange rates which were fixed globally during the war. This mean that Western Europe and Japan would be able to compete with the United States as equals (Schaeffer, 2005, p. 3). Now, of course, because of this era of globalization, products are being made around the world and are consumed by countries around the world. Products are made in China and shipped everywhere, or they are made in the UK and shipped everywhere. It is truly a global marketplace. Inevitably, the global marketplace, being what it is, gave way to the online marketplace. This online marketplace is a place where people can buy anything from any place in the world. There are different kinds of internet marketplaces, that fall under the umbrella of E-Commerce. These internet marketplaces are business to business, business to consumer, and consumer to consumer. E-procurement is the one business to business model described Tvrdikova & Koubek (2010). With E-procurement, businesses interact with other businesses, and products and services are provided from one business to another and this is where businesses use the Internet to obtain or provide products and services to one another. These procurement models might be integrated, such as models that combine value chain and procurement (Niles, 2008). Other examples of integrated models are models which combine products, services and activities (Zott, 2010). E-businesses are another model, and this is where businesses use the Internet for commerce and communication. This includes e-auctions. E-Bay and penny auctions are examples of this (Hanafizadeh & Nikabadi (2011). The e-marketplace is another example of an e-business, and this might include an “e-mall,” which puts different brick and mortar type stores under one interface – such as featuring Macy’s website, with Foot Locker, etc., just like a regular mall. And, like a regular mall, consumers may shop at these different stores, as they are featured on one site (Tvrdikova & Koubek, 2010). E-marketing would be another customer oriented business model described by Tvrdikova & Koubek (2010). In E-marketing, businesses network their products through different channels, including social networks and traditional business models. The social networks are horizontal, the traditional business models are hierarchical and vertical (Van Dijck & Nieborg, 2009). Social networks may also be virtual networks, such as Facebook, or user-added value communities. In virtual networks, these are peer to peer, and the users spread the word about businesses between one another (Wirz et al., 2010). YouTube would be considered a user-added value community, in that that the content of the site is generated by the users of the site. Credit Cards With the transformation of the marketplace, there has also been an evolution in how individuals use credit cards. Merskin (1998) explains that credit has developed as the marketplace has developed. Specifically, as the economics of consumerism has developed, and consumers have started wanting more and more, credit cards have played a large part in this. As noted above, our society changed from one that had a certain sense of thrift and puritanism before consumerism began. This was a period where people did not need credit cards, nor credit, because people were happy just buying necessities. When the age of consumerism began, however, according to Merskin (1998), people increasingly purchased non-essentials. This was still prior to the age of credit, however, so people increasingly started skimping on essential items. They ate less, they lived in smaller quarters, and they bought less clothing. This was necessary because people increasingly wanted non-essentials, but they did not want to access credit. It was considered immoral. Moreover, there were dangers in credit, in that debtors were put into prison during this period of time. That said, in the 1920s, according to Merskin (1998), everything changed. This was because, contrary to prior eras, credit was no longer seen as being immoral or dangerous, but, rather, was seen as a sign of authentication and good character. In other words, in order to get credit, you had to have good character and a good background. Therefore, credit was seen as a sign that one had a good background. In this way, the identity of getting credit works much like the identity that is forged through brand names – just as wearing the right brand names is a sign of prestige, so is the possession of credit. Merskin (1998) further implies that credit cards contributed to the overall rise of consumerism, simply because it made it easier to afford the brands and items that are non-essential. Department stores offered credit, which enable them to sell more products. Home appliances and cars were sold by credit. In short, consuming was no longer class-based, but, rather, became more mass-based. The masses could afford what was only available to the wealthy through the use of credit. Because of this, according to Merskin (1998), the use of credit has transformed society fundamentally. It has changed what it is meant to be successful. People can have things that they cannot really afford, and these things are the marks of success – the right car, the right house, the right television, etc. Credit has created the means for everybody to have access to what only the wealthy could previously afford. That said, there is a dark side, according to Merskin (1998). Specifically, credit is abused. High school kids and college kids obtain credit cards and rack up tens of thousands of debts on foolishness – pizzas, parties, dates, etc. They don’t feel the pain of paying for these items, because credit does not seem real to them. More mature adults are not much better, using credit to buy items that they cannot afford, often to make themselves feel better about their lives. The result is that people end up with debts that they cannot afford to pay, and often end up in bankruptcy. Credit Card and Identity Theft In addition to the dangers of abusing credit, there is also the danger of identity theft. This can happen when one purchases items on-line with the credit card, or when using credit cards in a bricks and mortar store. Identity theft may be the result of a breach. For instance, TJX Companies, Inc., had a security breach which resulted in 94 million credit cards being compromised and available to outsiders (Sprague & Ciocchetti, 2009). The larger problem with credit cards is the fact that the individuals who apply for credit cards have to divulge more personal information to obtain this credit, including giving up social security numbers. Because of this, these individuals are open to having their identities stolen, which is a larger problem then ones’ credit card information being available to outsiders (Sprague & Ciocchetti, 2009). Identity theft is more serious than accessing credit card information because the thief is able to use the person’s identity to “empty bank accounts, obtain credit cards, secure loans, open lines of credit, connect telephone services, and enroll in government benefits in the victim's name,” (Citron, 2007, p. 252). Conclusion The marketplace has evolved through the years, and part of the reason why the marketplace has evolved is because of the advent of credit. Prior to Henry Ford and the rise of mass consumerism, people were ascetic, for the most part. They bought what they could afford, and what they could afford typically was only the necessities. A streak of Puritanism underlay this ethos. However, Henry Ford introduced consumerism. He paid workers more than they were previously paid, which gave them increased purchasing power, which, in turn, meant that more goods would be mass produced, because more people were buying them. This pattern was accelerated by credit, which transformed society in the 1920s. Before credit, consumers who wanted to buy non-necessities often had to do without certain necessities – such as food and clothing. However, with credit, this changed. Suddenly, all individuals had purchasing power that they never before had. Things were within reach, things that were only previously within reach for the wealthy. Cars, homes, expensive furniture, etc. were affordable to masses through credit. Thus, credit transformed society. Hand in hand are the issues of identity, in that identity is obtained through credit and through consumerism. Consumerism is linked with identity, because people are, essentially, what they buy and present to the world. They express their identity through the brands that they buy. Credit is also linked with identity, in that credit enables people to buy the products that express their identity. Plus, at least in the early days of credit, the mere fact that one qualified for credit was a part of that person’s identity. They could only get credit if they were successful and trustworthy. It is not the case today, of course, as high school and college kids, who have not established the requisite amount of trust and success to qualify for credit, nonetheless get credit cards on a regular basis. In the modern era, the economy has gone global and has also gone on-line. Wherever there are mass goods to buy, credit cards are used to buy them. This has led to problems. One of the problems is that individuals often overextend themselves with with debt. Another problem is identity theft and credit card theft. That said, credit is here to stay, and it is inextricably tied to mass consumerism, identity and society. Bibliography Robert Bocock (2000), Consumption. 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(2010) The business model: Theoretical roots, recent developments and future research. Doi: http://www.iese.edu/research/pdfs/di-0862-e.pdf Read More