“Something strange has happened in the last decade or two in Western societies. Wants have increasingly become regarded as needs,” writes ROBERT McMAHON in his first regular column for CityNews. 

Years ago, studying high school economics, my teacher, Miss Jackson, taught me the distinction between needs and wants in economic theory. 

In simple terms, she explained, a need was a good or service essential to survival and basic everyday function, such as food and water, shelter, clothing and healthcare.

A want, on the other hand, was a mere nice-to-have: something that made life enjoyable, a reward for effort.

So economists posit, people work harder, produce more, to always satisfy their needs; but to also satisfy some wants. The harder you work, the more you produce, the more wants you can have. 

Something strange has happened in the last decade or two in Western societies. Wants have increasingly become regarded as needs.

Partly this is a function of our success economically following the wave of reforms from the 1970s onwards where trade liberalisation, deregulation and monetary policy changes – neoliberal economic reforms – have underpinned economic growth and, in turn, our prosperity.

In simple terms, as the economic tide has risen, so too have the boats that sail upon it (some boats being luckier than others).

But it’s something more than that. As a function of our prosperity, members of Western societies – ours included – have become somewhat complacent. We have come to take for granted our prosperity. We have come to take for granted that our wants, our desires, can be satisfied as and when they arise. And more and more of those wants have, in our more prosperous lives, become regarded as needs; a necessity for living. 

Unfortunately, for many of us, we are funding our wants not just through cash but through borrowings, or what economists call dissaving. This manifests as debt.

Whereas our national household debt is mammoth – something in the order of $3.5 trillion – the majority of this is mortgage debt to fund housing. While our housing choices have certainly become more opulent (for example, an ensuite is now regarded by many as a need versus a mere want), mortgages are for housing; a legitimate need. 

But worryingly, consumer debt – as a function of our household debt – is also at near record levels nationally.

In other words, many of us are funding our wants by borrowing money from tomorrow to pay for them today. With a big whack of interest in the meantime to service the borrowings. 

And, of course, our wants are no less likely to be as compelling in the future as they are today. Hence an ever-escalating inter-temporal Ponzi scheme of sorts; of which individual consumers are the only members selling themselves today’s (and tomorrow’s) must-haves. 

At the same time, consumers are complaining, with much justification, they can’t afford everyday items to live. That the cost of living – their needs – has become burdensome, even unaffordable. Anyone who has done a weekly household shop and comes out of it any lighter than $300 knows the feeling.

On top of this, there are transport (and exorbitant) fuel costs, rent or mortgage payments, electricity, water and gas, and (for home owners in the ACT) our ever-increasing rates. 

No wonder households are under record financial stress – and financial counselling is one of the fastest-growing job markets.

Former UK prime minister Theresa May was much maligned for her advocacy of “austerity measures” and became a figure of fun for apparently telling her cabinet that she picked mould off the top of marmalade to keep it edible longer. 

But just maybe, there was something in what Ms May clumsily exhorted. 

Perhaps as a society we need to re-visit what we regard as needs. Perhaps we need to return to previous notions that desirable wants are not always our needs, they are not actually necessary for living. 

And perhaps, as consumers, we ought to re-visit our own consumption patterns and moderate our expectations of government to intervene in our everyday lives. 

After all, marmalade can surely withstand a few latent mould spores!

[This column is dedicated to Miss Jackson, my public high school economics teacher, whose skilful economic education sustained throughout my government service. Our society is fortunate to have teachers like her.] 

Dr Robert McMahon PSM is a visiting fellow at the Australian National University, adjunct professor of government at the University of Canberra, and former assistant secretary of the Department of the Prime Minister and Cabinet.