2. Essential and Discretionary Spending

In my first piece I referred to discretionary spending:

What we earn, as employees and from self-employment and pensions, will buy less as time goes on. For the time being, we will deal with this by reducing our discretionary (‘left in your pocket’) spending. Sooner or later we will be confronted with having to reduce our essential spending.

This is an aspect of the new ways which I am confident about.  We can see it now, as the number of redundancies increases as a result of the virus epidemic.

But what will the outcome be?  How will this fit into the new norm?

Essential spending is on things and services we can’t avoid.  Such as council tax, mains services, food, a roof over our head.

Discretionary spending is on all the things we can do without.

Personal views on what is essential vary.  Some may say having a car is essential, living where we do.  Which depends on individual circumstances. A bicycle may be an option or a taxi.

It is easier to see the differences between the two types of spending when prosperity is increasing.  I can remember during and after WW2, with ten pence a week (old money) pocket money, I was not able to buy toys.  They were all handed on from relatives and friends.  I suppose the only essential spending on me was on shoes and a school uniform.  Even those were passed on in families with more than one child.

In those days bicycles were essential.  Mine was bought second hand.  For most families, having a car didn’t become possible for many years.  Bus travel was essential for some work journeys and trains for occasional day trips and the annual holiday.

Now think of the process in reverse.

In rural areas in the past, cars were not essential because lifestyles were local and self-sufficient, with shops selling essentials within cycling distance.

But our lifestyle is not local.   Not yet perhaps.

For our lifestyle to become local our essential food will have to be grown locally and there will have to be a return of very small shops selling fresh and processed food. Sometimes based in people’s front rooms (as existed in Orcop in the 1930s).

A speculative possibility is that although the prices of mass-produced essentials may inflate nationally, the costs of locally grown and processed food may be more geared to declining local prosperity.  This may result in local food clubs, with residents paying less for their food than prices charged to outsiders.

There are so many uncertainties!  But worth being aware of the different kinds of spending, as an aspect of what we spend now.

 

1: Ideas for local community development

How you see things depends on where you sit.

From the top-down, your interest will be as an employee or elected member of a public authority.

As an individual, you see things from the bottom-up, on your behalf, or from the perspective of your local community or neighbourhood.

No-one knows how the future will be.  And we may not know for some years. (Did we ever?)  All we can say is that the future will be nothing like the past.  Perhaps a paradigm shift is taking place.

Continue reading “1: Ideas for local community development”