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The Role of Advertising in Our Economy

Nov 6, 2007
We in America live and prosper in a dynamic economy. Ours has been and is an economy of relative abundance which has succeeded in bringing about a material well-being never before known in history. It is an economy which emphasizes consumption! In this country consumption does not necessarily mean wearing out goods in a physical sense. We wear out goods psychologically as well. Our hats are discarded because they are psychologically worn out, not because they are physically done in. Usually our clothes are psychologically worn out and discarded while the material is still good. We dispose of our automobiles when they become obsolete rather than when they are physically worn out. How different is this viewpoint from the practices that are current in other nations, England and France, for instance!

It is difficult for the European to understand the economic importance of the individual in our country and the American idea of psychological obsolescence. It is also incomprehensible to most that in America we spend nearly eight billion dollars a year for advertising!

Why do we do it? What is advertising's role in our economy? What useful purpose does advertising serve?

I shall undertake to develop my observations why advertising is essential to our dynamic way of life:

First, advertising makes jobs.

Second, advertising reduces selling costs.

Third, advertising increases company profits.

Fourth, advertising increases company security.

and finally, our enormous and growing productivity needs advertising to speed up consumption.

Advertising makes more jobs for more people. Yes, it is a fact that by creating a growing demand for new products, advertising makes jobs. A few examples. The automobile, of course, is the classic one. To be sure, it eliminated the village smithy, the buggy maker, and the livery stable, but it revolutionized our way of living and it opened opportunities never before possible. When you think what has been accomplished in the era of the automobile, when you think of all the jobs that are made possible by the five million and more automobiles sold in the United States every year, when you think what this has meant in the way of new jobs, ranging all the way from the thousands of motels, restaurants and gas stations, to the enormous development of our national parks, it gives some idea of what the automobile has contributed to our society.

Was it the first automobile, or the first hundred, or the first thousand that brought this about? No! It was the mass production of customers for automobiles that has brought the automobile to its present importance in our economy. Mass consumption made mass production possible and advertising is largely responsible for bringing about mass consumption, and the jobs, that the development of the automobile has created.

To cite another example in a totally different field, deodorants. Remember the day not so long ago when Lifebuoy was the only deodorant product with any appreciable volume? Today the deodorant business has grown to major proportions, and this has been accomplished without taking away from any other business, including perfumes! This is another example where demand created by mass consumption methods resulted in a new industry with attendant jobs, and one which has been developed without taking away from any existing business.

The new instant dessert puddings can be cited as another example. Puddings have not moved as rapidly as they might have in recent years. Along came the instant pudding and look what happened. Sales of all dessert puddings are up one-third as the result of the introduction of something new, the instant pudding, which revitalized an old and somewhat static business by the introduction of a new product idea, extensively promoted through advertising.

It all adds up to the fact that mass consumption makes mass production possible and mass production means more jobs. Advertising, because of its ability to accelerate the regular acceptance of new products and to lift the level of acceptability of established products, unleashes a tremendous flood of new demand, and new employment.

The critics say advertising causes people to spend needlessly. By a narrow definition this may be true. But our whole economy, which has brought us so much prosperity, emphasizes consumption. And psychological obsolescence is a factor of importance in that consumption.

What advertising does, and does well, is to increase what might be called the "want ability" of goods. The more want able goods become, the greater the prospect that money will be exchanged for those goods, and this in turn spells continued employment and more jobs.
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