Poverty--capitalism's finest hour

Free Radio, Free Skype, Free Food

“Honey, can you also pick up some KFC eggs—you know they taste the best—and some Ford flour? Greg is home this weekend and I’d love to make pancakes.”

            “You don’t mind if I also pick up some Huawei bacon with that?”

            “Only a bit. Get some bread and milk while you’re at it, will ya?”

            “Microsoft or Apple?”

            “Apple, always,” she says with a smile. “Microsoft bread feels so corporate. All squares and so correct.”

            Mike laughs at his wife’s barb. He has always been a Microsoft man and she will always be an Apple girl. He couldn’t understand why Amazon didn’t deliver the free food. Always the premium Whole Food brands. Great if you were a double income no kids family or not living in the city with kids. Every penny mattered. Especially now with the economy so fragile.

            Mike walked to his corner store, all bright with happiness and warmth. The freshly baked wares transport him to his grandmother’s kitchen and he is five years old again. The familiar cereals line the aisles, beckoning him to try them and live a healthier, happier life.

            He has his list and diligently picks up the KFC eggs, Ford flour, Huawei bacon, Microsoft milk and Apple bread. Total cost: five cents. Perhaps he’ll drive his new electric Ford Mondeo to the new KFC shop and pick up a family bucket; or maybe Greg would prefer Taco Bell or Pizza Hut…

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The above represents a possible approach to addressing poverty in a post-capitalist modern developed economy (ie. ours). Food would be for sale as usual, offered up on the moving feast that is modern advertising—engaging, humorous and omni-present (on and off-line). Certain food, as determined by the advertisers, would be effectively free to all.

            How? The idea is simple, implementation less so.

The idea: a method to create both a new advertising income stream and provide free/subsidized food to the public. Companies are to advertise on food (initially generic but then evolving as the market matures). For example, everything from eggs to milk to coffee have been branded to provide value for its promoters; 95% of these goods are generic and can be sourced inexpensively for the purpose of providing free food. Start with essentials: eggs, milk, butter, flour and move to fruit and vegetables.

Advertisers paint or label food enabling it to be free. (It is likely that they’ll come up with something much cleverer than this, but you understand the concept.) The business model is not dissimilar to free newspapers which are distributed free of charge but survive on advertising revenues. Or radio that is enjoyed by millions while distributing advertising—the radio thrives as the distributer, the listener enjoys their niche music preference, the companies advertising reach a wider audience. Cost of advertising will be directly proportionate to the audience reached.

For food, instead of 30 seconds on television or 15 seconds on radio or the 5 seconds on the internet (before the user can skip the ad), children (and their parents) will see products being advertised every time they look in the fridge or cupboard (or trash bin).

Advertising agencies can tick the moral/social box for their corporate clients. The public will (hopefully) appreciate a wider choice of products that can be used as entry level participation for free while requiring payment for the wider range of products (think of the internet business model where products such as games/apps are given for free in order to draw in users—and expand their base). We all use Adobe to open our pdf files, but only businesses or those that require it pay for the license to access the real power of Adobe. Result: a very broad base of usage and knowledge of Adobe for general users subsidized by the businesses and creators of products in the Adobe medium.

The objective is that everyone is able to access this “free” food. It becomes a new channel for advertising revenues. The upside is that the “poor” will benefit from real food and those who can afford to pay will develop brand loyalty—by enjoying the “free” food and buying from the non-free range in due course.
True, food is not like IT (where the cost of development is expensive, and copies are virtually free to make). Food is better. We are what we eat. You can stop playing a game or a version of an app, but you can’t stop eating.

Just about anything can be turned into an advertising opportunity. As John Wanamaker (1838-1922) said, “half the money I spend on advertising is wasted; the trouble is I don’t know which half.” What is proposed is to increase the canvas on which advertising can occur. Newspapers have always been driven by advertising revenues. The internet posed a problem for advertisers and developers alike, but that circle was squared. Billboards, radio, and free newspapers are still very effective. Moving billboards such as cars and buses are a common site. Famous people/families love to advertise themselves through the naming of buildings/bridges/statues. Clothing and fashion have been branded to the point where the advertising has become part of the desire—think Nike, Channel, and so on. Adam Smith would explain this evolution of capitalism in terms of innate animal spirits. To that end, why not extend it to food and promoting the end of poverty?

Toilet paper is an obvious choice where countless advertisements would be studied by the lavatory’s occupant at their leisure. This may not have happened (yet) because brands may not want to be rubbed on anyone’s posterior. But it remains a very untapped source of quiet time that might have a significant impact on prospective purchasers. For the purpose of poverty eradication, I suggest that those who advertise on the toilet paper would be doing so to allow underprivileged people to receive free quality toilet paper and save that little extra for food. Tampons, sanitary napkins, and baby diapers are other socially responsible products that would be suitable for this proposal. It may turn out that people like the idea of something free (underprivileged or otherwise) and it becomes mainstream.

All fruit (tomatoes, apples, oranges, bananas) are perfect candidates for this form of advertising. Those who consume the products become wed to the brand and those who are socially minded will (hopefully) choose the brands that undertake the free food programme.

It is not suggested that this is a magic bullet for poverty. Poverty is a broad-spectrum dilemma that spans homelessness (involving mental issues) to families with both parents working who can’t make ends meet. In a country like the United States where advertisers spend $200 billion annually[1], it is not a big ask to find a subsidy for the officially poor circa 38 million people.

The most common types of advertising are displays, social media, newspapers/magazines, outdoor advertising, radio/podcasts, direct mail, video ads, product placement, event marketing and email marketing. What is proposed is a mixture of most of the above types with a twist: the medium would be food. The market would be the recipients but also the kudos that are generated for the promoter itself (for self-promotion, industry best-practices awards, news articles, public interest, etc).

            Wait, you say, haven’t we already tried this? Isn’t this an extension to welfare and the expansion of big government, and the social statehood? Who is going to regulate what food is to be free? If the past is anything to go by, marketing and consumers tend to race to the bottom of the barrel—we’ll end up seeing unlimited KFC chicken making the general population more obese, with its knock-on detriments of diabetes, heart disease, and so on. If we are pushing free food on the public, should we ensure that they get a balanced diet? Would we deem certain products as essential within the free food model? Why not utilise a Universal Benefit Income instead where we give away money instead of food?

            Have we tried this already?   If you can go into a store near you and find free food with the only proviso that it has advertising on it, then someone is already doing it. I am not aware of any such programme in place. Various food agencies provide guidance against advertising junk food to children but this is primarily focussed at advertisements during certain times of day. Public health concerns have banned almost all forms of smoking advertisements. The idea being proposed is to advertise on food. The food becomes the medium—not dissimilar to a billboard, bus, or bench. This medium is brought into our homes, is seen by our families and friends, and sits in our plain view until consumed. It would be like McDonalds advertising on eggs—with the benefit that the consumer receives free eggs. McDonalds then gets a flash in the subconscious (and conscious) mind of every member of the family that opens the fridge until those eggs have been consumed. The egg carton can be covered with McDonalds (or KFC as in the dialogue that opened this paper) advertising and the eggs can be sprayed with the McDonalds/KFC logo in the same way as every egg has a logo and best before date already. The advertising on the carton may be of upcoming specials, coupons, that the consumer can then take and use the next time they go out for a meal.

            Extension of welfare/social state?     The opposite is true. The state may impose regulations to reduce abuse of this untapped medium BUT the operation of this form of free food is 100% profit-driven. We do not live in a purely capitalistic world. We live in a post capitalist world better described as corporatism. These corporate bodies are increasingly being reminded that there is a social contract and they are benefiting themselves by benefiting others. Case in point is an August 2019 posting by the Business Roundtable (a non-profit association of CEOs from major US companies) signed by nearly 200 CEOs (including Jamie Dimon of JP Morgan & Chase, Tim Cook of Apple, Jeff Bezos of Amazon, Larry Fink of Blackrock, etc) setting out the shift in focus of companies from purely shareholder benefit to include social benefit. The group said that it must invest in their employees, protect the environment, and deal fairly and ethically with their suppliers. A poignant preamble to their statement states: “…we know that many Americans are struggling. Too often hard work is not rewarded, and not enough is being done for workers to adjust to the rapid pace of change in the economy. If companies fail to recognise that the success of our system is dependent on inclusive long-term growth, many will raise legitimate questions about the role of large employers in our society.” [Emphasis added] We are at a maturity point in capitalism/corporatism where the delivery of free food provides an outlet for a new class of big business intent on doing some good—while remaining true to their core values of making money over the long term.

            Who is going to regulate this?           Food is already branded and heavily regulated. The mark-up on many non-essential products is very large. Essential products such as milk, eggs, bread, coffee can be purchased in the open market and packaged with the third party’s logos and advertising campaign while providing the product for free. This party will be subject to the same regulatory guidelines in place for milk, egg, bread, and coffee companies that produce and sell milk, eggs, bread, and coffee. While governments have a penchant for regulating things, nothing new is being proposed. Spooked competitors may look to derail the new scheme through legal (court challenges) or social (scaremongering) tactics. If this does occur, it reinforces the viability of this proposal.

            Race to the bottom/Balanced diet?    The government, like parents and teachers, can only advise what is best for your body to consume. We are told not to drink or smoke or eat the wrong foods. Do we listen? Of course. Do we follow their advice? We would like to. But peer pressure and cultural habits will over-ride much of this. It takes a lot for a government to change cultural habits. It has taken almost three generations to curb smoking. Obesity may take another three. Advice will remain the same as before. The only difference is that under this system, a very poor parent with a very limited budget will be able to afford to bring home luxuries such as butter, eggs, milk, fruit and vegetables that the rest of us consider essentials. Instead of foraging the cheapest source of calories (usually junk food), a parent can now source quality food. Temptations are always present and it is not proposed that we are to create such a Nanny state so as to prevent people from buying what they want. What is proposed is that we deliver the options. In all likelihood, popular sweets and junk food will be a desirable food group to give away for free. The problem is that it may not meet the same criteria as the essentials. Junk food will be eaten and discarded. What brand loyalty will be gained? Consumers may look at it as a free hit of junk food and continue their foraging. Alternatively, and reluctantly, regulators may look into banning the use of certain junk food within this advertising medium. I, personally, would be against regulatory interference and feel that the market should find its natural balance. (For example, advertisers may determine that junk food is not a good medium on which to spend their advertising budgets. They will be constantly recalibrating and looking for the biggest bang for their buck; how long will the medium sit in the purchasers’ homes before being consumed and thrown away?)

            Why not just give away money to people instead of food? The people could then spend it as they see fit. The Universal Basic Income (UBI) has been proposed in various forms by exceedingly intelligent people throughout history. I am, personally, not in favour of it as a permanent institution but I do believe elements of it might be beneficial in times of crisis. In any event, it is a very different solution than the Penny Foods[2] that I propose.

            What is Universal Basic Income? It is an unconditional, automatic payment in cash paid to all individuals in a society as a right. In theory, the state would pay every legally resident adult man and woman a fixed sum monthly regardless of ability, need, or intended use of money. No country has successfully implemented (yet) a pure version of UBI. However, the underlying philosophy behind it has influenced welfare policies such as the UK’s current Child Benefit (originally implemented in 1946 to encourage larger families). Brazil has implemented a version of UBI in its Bolsa Familia policy (2003 onwards). Effectively, Bolsa Familia is a cash-transfer programme to help deliver cash to those who most need it. Tellingly, it is conditional on children going to school, receiving vaccines, etc. Bolsa Familia has been received well by the public of Brazil and economists around the world.

            There are a lot of benefits extolled by proponents of UBI, namely:

1. Reduction of poverty rate and inequality/insecurity of citizens
2. Freedom for employees to take chances with alternative employers
3. Provides a cushion to employees whose jobs are threatened by automation
4. Reduction of government bureaucracy
5. Less incentive to cheat welfare as pure UBI is unconditional
6. Fundamentally ethical as goal is poverty reduction

The detriments of UBI are predominantly fuelled by uncertainty, namely:

1. Costs are to be very high; is it sustainable?
2. Negative impact on labour market; no one knows how it will react
3. Productivity decrease
4. Increase of wage pressure and inflation throughout the system
5. Progressive taxation
6. No real reason to implement UBI for reasons of technology as technology has historically created more jobs than it has destroyed
7. Increased economic migration
8. Another layer of regulation will spring up instead of deep reform
9. Once implemented, UBI is VERY difficult to disengage

 
Why am I taking up so much space talking about something that is purely theoretical? Because the smartest people (such Economics Nobel Prize winners Peter Diamond and Christopher Pissarides) and richest people (such Elon Musk and Richard Branson) and some of the most powerful people in the world are seriously contemplating this. 2020 Democratic candidate Andrew Yang advocated a $1,000 per month Freedom Dividend to every American adult.

President Nixon contemplated implementing a version of UBI to help alleviate poverty in the United States. His vision was for every poor family (with zero income) to receive the equivalent of $11,000 2020 dollars per year. His policy failed to make it past the Senate.

Elizabethan Poor Laws, (more correctly The Poor Relief Act 1601) legislated the transition from charity to taxes to fund the poor. This was administered at the local parish level. Life was still exceedingly harsh if one was poor in the early 17th century (and 18th, 19th, 20th for that matter). The difference was in how poverty was to be handled. The Poor Laws were tweaked over the centuries and corruption set in. Landed commercial interests benefited disproportionately over time. By the time the Speenhamland System (also known as the Berkshire Bread Act 1795) was put in place, a series of bad crops made famine a real possibility. The solution: give every man a fixed amount of bread (approximately 8 ½ pounds of bread per week) plus 1 ½ loaves for every other member of his household. The exchange? The man would work for either nothing or very reduced wages. The result: it worked very well until it didn’t. A number of factors played a role in the system’s demise, primarily the doubling of the population, improved thresher technology and the adoption of the gold standard by the government. This system was not universal and was not able to be passed into law despite William Pitt the Younger’s best efforts. The system died with the passing of the Poor Law Amendment Act 1834. In retrospect, critics such as Karl Marx felt that the system was harmful to labour by keeping their salaries artificially suppressed.

While politicians may give lip service to UBI, the ability to pass such a massive social welfare programme may not be feasible. Nixon’s Family Assistance Plan was supported by then congressman George H.W. Bush and Donald Rumsfeld. Today, many academics espouse UBI as a possible solution to poverty. I disagree on only one point: the permanence of the system. I believe that giving citizens direct benefits is generally a good idea as they are best placed to implement how the money is to be spent. During the most recent financial crisis (2007 onwards), I believe that society and the markets would have been better served if their citizenry were each given £100,000 or €100,000 or $100,000 as the case may be. I understand that the fabric of the banking system was at risk. The politicians chose to save the system—which, in part, was correct. How they chose to save it was less than ideal. We have seen a significant crystallisation of social status over the last decade. Social mobility, or at least the sense of social mobility, has lessened. The divide between the rich and poor is increasing. More alarmingly, the divide between the working rich/affluent and the super-rich is becoming insurmountable. The power of capital employed is too great to overcome.

But none of that is overly relevant to the proposal at hand: namely, the use of food as an advertising medium to provide free food. Why? Because UBI is a government-led, top-down new system and Penny Foods is a systemic, market-driven expansion of an existing system. How the details are worked out and how they are implemented are things for the market to determine. All of us make up this market.

UBI may be a great idea on paper. Whether it can be delivered is unknown and, possibly, irresponsible until further tests are carried out. It could be the next evolution of capitalism or a tipping point that allows the rich to wash their hands of social responsibility of the poor and watch as any benefit conferred is inflated away (in kind and in real terms). 

A more responsible and natural progression for capitalism is to use the mechanisms of earnings to spread benefits through an advertising medium. 

Questions may arise over what is given away free. Unlimited KFC may create more overweight citizens (with its diabetes, heart disease, and other knock on effects). But it is unlikely that KFC would give itself away as this destroys its value. Instead, KFC could advertise on eggs, milk, bread, butter, sugar, coffee which would be free to consumers. People would eventually associate KFC with eggs, butter, and milk. When they want to have some lunch, where do you think their subconscious takes them? McDonalds? More likely, KFC (or any of its stable of brands). KFC would be sitting in the fridge and cupboards permanently.

Savvy advertisers would want to match their products with their advertising medium. Pampers sell premium diapers. But there may be a synergy that a competitor can find that allows the competitor to give free diapers with their advertising on it. Say, car manufacturers? Or IT giants? Or housing builders in a specific area where mass construction is occurring.

The issue of who advertises what, how, and for whom should be market-driven. In other words, regulation should be light enough to allow this advertising model/medium time to establish itself. There may be some missteps such as a marijuana producer advertising on eggs, milk or bread. Or smoking companies advertising anywhere. Marlborough eggs or butter? Or alcohol that advertises on milk? Free Absolut milk? Or Budweiser milk? It can be made to look and feel cool (which is the gateway to the real product being sold/advertised). There is a reason why the ‘sin taxes’ (smoking, drinking, etc) are such reliable revenues for governments.

What will it cost to do this? Time will tell. Penny Foods (for lack of a better way of referring to this ‘free’ food), may initially operate on a different metric than usual advertising CPM (Cost Per Thousand views) analysis. Penny Food is seen by those carrying it home. It is found in the fridge, cupboards and trashcans. In an urban environment, it is not hard to extrapolate and demonstrate large numbers of views passing over a carton. By virtue of it being in a supermarket will also generate significant numbers of views.

In 1994, a firm in the UK designed a spray to put logos and advertisements on eggs. The cost? £6,000 per million eggs in 1994 money. They were looking at doing bananas as well at the time. In 2006, CBS (a broadcasting conglomerate) placed laser imprints advertising their TV shows on 35 million eggs (randomly inserted into the food supply). In 2012, an Israeli firm imported the technology from the US and etches logos/advertisements on eggs measuring 5% of an eggshell’s thickness. The cost? Approximately one third of a penny per laser carving.

Sticking with eggs, the cost of wholesale eggs in the US has fallen to fifty cents per dozen. A pack of four eggs in a Penny Foods/advertiser’s carton (cost of circa 20 cents with engraving and carton) is not dissimilar to handing out fliers. Google averages $2 per 1,000 views. At 20 cents, the product would only need 100 eyeballs to match Google’s reach. 100 eyeballs from shelf to fridge to kitchen table to trash bin. Most importantly, it endures.[3]

At present, egg lasering/labelling is predominantly used to mark the freshness of the egg (best before dates) and the logo of the manufacturer.

I call my parents on the other side of the world for free on Skype. Do I care how this happens? I listen to the most recent pop hits and social commentary for free on my car radio on the way to London. Do I care how they do this? I plan to stop by the shop and pick up some free essentials for my family. Should I care too much how they do this? At the very least, I hope to see a massive reduction, if not elimination, of food banks as we open our arms to the least privileged amongst us and say ‘welcome back’ and try this.

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If you find this interesting, please forward this to your friends. Let's get a conversation started!

Baron A. Deschauer

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Footnotes:

[1] Source: Statista.com; Advertising spending in the US 2010-2019, published 8 January 2020

[2] Penny Foods is a possible branding name for all foods that fit in this category. Branding of the virtually free foods may help destigmatise the poverty/charity element of the advertising exercise. In an odd way, it makes the food more desirable and it still remains effectively free. The objective is to service the entire market place. The reduction of poverty becomes ancillary to the primary objective of utilising this new medium.
 
There may be advantages to selling food for one penny in that a contract is created (consideration of one penny) and all of the legal and consumer benefits that may bring. It may also help in monitoring (and, monetising) the buying habits of people who buy penny foods (ie. what else is in their shopping cart).
 

[3] For completeness, the average CPM for radio (daytime) is $12-16 for adults between 18-49 and $8-12 for adults 50. For television, CPM is between $9-25 (but this is calculated based on the number of people watching the show, not necessarily the commercials). If Penny Foods was able to deliver a CPM of $12 or less, it would be commercially viable.