Limited purchasing power

Insufficient buying power
Lack of purchasing power

Nature

Limited purchasing power refers to the economic problem where individuals or groups lack sufficient financial resources to buy goods and services necessary for a reasonable standard of living. This constraint often results from low income, high prices, inflation, or unemployment, restricting access to basic needs such as food, housing, healthcare, and education. Limited purchasing power can lead to reduced quality of life, increased poverty, and social inequality. It also negatively impacts economic growth, as lower consumer spending diminishes demand for products and services, hindering business development and job creation within an economy.

Background

The global significance of limited purchasing power emerged during the Great Depression, when widespread inability to afford basic goods highlighted systemic economic vulnerabilities. Subsequent decades saw the issue persist in both developing and developed nations, particularly during periods of inflation and wage stagnation. International organizations began systematically tracking household purchasing capacity in the late 20th century, recognizing its central role in poverty, inequality, and economic instability, and prompting targeted policy responses worldwide.

Incidence

Limited purchasing power affects billions globally, constraining access to essential goods and services and perpetuating cycles of poverty and inequality. According to the World Bank, in 2022, over 700 million people lived on less than $2.15 per day, with inflation and stagnant wages eroding real incomes even in middle-income countries. This problem is particularly acute in regions facing economic instability, high unemployment, or currency devaluation.
In 2023, Argentina experienced a dramatic surge in inflation, exceeding 140% annually, which severely diminished the purchasing power of ordinary citizens. Many households struggled to afford basic necessities such as food, medicine, and transportation.

Claim

People in developing countries are hungry because they are poor, not because there is insufficient food or land available there. Even when people are starving to death, there may be quite enough food within the country but they cannot afford to purchase what is available.

One of the major contradictions in the international economy is the fact that productive resources lie idle in developed-market economy countries because the largest group of potential customers, namely the developing countries, lack the means to purchase the output, even to the extent of satisfying basic human needs.

Counter-claim

Limited purchasing power is vastly overstated as a problem. People have always adapted to their means, prioritizing needs over wants. In fact, constraints encourage resourcefulness, innovation, and smarter spending. The obsession with ever-increasing consumption is unsustainable and unnecessary. Instead of lamenting limited purchasing power, we should celebrate its role in fostering resilience and responsible choices. Frankly, it’s not a crisis—it’s a natural, even beneficial, part of economic life.