The lipstick effect and what we can learn from Tipu Munshi’s comments
When Commerce Minister Tipu Munshi made the comment that "the women are applying lipstick thrice a day, and changing sandals four times", what he probably meant was that people in his constituency have enough money to afford luxuries.
But the minister may not have been aware that an interesting economic theory, called the "lipstick effect", already exists around the usage of cheaper luxury goods during times of economic crisis. In fact, his comments possibly bear a crucial testament to the real economic situation of the people in Rangpur.
The lipstick effect is an economic theory that is used to describe people's spending tendencies during economic downturns. When trust in the economy is low, consumers tend to shy away from spending money on highly valuable items that might affect their savings, such as assets and investments.
On the flipside, they buy larger quantities of comparatively cheaper luxury goods, like branded lipsticks, an extra pair of shoes, cheap electronics, etc. Another way to explain this tendency is that during troubling times, people show a tendency to keep up pretences, trying hard not to let the economic difficulties affect them too much.
Historically, the first instance of the lipstick effect was seen during the Great Depression of the late 1920s and early 1930s in America. Industrial production reduced sharply, but sales of cosmetics rose.
After 9/11, Leonard Lauder, heir to the Estee Lauder fortune in cosmetics, was reported saying that his company's sales of lipsticks rose as well. In more recent times with more reliable data, during the 2008 economic crisis, L'Oréal reported a rise in sales whereas the economy was shrinking in the majority of the countries around the world.
While the commerce minister's comments likely only describe the situation of a portion of people in his constituency, he may have pointed out a unique economic theory playing out in real life in Rangpur.
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