Advertising has an important effect on a country’s economy, society, culture, and political system. This is especially true in the United States where the advertising industry plays such a prominent role.
Economic impact. Most economists believe that advertising has a positive impact on the economy because it stimulates demand for products and services, strengthening the economy by promoting the sale of goods and services. Manufacturers know that advertising can help sell a new product quickly, enabling them to recoup the costs of developing new products. By stimulating the development of new products, advertising helps increase competition. Many economists believe that increased competition leads to lower prices, thereby benefiting consumers and the economy as a whole. These economists also argue that by interesting consumers in purchasing goods, advertising enables manufacturers and others to sell their products in larger quantities. The increased volume of sales enables companies to produce individual units at lower costs and therefore, sell them at a lower price. Advertising thus benefits consumers by helping lower prices.
Other economists, however, believe that advertising is wasteful. They argue that the cost of advertising adds to the cost of goods and that most advertising simply encourages consumers to buy one brand rather than another. According to this view, advertising simply moves sales from one company to another, rather than increasing sales overall and thereby benefiting the economy as a whole.
Social impact. Advertising can have wide-ranging repercussions on a society. Some critics suggest that advertising promotes a materialistic way of life by leading people to believe that happiness is achieved by purchasing products. They argue that advertising creates a consumer culture in which buying exciting new products becomes the foundation of the society's values, pleasures, and goals.
Advertising has a major social impact by helping sustain mass communications media and making them relatively inexpensive, if not free, to the public. Newspapers, magazines, radio, and broadcast television all receive their primary income from advertising. Without advertising, many of these forms of mass communication might not exist to the extent that they do today, or they might be considerably more expensive, offer less variety, or even be subject to government control through subsidies. In-depth news programs, a diversity of magazines, and free entertainment might no longer be widely available.
At the same time, however, some critics warn that because advertising plays such a major economic role, it may exercise undue influence on the news media and thereby curtail the free flow of information in a free society.
Advertisers may affect media programming in other ways, too, critics charge. For example, companies that sponsor TV programs prefer relatively wholesome, non-controversial programming to avoid offending a mass audience. This preference causes TV networks to emphasize this type of programming.
The impact of television on young children has received much attention. Research suggests that children see television advertising as just another form of programming and react uncritically to its messages, which makes them especially vulnerable to advertising.
Cultural impact. Advertising can affect cultural values. Some advertising messages, for example, encourage aggressive individualism, which may clash with the traditional cultural values of a country where the collective or group is emphasized over the individual or humility or modesty is preferred to aggressiveness. With the globalization of the world economy, multinational corporations often use the same advertising to sell to consumers around the world. Some critics argue that advertising messages are thus helping to break down distinct cultural differences and traditional values, causing the world to become increasingly homogeneous.