Consumerism Feeds Economic Growth: Mental Prosperity and Environmental Protection Left Behind

Abstract

This paper attempts to challenge and bring into question what economists and politicians have commonly categorized as economic growth and the effects consumption has played on real social prosperity. The numbers which commonly represent growth are the typical: consumption rate, business investments, earnings, and increased employment. However, all of these numbers come at a cost to the world’s environment, general mental stability and almost always negatively affects those at lower-income brackets. This paper attempts to guide economic leaders into creating commercial policies which not only sustains profits of their developing or developed country, but benefits the entire society and all of their population.

The state of consumerism is defined by Merriam-Webster’s dictionary as “the belief that it is good for the people to spend a lot of money on goods and services.” For the sake of economic development and growth, consumerism is known to be the economy’s greatest attribute for advancement. In simple and closed economic models it is always assumed that the world’s environment and humans are without any negative externalities because of consumption such as pollution, personal grievance, or deterred psychological development because of capitalistic society’s consistent state as constant consumers. It is commonly concluded in many known economic models that society benefits in the long-run when buyers consume what the dealers are selling, and the dealers use their extra-funds (profit) to expand and develop their business. The definition of growth needs to not only test the numbers shown in the categories of increased investment of capital goods, income to employees, income turned by capital goods to shareholders, and business, industrial, or manufacturing expansion, but should be determined based on the effects and the positive correlation of these events to the average population’s mental stability, racial and social equality, and the decrease of carbon emissions. There are policies that can be put in place that will not hinder economic growth, but will create a better atmosphere environmentally and psychologically. By focusing on the general wellness of the whole society when the economy is developing we can be assured that the growth benefits not only the owners of capital goods, but also the combined society.

Examining the case of newly developed and expanding China’s economy studied by a group of economist in their work published as “The Relationship between Energy Consumption and Economic Growth: Evidence from China’s Industrial Sectors” (Hu, Guo, Wang, Zhang, Wang 2015), an observant may see an upspurt of economic prosperity that has also given rise to a new consuming middle-class of China. The growth percentages should not be shown only by their industrial and consumption expansion, but progress should actually be decreased due to the long-run detrimental side effects their rapid industrial growth realistically created. The consumption engaged by Chinese citizens has not only increased their recent industrial expansion but also has accounted for their newly developed problems. China now faces a severe problem of uncontrollable industrial production of carbon emissions, and this is posing a considerable threat to many people’s general health condition and it is damaging the world’s ecosystem. In order to take action against the newly arrived problems, the municipal government of Beijing released a Five-Year Clean Air Action Plan (2013–2017) to limit industrial and traffic pollution by a set of new measures in 2013, according to this plan, the government shut down a lot of heavy factories for the short-term. This policy however does not assist in maintaining economic growth and this act will result in a great disruption to their economic development and will not properly solve their problems. Policies such as this one are absolutely non-progressive (Hu, Guo, Wang, Zhang, Wang 2015).

To maintain China’s economic growth adequately, which has attributed to many positives in their society such as rise of socio-economic mobility, energy consumption will need to be increased to maintain their industrial and economic capacity. China needs to initiate policies which offer a gradual switch from high energy-consuming and high energy-intensity to low energy-consuming and low energy-intensity industries. Also, China would benefit from seeking the advantages of switching from high emission energy, like coal, oil, and other fossil energy to hydropower, solar energy, wind power, and biofuels. The government can also engage in deepening China’s technological innovation to further advance initiatives necessary for creating a balanced economy, which not only sustains profits, but also ideally projects long-run utility to the environment and general population in a much more satisfactory way. (Hu, Guo, Wang, Zhang, Wang 2015)

Growth stories similar to those in China have been of the norm in developing economies. In the example of Cape Town, South Africa, the government has failed to act and engage itself into a growing problem that is only affecting their lower-income neighborhoods. Trash collection has become a grave problem due to South Africa’s expeditious industrial expansion and new consuming classes of citizens. What has been observed and studied is an inequality of simple things like waste collection, because the government has been quick to liberalize all aspects of the economy, and lower-earning socioeconomic classes cannot afford the service of private waste management (Miraftab 2004). The lower-income areas are finding themselves living in the midst of an urban industrial dumping ground. To avoid the negative externalities of their expanding economy, privatization of waste management should be alternated with a social government program that is covered by applying a tax to businesses to cover the cost for their new growth.

Another detrimental side effect from rapid economic growth can be noticed in the example of the urban development of Gujranwala, Pakistan. The rapid growth has attributed to a shortage of water compared to their rising population in growing industrial areas. Also socio-economic development has been hindered due to the lack of sources for proper sewage in this area (Ghaffar, Rafique, Mohsin 2016). The lack of business policies enacted by the government to create adequate utility for all is of common in not only modern growing economies, but also the developed ones as well. Developed countries often have been able to implement many social programs to eradicate some growing problems from commercial expansion, because their political maturity eases this process. However, the developing economies demonstrate a different scenario. A government either pushes for growth too rapidly to “show-off” their expansion in quest of being defined as an “economic powerhouse,” while their poor citizens are left at the bottom, literally in the captivity of trash fields, carbon emissions, and menial labor positions.

The expanding industrial and growing consumerism cultures has also generated a negative mental wellness to those who live and engage in a market system. Not only is rapid consumerism producing immense carbon emissions, but it is being argued by psychologists that consumers are being enslaved by this form of economic structure. Studies are showing that consumers are constantly dissatisfied with what they have because they consistently are viewing other substitutes for their presently owned goods through advertising on media platforms. This practice highlights the hypothesis in which capitalism is built on. The sellers are engaged in a constant experiment with the public attempting to persuade them to disengage with their old products and purchase what is new, and if not, they are “shunned” by mainstream society. Economic growth is always correlated with increased consumption but Passini (2013) argues that this consumption creates an “addicted” society. He states this because he refers to those who spend too much on goods and services for their benefit are in constant need for something new. The comparison he makes is seeking psychological similarities of a person who binge-shops to a person who binge-drinks. Both of these can be extremely detrimental to a family’s financial structure and leads the family affected in a worse economic position as a result (Passini 2013).

The constant need for “what is new,” is concluded as a result of businesses constant need for profit. For business to expand their profits, they present to the market a variety of products, usually concentrating on a specific market or group of people engaged with goods or services demanding these specifically selected products. Concentration is supplied to an area where there is increase in demand. Realistically productivity and profits trickle down in these situations from final consumer to capital good suppliers because there is a correlation to changes in the income of those who are less wealthy as being the most crucial step towards new investment in capital items for business development (Ciarli & Valente 2016). To determine the area in which a firm is going to concentrate, heterogeneity of the quality of goods across firms, goods, prices, and consumer demand elasticity is considered with respect to the price and quality of goods. Heterogenous consumers choose goods from a selected firm and depending on the elasticity of the price and quality, each consumer selects a subset of firms to purchase these products from, and this determines how a firm will concentrate their market. Market concentration allows firms to properly determine demand and productivity. When they have higher market concentration, productivity is increased, but if productivity is too low to supply a demand, the economy will enter what economist refer to as as a stage of “Malthusian stagnation.” Malthusian stagnation is when per capita income does not grow as a result of this lack of productivity, therefore demand suppresses (Ciarli & Valente 2016). Concentrating on a market is not this clear in practice. It requires some companies to engage in lobbying and inadequate or false advertising which misinforms consumers creating an irrational market. Lobbying acts as protection against the government and results in a competitive advantage for firms to persuade consumers to feel morally or socially obligated to purchase the goods which they are producing. This creates the vicious cycle of protecting the detrimental side-effects of modernly accepted “invisible-hand” business practices and eradicates the moral responsibility which firms must offer to benefit not only consumer, but to themselves in the long-run.

Commercial enterprises always focus on increasing their productivity in this concentrated way leading to the increase of carbon emissions, waste, and society’s psychological degradation. What we as consumers must demand is for products which have been represented by companies in neo-liberal societies and expanding economic areas to adhere to a strict moral responsibility to create real growth for all people. It would be absurd to say our economy is “growing,” when a group of people in your economy are left in heaps of trash and industrial waste. It is ironic to say that we are becoming “rich,” when a greater number of the world’s population is suffering from depression due to their developed personal insecurities from mainstream neo-liberal social pressures to surrender to the common moral code of being a consumer. The people must demand for a new approach to not only developing economies, but to the ones who are already developed, and create a system that requires all involved to remember morality over profits, and secure a better future for the world’s people.

References

Ciarli, T., & Valente, M. (2016). The complex interactions between economic growth and market concentration in a model of structural change. Structural Change & Economic Dynamics, 3838–54. doi:10.1016/j.strueco.2016.04.006

Gilead, T. (2013). Educational Insights of the Economist: Tibor Scitovsky on Education, Production and Creative Consumption. Studies In Philosophy & Education, 32(6), 623–639. doi:10.1007/s11217–013–9355–6

Minallah, M. N., Ghaffar, A., Rafique, M., & Mohsin, M. (2016). URBAN GROWTH AND SOCIO-ECONOMIC DEVELOPMENT IN GUJRANWALA, PAKISTAN: A GEOGRAPHICAL ANALYSIS. Pakistan Journal Of Science, 68(2), 176–183.

Miraftab, F. (2004). Neoliberalism and casualization of public sector services: the case of waste collection services in Cape Town, South Africa. International Journal Of Urban & Regional Research, 28(4), 874–892. doi:10.1111/j.0309–1317.2004.00557.x

Yi, H., Dongmei, G., Mingxi, W., Xi, Z., & Shouyang, W. (2015). The Relationship between Energy Consumption and Economic Growth: Evidence from China’s Industrial Sectors. Energies (19961073), 8(9), 9392–9406. doi:10.3390/en8099392