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Consumption Junction: How Much Should We Spend?

J. Mijin Cha

While there is a battle in Congress as to whether we should put more money in the pockets of the 99 percent or the 1 percent, there is a common unifying assumption: giving people money to spend is what generates economic activity. The problem is that if increased spending is the only thing that gets the economy going, what does that mean for our planet? Do we really have to choose between economic growth and environmental sustainability?

Increased consumer spending is widely seen as an indicator of an improving economy. The economy in the third quarter of this year was seen to have the fastest pace of growth because people saved less money and spent more on goods and services. Intuitively, it makes sense that people are doing better financially if they are going out and spending money, instead of saving it in case of future financial insecurity.

But, as we discussed previously, buying things causes more resources to be used and we are already bumping up against our planetary limit. Currently, there are 1.9 hectares of biologically productive land per person available to provide resources and absorb waste. The average person already uses 2.3 hectares and the average American uses 9.7 hectares. Plus, over 60 percent of U.S. credit card holders carry a balance, resulting in substantial additional fees and indicating that people are purchasing more than they can afford. So all this spending is not just bad for the planet, but also for personal finances.

This brings us to the same crossroads: do we choose economic growth or environmental sustainability? In fact, as we’ve pointed out before, we can have both. For starters, we need to expand our economic metrics so we have more sophisticated economic measures than spending equals growth, particularly if spending is causing economic hardship on the personal level. Adopting new metrics would take us a huge step towards environmental sustainability, as consumption would stop being the sole indicator of economic well being.

We also need to curb our consumption. If the U.S. could consume energy at a rate equal to European nations, for example, we would be a net energy exporter, thereby generating significant economic activity while using less energy. In this case, and many others, our over-consumption is actually hurting our economic well-being.

Additionally, we need to be more responsible about how we consume. Buying products made in a sustainable fashion, or imported through fair trade, can make a positive difference. Recycling or donating the stuff we don't need any more -- especially toxic electronic gadgets -- is important, too.

Finally, what ails our economy is not lack of spending but severe economic inequality. Inequality is a significant drag on our economic growth, as shown by Maryland’s Genuine Progress Indicator. Focusing on reducing inequality would do more for our economy than increasing consumer spending.

Ultimately, we do need to break our addiction to consumption and spending--  for our planet and for our pocketbooks.