Consumer spending is good, right? We are told in the media all the time to spend more, and we worry when “consumer confidence” is down. Why is that?
In short, the answer is because we have a GDP to look after. The GDP (Gross Domestic Product) is one of our key financial indicators, and in developed western societies consumer spending makes up approximately 65 per cent of GDP.
If consumer spending is a large determinant of GDP, then the more we spend the higher our GDP and the better the economy. So if we are being told to spend just so we have an increasingly higher GDP, then someone, somewhere must have worked out that this must be good for its citizens right?
Or put another way ‘What’s so good about an increasingly high GDP?’
There is evidence that a high GDP is correlated with people’s wellbeing, their happiness. However, what’s interesting is that the correlation only works up to a point. Studies in the area broadly show three things:
- Countries’ wealth and happiness are highly correlated but not infinitely. A basic level of wealth gets food, shelter, education and healthcare for its citizens, ensuring a strong correlation between wealth and happiness. However, after a certain level of wealth the correlation fades away.
- Within individual countries, the same is true. Richer people are generally happier than poorer people. But again, the correlation between wealth and happiness works only to a point. After a certain level of wealth, the correlation fades away.
- In developed nations (like the USA and Australia), our increased level of GDP does not appear to be contributing to a happier society over time.
So if the level of happiness we can achieve via economic means is finite, then why are we hell bent on ensuing consumer spending continues to rise? To what end? The GDP? What use is a higher GDP if it’s not benefiting its citizens?
There is a saying in psychology: ‘The brighter the picture the darker the negative’, and it’s about time the dark side of consumerism was exposed. If we continue to consume to increase GDP then we may continue to observe the following trends, all arguable by-products of consumerism:
- Financial Hardship: We are experiencing higher levels of wealth, yet at same time greater levels of debt and financial hardship.
- Physical decline: We have the highest rate of obesity in the world – due in part to over eating, eating bad food, and of course exercising less (we don’t have time as we are working harder so we can consume more).
- Psychological Issues: Rates of anxiety and depression are on the rise. One in five will experience a mental disorder in their lifetime.
So why do we bother consuming so much? It’s not making us happier. What’s more important, money or happiness?
I’d argue that we should not be trying to consume more, but we should be trying to consume in ways that make us happy. We should aim for “positive consumption”. Instead of encouraging people to spend “more” we should be encouraging people to spend “positively”.
Here are five guidelines to positive consumption:
Giving: The happiest countries on earth are often Scandinavian or ones with socio-democratic government. That is a socialist spirit within a democratic framework. We need to consume in ways that redistributes the wealth more evenly. At an individual level if you are going to buy yourself something as a reward, consider buying something for someone else. You’ll feel happier as a result.
Connectedness: Consume in ways that forge stronger connections with others. Even a bunch of flowers for your partner or a beer with an old friend can achieve this. Further, consume in a collaborative fashion. Purchase things you need together, as a street or community.
Interests: Consume in ways that foster deep and satisfying interests. Understand what you are truly interested in, and consume to further that interest. If you’re a golfer then go on, buy that oversized driver. Your helping the economy and your own level of satisfaction by buying soemthing you’ll use again and again.
Experiences: Experiences and travel provide greater happiness and enjoyment than purchases of material goods to the same value. You won’t remember yet another a big night out on the town, but you’ll definitely remember a weekend away to the vineyards.
Consume to create: Stimulate our economy by creating something amazing, not consuming something ordinary.
So in short, the suggestion is to encourage people to practice positive consumption, not excessive consumption. To do this, we’ll need to educate ourselves on consumption styles that lead to better outcomes and not just consume for the hell of it.
Adam Ferrier is a Consumer Psychologist and Partner at Naked Communications. Read www.theconsumerpsych.com
Twitter: @adamferrier
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