“Black Friday,” the busiest shopping day of the year in the U.S., symbolizes the increasing commercialization of holiday gift-giving. When it is over – actually after “Small Business Saturday” and “Cyber Monday” – economic analysts use sales statistics to judge the health of the economy because consumers now account for 70% of it.
If the economy is growing, people must be getting better off. Well, maybe. In recent decades, growth in the U.S. mostly has benefited the rich, leaving incomes stagnant for most Americans.
The customary metric for economic welfare is gross domestic product, the monetary value of all the goods and services exchanged. However, GDP is to spending as speed is to travel. It’s usually OK to accelerate, say, from 30 mph to 33 mph, but keeping the foot on the pedal for long enough might soon take you from 90 mph to 99 mph! Acceleration becomes irrelevant beyond the legal speed limit.
Unfortunately, our economy has no inherent “speed limit.” However, a 1972 study from the Massachusetts Institute of Technology entitled “Limits to Growth,” famously suggested that environmental impacts would serve as a governor. Because this conclusion violated the “common sense” of economists, policy makers ignored it.
After 50 more years of accelerating fossil fuel burning to grow the economy, Mother Nature is entering the economy as a climate change “traffic cop,” wreaking havoc across the world. Excessive growth can become “uneconomic,” doing more harm than good. Despite the tacit assumption of economic models, the human economy operates within the biosphere, not outside of it.
The critical question of what is “enough” has no simple answer. For low- and middle-income countries (GDP < $14,000 per person per year, according to the World Bank), growth broadly improves standards of living. But these countries, with more than 80% of global population, consume only about 33% of global GDP. Most of global growth occurs in high income countries, much of it benefiting the very rich, even as the pandemic has laid bare inequalities that leave their own poor underserved.
Acknowledging that GDP is not a direct metric of human welfare, a few countries have adopted more holistic approaches to policy making. The small Himalayan country of Bhutan for decades has been cultivating the concept and associated metrics of gross national happiness to guide policy. New Zealand, a much wealthier country, is developing a “wellness economy,” leading to greater social investments. Are these models for over-consuming economies like ours?
Another approach is to transition to a steady-state economy in which consumption does not increase, but technological progress improves overall welfare. One key requirement is that population growth ceases. Another is more equitable sharing of the non-growing economic pie.
In the short term, before such alternative approaches become mainstream, combatting climate change requires decarbonizing the national and global economies. That essential strategy would decouple carbon pollution from economic growth, but continued consumption growth will become “uneconomic” in other ways. For example, across the globe, species are disappearing 1,000 times faster than they have on average in the past. Such biological impacts likely will engage Mother Nature’s “traffic cop” function in other ways that reverberate in human welfare and the economy.
Such a message about consumption may feel like coal in your Christmas stocking.
Rather than playing Grinch, I simply urge you to give mindfully this year. Please don’t feel obliged to heed every call of Madison Avenue for “more” and “better” stuff. Instead, think about buying local to support your neighbors and about giving services or experiences. Consider how the mantra of “reduce, reuse, recycle” might apply to holiday gifts. Then give to your loved ones out of genuine caring in the true spirit of the season.
