Dear Journal: Me, My Money And The Global Economy

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It’s been months I haven’t posted anything on the blog, and for that I deeply apologize. I still love blogging as much as the first day, but I went through a tremendous amount of stress, which totally killed my writing inspiration. But today, I want to share with you some thoughts about existence, money, consumption and our impact on the global economy.

HOW IT ALL STARTED…

I just came back from a long stay in Cameroon (Central Africa), and the first thing that struck me since I stepped back into the comfort of my downtown apartment in Montreal, is the sudden change in my consumption psyche and spending patterns. My thoughts on this matter have led me to make a link between this issue and the economy as a whole. Let me explain.

In my everyday life, like a lot of North Americans, I am a fairly big spender, relative to what I earn. I just like buying stuff, most of which ends up unused after a while. Interestingly, as much as I care about global waste, I tend to be relatively insensitive about my own consumption habits. It’s a bit like when you litter while telling yourself one little candy wrap is not the end of the world! Also, I generally do not mind overusing any kind of resource I have access to. I love running long hot baths, leaving the lights on while I’m out, putting too much conditioner in my hair and buying mineral water instead of drinking from the tap.

However, when I go to Cameroon, I noticed my consumption habits become more frugal: I shut down the shower when I’m applying soap, I choose between hazelnut and Almond instead of taking both for no particular reason, and I wait until my favorite dress completely wears off before buying another one. But interestingly, when I’m back in Montreal, it doesn’t take long for me to fall back into my old habits.

At the beginning I assumed the change in my behavior was purely due to the environment. Indeed, when you live in a country where running water and electricity are rationed, and where retail stores’ shelves are not always replenished with your favorite products, frugality and recycling become a necessity before being a lifestyle trend. However there are two more critical reasons justifying my reckless consumption when I’m in Montreal:

  • I feel I have access to an infinite amount of goods and services,
  • I feel I have enough money to buy as much as I need anytime.

This brings me to my next point.

SUPPLY, DEMAND & DEBT

Let’s take a look at the first factor justifying my overconsumption. Spending more when one has access to more goods and services seems self-explanatory. The overwhelming variety and quantity of supply on the western market makes it easy to buy anything you want anytime. We can also constantly try new products without even needing them. For example, Imagine there was only one brand of potato chips available on the market in limited supply. When you stumble upon it in a grocery store, you may buy, say 5 packs, stack them in your pantry, and eat them parsimoniously over a month. But what if you had access to a steady supply of over 20 potato chip brands? Then instead of buying just one pack of your favorite brand when you crave it, you would be more likely to buy, say one pack of Lays, one pack of Doritos and one pack of Pringles, all of which you would probably exhaust within a week. In general, because we use up our supplies faster in the West, we end up buying stuff more frequently. This happens because in developed economies, the average consumer can avoid rationing or compromise in front of the wide availability of goods and services. And this mentality is transposed to everything we consume, including public utilities like water and electricity.

Now let’s look at the second reason. Normally, any consumption level is rapidly capped by one’s purchasing power. For example, you may buy only one pack of chips because you can’t afford more. However I noticed that I very often spend without counting, even if I have limited financial resources. It doesn’t take long to realize that this false impression of wealth is mainly driven by credit. Indeed, contrary to developing economies where most expenses require me to actually have cash in my wallet, in North America the use of my credit card tremendously increases my purchasing power. In fact, I calculated that my total credit limit allows me to spend about twice as much as I earn at any given point in time. As a result, my everyday consumption drastically spikes.

REFLECTIONS ON THE GLOBAL ECONOMY: THE UNFAIR ADVANTAGE

In general, when people spend money using credit, they are able to buy twice the amount of stuff they need and use it up in half the time. This applies to everything: clothes, accessories, cosmetics, groceries, cars, utilities, entertainment and other services. If you apply this to the entire population of a country, say the United States, you soon realize how fast a western economy can grow compared to, say an African one, by building a system that depends on credit and overproduction (considering that the latter very often relies on cheap and outsourced labor). What is even more dramatic, is that encouraging frantic (credit-based) spending has become the most convenient shortcut for governments to revive economic growth, without having to spend too much time working on stronger fundamentals like positive trade balances, lower debt and environmental protection. It’s just so much easier to lower interest rates and feed the people with Boxing Days, Black Fridays and Cyber Mondays in order to report record sales and a thriving economy. And even when consumer debt becomes so big it bursts the whole bubble, the best solution we generally come up with is to redo it all over again, by rushing towards growth while paying little attention to depleting natural resources and alternative ways to define economic development.

So going forward, the world has two options: On one side, emerging countries can all follow the same economic model as western ones, by boosting industrialization, production and credit-based consumption. That way, everybody benefits from the same system from Nigeria to USA, until there’s no more cheap labor and natural resource to exploit. Or alternatively we can commonly decide to rethink the notion of development by encouraging people to waste less, share resources and consume more responsibly. But if that happens, you may only be able to buy one pack of chips per month at twice the original price; and that might apply to everything you purchase.

The reaction you are having right now will shape the world for the next century…

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