Debt
crisis, debt bomb, financial crisis – you’ve heard it everywhere. And it’s
still going on. The European debt crisis may not make the headlines every night
(seriously, the viewers can’t take it anymore) but the crisis is far from over.
Blaming it on the spendthrifts of Acropolis may seem like a neat idea, but
admittedly our Hellenic cousins are not the only ones who have been on a
finance-fuelled spending spree.
Carmen
Reinhardt, a University of Maryland economist, and Harvard professor Kenneth
Rogoff published a book called This Time It's Different: Eight Centuries of
Financial Folly three years ago.
They report that 90% public debt-to-GDP ratio is a so-called critical threshold,
beyond which problems are of the worrying scale[1].
Consumerism
is a fundamentally materialist social order, holding buying and consumption as
the most important ways of action in society. Whether you like it or not, we
live in a consumerist society at the moment. Interestingly, both consumption,
use of resources and debt levels have risen considerably in the last decade
(see graphs).
As interesting as this is economically, a more important question in my
opinion is why are we so indebted? What makes the debt rack up so fast?
In economic psychology, it has long been thought that materialism may
well be connected to increased debt on a personal level. In this context
materialism is a psychological stance, mainly meaning that a materialist person
places a lot of value on things and possessing them. Usually studies
differentiate between subjects with high and low materialism.
Is the connection of materialism and debt proven? In a study[2] Watson
showed that materialism is correlated with laxer attitudes toward debt. In
another study[3],
Richins showed a connection between materialism and behaviors linked to credit
overuse. So, the evidence is convincing in the way that materialism probably
can be linked to higher debt levels, at least to some extent.
Quite frankly, linking this with the racking up of public debt is just
an idea – it has never been proven (or even researched, to my knowledge). But
there’s still a very important interplay of society and the individual here:
namely, the process of acquiring a materialist psychological stance in the
first place.
As with any belief system, there are two ways we can acquire
materialism: either it’s in the genes or we have learned it through society. I
can’t see the genetic argument really working for materialism. The world of our
ancestors was hardly very focused on items, and hence “genetic materialism”
seems to have very little face validity. Therefore, the only sensible
conclusion is that we have learned the belief. And that is exactly the link
that could justify the connection to global debt.
What if our global debt is also influenced by the same materialist
beliefs? What if that’s why the system tries to get more than it can afford?
And, more importantly, what will happen once we figure out we’ll never pay back
our public debt?
Interesting, and scary, indeed.
[2] Watson, John J. “Materialism and
Debt: A Study of Current Attitudes and Behaviors.” Advances in Consumer
Research 25, no. 1 (January 1998): 203–207.
[3] Richins, Marsha L. “Materialism,
Transformation Expectations, and Spending: Implications for Credit Use.” Journal
of Public Policy & Marketing 30, no. 2 (Fall 2011): 141–156.
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