How I Lowered GDP Today

I want to apologize to my readers for my actions today, which clipped a small but very real amount from this year’s GDP figure. We wanted a charcoal grill and a ceiling fan for our house. Instead of going to Wal-Mart to buy new ones, we bought used ones on Craigslist for a fraction of the price. This is on top of my recent borrowing of my neighbor’s lawnmower and power tools.

Admittedly, $100 or so isn’t going to make much of a dent on GDP. But imagine what happens when such behavior becomes widespread. If people sell their old things to each other instead of throwing them away, and if neighbors borrow and share instead of everyone owning their own copy of everything, that means fewer purchases of new goods, fewer factory orders, and fewer jobs.  Rising unemployment, in turn, means even more people making do with less, more borrowing and sharing, and even fewer jobs. This is one of the key vicious circles that constitute the dreaded “deflationary depression”.

Simply put, the economy stalls out if demand and consumption don’t rise every year. That is why politicians right and left are happy when housing starts or automobile sales increase. Rising consumption means more jobs, higher profit margins, and the continued servicing of debt. The economic system we have today simply does not work without growth.

An economist might dispute my reasoning above and say that the money freed up by the circulation of used goods on Craigslist will be devoted to other purchases. Either I’ll spend the $100 I saved on something else, or I will invest it, and that investment will eventually be spent by someone else. This argument, though, rests on a very deep and pernicious unstated assumption: that there is essentially no limit to human needs and desires; particularly, that there is no limit to those that can be met by money. On the supply side, it depends on the mirror image of that assumption: that there is no limit to the capacity of earth and culture to bring new goods into the money realm.

Both of these assumptions are deeply problematic. Not only is the planet unable to supply increasing amounts of resources to turn into products, but many people are realizing that more consumption does not equate to more happiness.

When I taught at Penn State, I’d poll my class on how many televisions were in their home. The average was around four or five, but some of the wealthier kids had more (the record was eleven). Economists’ logic would say that the household with ten televisions (and ten times more of everything else) is ten times better off than the household with only one, but in fact we all know that if anything, the opposite is the case. Once a certain basic level of material needs is met, money correlates barely at all with happiness. That is not because people are making do with less; it is because many of their needs are met through non-monetary means. Be careful when you pity the half the world that subsists on less than two dollars a day. Perhaps they grow much of their own food, perhaps their children run around all day outdoors instead of going to day care; perhaps they have street carnivals and dancing rather than paying for television sets and movies. The economists’ version of happiness, which involves piling on the stuff, more TVs, bigger houses, newer electronics, more jet-away vacations, is looking pretty empty. Perhaps our endless desire for such things is a symptom of our poverty, a forlorn compensation for the loss of community and connection caused, in part, by the very products and technologies we so crave.

There is another possible economic response to the savings that result from borrowing, sharing, and doing things oneself. Rather than saving the money or spending it elsewhere, we could work less instead. Working less has indeed been the promise of technology for at least two hundred years, as the productivity of each worker has risen steadily. Always, though, instead of working less, we as a society have chosen to consume more. In a money system based on interest-bearing debt, we indeed have no choice.

It is time now to create the opportunity to make that choice. As resource extraction peaks, as the biosphere’s capacity to absorb our wastes hits a limit, and as productivity outstrips demand, the time is ripe to transition toward a money system consistent with a steady-state economy. I describe it in detail in Sacred Economics: a system based on negative-interest currency, resource-based taxation, and the elimination of economic rents. Today’s money system engenders relentless debt-pressure, and therefore relentless pressure to produce and sell new goods and services, and therefore pressure on policymakers to create conditions to allow further production and to stimulate further demand. Imperialism, war, habitat destruction, environmental deregulation, and so on are all ways of doing so, and as long as the money system remains the same, none of them will stop.

So, if you want to play your part in sustaining the growth machine a few years longer, until perhaps the very basis of civilization is consumed, then go shopping. If you want growth to stop, take a step or two away from the money economy. Borrow, share, give, use open source software, spend less and work less for money and do more in the spirit of the gift.


About Charles Eisenstein

I am the author of The Ascent of Humanity and Sacred Economics. I am also a public speaker and member of the faculty of Goddard College.
This entry was posted in Uncategorized. Bookmark the permalink.

5 Responses to How I Lowered GDP Today

  1. Gab says:

    Oh, those dreaded wikipedians, file sharingers, freecyclers and couchsurfers, lowering the GDP of countries all over the world…

  2. Patrick says:

    Hi, Charles. I was curious to see if you’ve come into contact with the ideas of Jacque Fresco whose work has culminated in The Venus Project. He has developed a system, Resource-based Economy, in which all production and consumption exists in sustainable balance with the Earth’s natural resources. If you are familiar with his work, where do you think it might fit in with Sacred Economics?

  3. Gab says:

    I love this phrase “Resource-based Economy”. It’s bit like “Energy-based Engine”.

  4. Tom Smith says:

    Hi Charles, fantastic post, especially for myself studying “international development” with all of its economic/GDP-based assumptions.

    Perhaps I’m being pedantic but two things stood out:
    – “my actions today, which clipped a small but very real amount from this year’s GDP figure.” I could be wrong but wouldn’t your actions have simply added little or nothing to GDP, rather than actively clipping an amount off? I didn’t think GDP was similar to “economic profit” in that you take into account the opportunity cost..

    -“This argument, though, rests on a very deep and pernicious unstated assumption: that there is essentially no limit to human needs and desires”..The crazy thing for me is that this isn’t an “unstated assumption”. Any economics 101 class, the one I took included, laid this down as a basic principle of the world. The fact this isn’t challenged by my lecturer or any of his colleagues says a lot.

    • Yes, Tom, you are right on both counts. It gets complicated with GDP when you get into all that stuff about how doing things more efficiently (i.e. requiring less expenditure) frees up money to be spent elsewhere.There is a lot of economic logic based on this idea, but in my opinion it is unsound, resting on the assumption of unlimited human needs and desires which, as you point out, is not always unstated. I should have said, unquestioned.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s