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Consumerism and Economic Crisis Essay


The world has barely recovered from the effects of the global financial crisis of 2008 and yet Europe is slowly gliding to a similar economic downturn. Greece, a nation at the verge of bankruptcy, stands at the centre of the European debt crisis. During an economic boom, Greece took loans from other sovereign states and spent the funds organizing functions such as he Athens Olympics.

Though the country was mildly hit by the US financial crisis, it experienced huge levels of tax evasion leading to insufficient funds to repay their debts and their associated interests. Consequently, creditors imposed high interest rates on loans to the country due to the high risk of default, a move than further worsened its debt situation.

Despite bailouts of over 200bn Euros by the European union and written off debts, the country is still on the blink of collapse. Worse still, countries such as Spain and Portugal may follow suit (Isaac et al., 2012).

This economic crisis is best explained by consumerism. Consumerism is defined as the social or economic tendency to purchase more goods in larger amounts. It differs from consumption entirely on the difference of what is purchased and the reasons for purchase of the commodity.

While consumption refers to the purchase of goods in order to satisfy basic needs, consumerism is the purchase of goods with the intention of fulfilling one’s comfort and luxury desires. Though, the entire concept of capitalism, which drives the economy works on the consumption idea, overspending beyond one’s means results in an economic crisis.

Consumerism generally affects the rich, the middle class and certain employed people. These groups have the freedom to purchase the luxury items they desire but excessive purchases beyond what they can afford can be disastrous. Modern culture seems to lay more emphasis on the acquisition of material things as a means to happiness. For instance in the U.S., owning a house is considered a major achievement.

Therefore, in the year 2007, many of the U.S. citizens took advantage of the banks relaxation on the lending rules to acquire funds to service a mortgage. Unlike in the past, banks did not thoroughly scrutinize the collateral against which the loans were given. Therefore when payments were due and the debtors defaulted, the banks realized that assets used as collateral had depreciated rapidly and were not sufficient to repay the loans.

They reacted by hiking the interest rates for the homeowners who apparent had no money to pay. These events lead to the crumbling of large institutions such as the Lehman Brothers. Countries such as Canada that instituted measures to counter excessive unguaranteed spending were slightly scathed by the economic crisis (Hermerijck et al., 2010).

A mutual relationship exists between consumerism and economic crisis. Though consumerism is perceived to trigger an economic downturn, the resultant crisis can also influence future consumerism.

An economic crisis is often marked by alarming inflation rates than make certain luxurious goods unaffordable and consequently cutting down consumerism. Moreover, the increase in the prices of basic needs depletes all the extra funds available for the purchase of luxurious commodities (Ben-Ami, 2012).

Consumerism seems to be the cause of our present woes. If one country, such as Greece, exercises consumerism, it can drag along other nations just as Spain and Portugal may soon follow suit. Therefore financial institutions should be more than cautious in determining credit worthiness in future. This should avert the emergence of another economic crisis.

References

Ben-Ami, D. (2012). Ferraris for All: In Defense of Economic progress. Chicago: The Policy Press.

Hermerijck, A., Knapen, B. & Doome, E. (2010). Aftershocks: Economic Crisis and Institutional Choice. Amsterdam: Amsterdam University Press.

Isaac, G., Levy, J. & Ognitis, A. (2012). The Benefits of the New Economy: Resolving the Global Economic Crisis through Mutual Guarantee. New York, NY: Laitman Kabbalah Publishers.

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IvyPanda. 2019. "Consumerism and Economic Crisis." April 5, 2019. https://ivypanda.com/essays/consumerism-and-economic-crisis/.

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IvyPanda. (2019) 'Consumerism and Economic Crisis'. 5 April.

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