What Is Consumerism?

Consumerism is the idea that increasing consumption of goods and services purchased in the market is always a desirable goal and that a person's wellbeing and happiness depends fundamentally on obtaining consumer goods and material possessions. In an economic sense, it is related to the predominantly Keynesian idea that consumer spending is the key driver of the economy and that encouraging consumers to spend is a major policy goal. From this point of view, consumerism is a positive phenomenon that fuels economic growth.

In common use, consumerism refers to a tendency of people living in a capitalist economy to engage in a lifestyle of excessive materialism that revolves around reflexive, wasteful, or conspicuous overconsumption. In this sense, consumerism is widely understood to contribute to the destruction of traditional values and ways of life, exploitation of consumers by big business, environmental degradation, and negative psychological effects. Early uses of the term in the mid-20th century were intended to have a positive connotation, which would emphasize the benefits that capitalism had to offer consumers in improving standards of living and an economic policy that would prioritize the interests of consumers, but these meanings have fallen out of general use.

Key Takeaways

  • Consumerism is the theory that states people consuming goods and services in large quantities will be better off.
  • Some economists believe that consumer spending leads to an increase in production and economic growth.
  • However, consumerism has been widely criticized for its economic, social, environmental, and psychological consequences.

Understanding Consumerism

As consumers spend, economists presume that consumers benefit from the utility of the consumer goods that they purchase, but businesses also benefit from increased sales, revenue, and profit. For example, if car sales are increasing, auto manufacturers will see a boost in profits. Additionally, the companies that make the steel, tires, and upholstery for cars also see increased sales. In other words, spending by the consumer can benefit the economy, and the business sector in particular. Because of this, businesses (and some economists) have come to view increasing consumption as a critical goal in building and maintaining a strong economy, irrespective of the benefit to the consumer or society as a whole. 

In Keynesian macroeconomics, boosting consumer spending through fiscal and monetary policy is a primary target for economic policy makers. Consumer spending makes up the lion's share of aggregate demand and Gross Domestic Product, so boosting consumer spending is seen as the most effective way to steer the economy toward growth. Saving can even be seen as harmful to the economy because it comes at the expense of immediate consumption spending. 

Consumerism also helps shape some business practices. Planned obsolescence of consumer goods can displace competition among producers to make more durable products. Marketing and advertising can become focused on creating consumer demand for new products rather than informing consumers.

Beyond these effects, consumerism involves on the impact that increasing consumption in itself, and the view of the consumer as target of economic policy and a cash cow for the business sector, has on the consumer and the society within which the economy operates. Economist Thorstein Veblen developed the concept of conspicuous consumption, where consumers purchase, own, and use products not for their direct use value but as a way of signaling social and economic status. As standards of living rose subsequent to the Industrial Revolution, conspicuous consumption grew. High rates of conspicuous consumption can end up being a wasteful zero-sum or even negative-sum activity as real resources are used up to produce goods that are not valued for their use. This can be analogous to the phenomenon of rent seeking, including associated deadweight loss, but with social status as the objective rather than political influence.

Advantages of Consumerism

Advocates of consumerism point to how consumer spending can drive an economy forward and lead to an increased production of goods and services. As a result of increased consumption spending, a rise in GDP growth or Gross Domestic Product can occur. In the U.S., signs of healthy consumer demand can be found in consumer confidence indicators, retail sales, and personal consumption expenditures. Business owners, workers in industry, and owners of raw resources can profit from sales of consumer goods either directly or by downstream buyers. 

Disadvantages of Consumerism

Consumerism can be criticized on economic grounds. In the form of conspicuous consumption, consumerism can impose enormous real costs on an economy. Consuming real resources in zero- or negative-sum competition for social status can can offset the gains from commerce in a modern industrial economy and lead to destructive creation in markets for consumer and other goods. Consumerism can also create incentives for consumers to take on unsustainable levels of debt, which can contribute to financial crises and recessions

Consumerism is also often criticized on cultural grounds. Some see that consumerism can lead to a materialistic society that neglects other values. Traditional modes of production and ways of life can be replaced by a focus on consuming ever more costly goods in larger quantities. Consumerism is often associated with globalization in promoting the production and consumption of globally traded goods and brands, which can be incompatible with local cultures and patterns of economic activity.  

Environmental problems are frequently associated with consumerism to the extent that consumer goods industries and the direct effects of consumption produce environmental externalities. These can include pollution by producing industries, resource depletion due to widespread conspicuous consumption, and problems with waste disposal from excess consumer goods and packaging.

Lastly, consumerism is often criticized on psychological grounds. It is blamed for increasing status anxiety, where people experience stress for increasing competition for social status in the constant drive to "keep up with the Joneses" by increasing their consumption. Psychological research has shown that people who organize their lives around consumerist goals, such as product acquisition, report poorer moods, greater unhappiness in relationships, and other psychological problems. Psychological experiments shown that people exposed to consumerist values based on wealth, status, and material possessions display greater anxiety and depression. Others show that encouraging people to identify as consumers leads to lower trust, lower sense of personal responsibility, and less willingness to cooperate with others.