The choice between scarcity or abundance is often not more than a mindset. People in traditional cultures believe they have enough when they have enough food to survive. Many modern people in capitalist societies believe that they haven’t enough even when they have a house, a car, a lot of stuff, and enough food. You can always go for a bigger house, a more expensive car, or more luxury items.
Most people in wealthy countries have enough, including me. We do not need more products and services, and even if we think we do, it probably is the advertisment industry making us believe that. The writing is on the wall. Interest rates are turning negative because more and more people have enough.
Most economist still think that interest rates will go up again. But what if that doesn’t happen? What if negative interest rates are here to stay? That would turn economics upside down. It would signal that we have enough. Scarcity is the foundation of economic thinking. It is the belief that we never have enough.
What has this to do with interest rates? If we want more stuff, we need more businesses, so we need investments. To make investments, we need savings. And to make people save, we need interest to make saving attractive. Consequently investments need to be profitable to pay for the interest. But if we don’t need more stuff there would be abundance and we don’t need more savings and interest rates go down.
That can push interest rates into negative territory. It already happens in wealthy countries where many people already have enough. Investment money will then look for more profitable alternatives and move into poorer areas. In this way developing countries can build their economies too. And the investment capital for making the economy sustainable may become available.
This may kick off an era of unprecedented peace and prosperity. There can be more money for other needs in society like caring for people that aren’t so fortunate. It may be easier to combat crime as it may be easier to fund a police force. And if conspicuous consumption is frowned upon, being a criminal doesn’t bring you a lot of benefits. A different world may be just around the corner.
Featuring image: Slums built on swamp land near a garbage dump in East Cipinang, Jakarta Indonesia. Jonathan McIntosh (2004). Wikimedia Commons.