Is Christmas Giving Hurting the Economy?

Hannah Snyder

Mrs. Straub

Economics

18 November 2014

Is Christmas Giving Hurting the Economy?

As the infamous Christmas season is quickly coming upon us, we have to ask ourselves, “Is holiday giving truly necessary?”. I’m sure many of us have been given some dud gifts in our day. Whether it’s a pair of bunny slippers from Great-Aunt Agnes or an imitation metal necklace from the little girl you babysit, not everything we receive on this holiday is completely useful in our lives.Think about all the money that could be saved if presents like this weren’t purchased. But more importantly take all of our philanthropy during the Christmas season. Do you think twice about participating in food drives and gift providing programs? Hopefully not! But are these things hurting economic growth more than they’re helping those in need?

You may or may not have heard about people like the ‘K-Mart Santa’ paying off people’s layaway bills and handing out $50 bills at the store’s exit. Of course, this person’s generosity is astounding, but is this truly helping? It can be inferred that more often than not, people focus on the idea of helping others in such a giving time of year more than how much their dollar truly helps. If people don’t give to organizations that use donations to the fullest, their once thoughtful giving doesn’t really help the impoverished, or the economy. But even more importantly, charity work can create a disincentive. If you make too much money, or if you gain success, you will no longer be able to reap the benefits of the charity. If there’s no incentive, there’s no economic growth.

Peter Greer, the CEO of a microfinance organization says something along these lines about a charity in Africa in an interview with Forbes Magazine. He said “ We were doing a study in [Africa] and actually found that in this one community, every year there would be one family that would be selected, and it would be the poorest family, to get a new home from this very generous group. But what that did is create a disincentive for people to make modest improvements, and it actually disincentivized people to say, “I’m going to do something to improve my house, my home.” Because one woman said, you know, “If I do that, then I won’t be seen as the neediest, and I’ll miss out on my chance to have the extreme home makeover.” So there is a problem, where what is good in short-term and what is good for the experience of the giver, might not be what is more difficult candidly and more long-term. It’s easier to give someone something and feel good about that in the short-term, than it is to do the much more difficult work of helping someone provide for their needs so that that person can be generous to others in their community.”

While his statement doesn’t necessarily connect to Christmas giving, It does ring true for the effects of charity work. With household disincentive, GDP per capita will be on the decline. Take a look at this graph relating to Peter’s scenario:

So, now that you know that charity work has the ability of hurting those in need more than helping them, what will you support this holiday season?

Works Cited:

Carden, Art. "Ruining Christmas: An Economist's Guide." Forbes. Forbes Magazine, 18 Dec. 2011. Web. 18 Nov. 2014. <http://www.forbes.com/sites/artcarden/2011/12/18/ruining-christmas-an-economists-guide/2/>.

"Anonymous Donors Pay Off Kmart Layaway Accounts Across Country." Fox News. FOX News Network, 15 Dec. 2011. Web. 18 Nov. 2014. <http://www.foxnews.com/us/2011/12/15/anonymous-donors-pay-off-kmart-layaway-accounts-across-country/>.

Bowyer, Jerry. "Your Help Is Hurting: How Church Foreign Aid Programs Make Things Worse." Forbes. Forbes Magazine, 30 July 2013. Web. 18 Nov. 2014. <http://www.forbes.com/sites/jerrybowyer/2013/07/30/your-help-is-hurting-how-church-foreign-aid-programs-make-things-worse/>.