Because we spend a whole heap of our productivity on making crap, basically separating people from money as effectively as we can fit as little development as we can get away with. Our financial system (UK, I'd say The West is all the same too) is tailored to make rich people richer, everything else is a by-product.

Yes, people would work less (and produce less waste). No, I don't have all the answers on how that would work out. Greed would probably cause it to fail.