So - what do we do about economic growth?
Posted: Wed Dec 27, 2023 9:03 am
In recent years, a lot of people have become critical of the whole idea that the economy should grow. The Degrowth Movement argues that more economic growth will inevitably destroy our planet, and that we should therefore shrink the economy instead of growing it.
Now, ecologically speaking, they might well be right. But some aspects of their slogans and rhetoric leave me with the impression that they don’t really know all that much about basic economic ideas. For instance, they love to talk about “growth for growth’s sake”, as if there would be no reason to have economic growth except that some people have an unhealthy, irrational obsession with it. And they love to bring up capitalist greed, as if the only people who want economic growth would be greedy capitalists.
This attitude ignores that economic growth plays an important role in center-left economic ideas, too. Basically, for followers of center-left economic ideas, growth is the main reason why we don’t need austerity. If the economy keeps growing, public debts aren’t much of a problem, because they stay stable or even shrink if you measure their relative size compared to the total size of the economy.
Take away economic growth, and that logic falls apart. Suddenly, the state can’t keep borrowing money forever anymore, because total public debt keeps rising compared to the total size of the economy, and lenders will start asking how they are ever supposed to get anything back. Suddenly, the state runs out of lenders, runs out of money, and has to implement austerity. Degrowth supporters never really seem to think much about that.
But at the same time, their arguments about how the economy simply can’t keep on growing forever without running into physical limits, and that continued economic growth is destroying our planet, sound perfectly valid to me. So I’m not at all sure how to solve all this.
Now, one possible response might be that we should simply abolish the capitalist system altogether, and with it, the established economic logic. But I don’t see how that will solve the underlying “growth or austerity, but not neither”-problem. Even a post-capitalist country where everything has been nationalized still won’t be able to spend more than it has in revenues for long – except if it can find enough people willing to lend it money. Which will be difficult if its economy keeps shrinking.
So this all looks like it might well be one of those problems with no solution whatsoever to me.
Now, ecologically speaking, they might well be right. But some aspects of their slogans and rhetoric leave me with the impression that they don’t really know all that much about basic economic ideas. For instance, they love to talk about “growth for growth’s sake”, as if there would be no reason to have economic growth except that some people have an unhealthy, irrational obsession with it. And they love to bring up capitalist greed, as if the only people who want economic growth would be greedy capitalists.
This attitude ignores that economic growth plays an important role in center-left economic ideas, too. Basically, for followers of center-left economic ideas, growth is the main reason why we don’t need austerity. If the economy keeps growing, public debts aren’t much of a problem, because they stay stable or even shrink if you measure their relative size compared to the total size of the economy.
Take away economic growth, and that logic falls apart. Suddenly, the state can’t keep borrowing money forever anymore, because total public debt keeps rising compared to the total size of the economy, and lenders will start asking how they are ever supposed to get anything back. Suddenly, the state runs out of lenders, runs out of money, and has to implement austerity. Degrowth supporters never really seem to think much about that.
But at the same time, their arguments about how the economy simply can’t keep on growing forever without running into physical limits, and that continued economic growth is destroying our planet, sound perfectly valid to me. So I’m not at all sure how to solve all this.
Now, one possible response might be that we should simply abolish the capitalist system altogether, and with it, the established economic logic. But I don’t see how that will solve the underlying “growth or austerity, but not neither”-problem. Even a post-capitalist country where everything has been nationalized still won’t be able to spend more than it has in revenues for long – except if it can find enough people willing to lend it money. Which will be difficult if its economy keeps shrinking.
So this all looks like it might well be one of those problems with no solution whatsoever to me.