I did a search of the SDMB for “Economic Growth” and came up with three pages of thread titles. Too much to even scan randomly. Perhaps this has been addressed, but I don’t remember seeing anything specifically like my question.
I am wondering (have wondered off and on) why every pundit and politician touts “growth” as the thing which will make it all better.
How much growth is enough?
Doesn’t growth imply unlimited expansion?
Continued production of material goods requiring more and more resources?
Doesn’t this also require a continually growing population?
When is growth sufficient?
Is there a point at which further growth will actually overflow the banks?
I am reasonably well educated, own my home. I may upgrade a few big ticket items over the next few years, but other than buying groceries, clothing and taking a few trips, what can I do to contribute to “growth”? Or should I?
Do I keep my savings in stock and bond based accounts, so that the managers can make money off my assets, then clean them out periodically?
♫All we need is growth, growth,
Growth is all we need.♫
Listen, I thought about this maybe 30 years ago. We have an economy that relies on continued growth. I thought that was fucked. I guess I still do and can’t comprehend the economics of it.
It appears that everything is based on housing starts, jobs created, and increased GDP, and if these things aren’t going in the right direction we’re all doomed. Macroeconomics is surely a man-made construct and why we even need to constantly worry about all of this is a very abstract concept for me, although I’m understanding it much better now than I did 30 years ago.
I don’t get it either. And not just for countries, companies are expected to continuously grow as well. Even the population. Surely this is unsustainable. Aren’t there any models for steady-state function?
This is a key question for which I don’t have an answer, but it needs to be broken down before musing can begin.
[ul][li] For a poorish country like China or India which wants to prosper, growth is essential. It translates to improving standard of living.[/li][li] As productivity improves (due to automation) in a developed country, growth is essential to maintaining full employment. (An alternative is to reduce hours per work-week.)[/li][li] A demographic fact like retiring Baby Boomers (or a Baby Boom!) requires an increase of workers or productivity to cope with the non-workers’ needs. Related to this is the desire to afford expensive improvements to health care.[/li][li] Shareholders may expect corporate profits to grow.[/li][/ul]
An obvious solution to the demographic problem is increasing the birth rate, but this leads to a vicious cycle where continual population increases are required to pursue growth.
U.S. corporations enjoyed high profit growth for many decades, but acquisitions and overseas market penetration are self-limiting, so continued growth requires increasing population and/or productivity.
Once a level of comfort is achieved, a person may decide that leisure is a better use of his time than earning more money. However this tendency works against growth (and corporate profits).
I think this was what I was going for. We can only get so big before we need more territory (empire), resources (empire and exploitation) and money (inflation).
Or is this too simplistic?
Septimus
Hence my questions. If I reach that comfort level, it then means that I am “counter-productive” (not that I will be a drain on US resources) or “anti-growth”, no?
How much growth is enough?
This is very subjective, for most people growth is never enough for some people we have already grown enough. Societies are just aggregates for individual choices so the answer varies by society as well as individuals.
Doesn’t growth imply unlimited expansion? Not necessarily. In a shrinking population it would be possible to have per capita growth and an economy that does not grow.
Continued production of material goods requiring more and more resources?
Not necessarily, it could just mean more efficient use of existing resources. If a way to achieve cold fusion was attained or solar energy had a breakthrough, it would be possible to achieve high levels of growth with fewer resources. Technology also expands how resources can be used.
Doesn’t this also require a continually growing population? No, a continually growing population is what we have had for recent memory but it would be possible to switch to an equilibrium where population growth is not necessary for growth. That switch probably will be painful, but is also likely inevitable.
When is growth sufficient? Probably never, if you look in the past predictions of the future always had people with alot more leisure time than we actually use. The people of the past just could not understand working once they had incomes over 30K per year. People will always want bigger houses and better cars, faster computers and smaller phones.
Is there a point at which further growth will actually overflow the banks? No, if there is too much capital in the banks then interest rates will fall and people will start investing in other things.
The way you contribute to growth is to work more efficiently. Or better yet invent a process that allows others to work more efficiently.
Even at the dawn of the personal computing era, a common theme was “what would anyone need a home computer for?” Cell phones? Just as weird a concept.
Consider today the size of the internet, PC, and cell phone industries. I think I pay almost as much for communications - satellite TV, internet, cell phones, etc - as I do for food. Should I include DVD rentals or Netflix? iTunes purchase? Kindle books? So the economy is growing “sideways” into new products, not bigger. Some of it is replacement (eBooks vs book books, netflix vs movie tickets) but some is a whole new facet of the economy.
However, yes, in a steady state population do we really need more expressways, bigger malls, more suburbs, etc.? Anything beyond replacement level is extravagance. However, due to demographics there is still residual population growth for a decade or two until the procreative bulge works its way out of the demographic category. Plus immigration. Apparently the worst country for this phenomenon is Japan, which is reluctant to allow immigration; Russia and Europe are not far behind…
Population growth is one simple reason that growth is necessary. As others have said, we need growth simply to maintain standards of living as long as the population continues to grow.
If we didn’t have a growing population, then it’s conceivable that a steady-state economy could keep people happy, but we’d also need a massive shift in psychology. Everyone wants to accumulate more, no matter how much they have. We’d need to retrain people to accept a lifetime at the same level and I suspect we’d come up against instinct-level drives that would be very hard to eradicate. Since this thread has already attracted snide comments about abstinence education, it’s probably a good example to use: teaching people to not have sex is going to be about as effective as teaching them to be content with what they have. The drive for accumulation of wealth is on par with sex as far as I can tell.
However, I don’t see why growth can’t continue indefinitely. Not all growth represents more resources being consumed. For example, entertainment companies could make profits without consuming any physical resources except electricity. You can pay electronically for music/video/software distributed electronically. There are some emerging “virtual” economies and they consume virtually no physical resources.
Even when resources do need to be consumed, there are ways to recycle components, to tap into previously unusable resources, and to redesign products to use available resources.
Well, let me ask you the opposite–do you want the economy to shrink? That is, do you want your standard of living to get worse? Do you want your pay to get cut? Do you want to get laid off from your job?
If the economy is growing that means there are more goods and services and those goods and services are cheaper. It means you get a raise, and if you don’t get a raise you can go across the street to another employer and get a better job for more money. It means more tax revenues which means schools can hire more teachers and potholes can get fixed.
Economic growth just means that more goods and services are produced. That means more stuff for you, or if you don’t care about more stuff, that means it takes you less effort to get the same amount of stuff.
My college macro economics course was very enlightening on this point, in the sense that it illuminated how completely batflapping insane the “official” American economic paradigm was. It sincerely read like something out of 1984, in that the weird disjointedness of the sentences and paragraphs, and their occasional excessive and enthusiastic repetition of certain phrases, felt like an actual book about economics had been written and then a team from MiniTruth had gone through it and redacted anything controversial before sprinkling in random bits of state dogma.
For example, the book went on and on about the absolute necessity for economic growth at great length, spending a great deal of time on how growth was measured and how it was a good thing and what happened when it slowed, without ever once talking about why growth was necessary in the first place; it was like a comprehensive encyclopedia of ships and shipbuilding that contains no mention of the word ‘water’.
It’s clear to me that most people cannot handle economic truth at all, and this makes sense, because real economics involves using science to try and determine values inherent in every aspect of our lives, and then building models to see whether or not those values are actually paying off in terms of greatest overall utility. Real economics is intrinsically subversive to the dominant social order, and this is why authoritarian regimes so often have such terrible, terrible economies.
One of the more embarrassing aspects of the free market is that when it works, one of the ways it works is by obscuring how it works, which can allow the losers to save face, and is very important when the losers are powerful people. If most conservatives could see what the invisible hand was actually doing all day, they’d call it a bleeding-heart liberal commie socialist, but they can’t see it, so it’s left alone to actually do its job.
Just wanted to address these. No, economic growth does not necessarily require using more resources or a constantly growing population.
Of course, those are some of the easiest paths to growth. If one guy can build a widget in an hour, then two of them, using twice as much raw widget materials, have just doubled your widget production. That’s easy. We pretty much necessarily know how to do that for any given level of technology.
But other ways in which economic growth can be accomplished are by increasing efficiency/eliminating waste, and by making use of resources that are renewable and essentially going to waste.
Consider solar panels. We’re still not quite to the point that solar cells are the cheapest energy production around, but once they are (if they are), we’re going to see an enormous amount of growth in energy production and the standard of living, almost all of it driven not by population growth or using up resources, but by the fact that we’re no longer just wasting all the sunlight that hits the planet. There’s plenty of room to improve people’s lives and have increased growth without ever-increasing population or nonrenewable resource exploitation.
If you have an old soda can from the 1980s, compare it to a soda can from 2012. The 80s soda can is two or three times heavier. Or put it another way, in 2012 we can deliver the same amount of sugary crap to someone’s gullet, but we only use a fraction of the aluminum we needed in 1980.
There’s your economic growth right there. It isn’t an example of more resources, more work, more everything. It’s an example of using the same amount of raw materials but producing twice as many soda cans.
Of course you could argue that soda cans are evil bullshit, but would it be better if we were using more aluminum to provide the same amount of evil bullshit?
Economic growth doesn’t always mean more more more. Frequently it means less less less.
Increased profits for Coca Cola == economic growth. Pretty much by definition, yes? If on aggregate the economy produces fewer profits, that’s economic contraction. If on aggregate the economy produces more profits, that’s economic growth.
I’m not saying you benefit directly from the fact that Coca Cola shareholders spent $0.00001 less on every can of soda they sell. But it’s obviously good for Coca Cola shareholders, in the same way that when you get a raise at work it’s good for you but Coca Cola shareholders couldn’t care less.
But in aggregate, if everyone around you is getting fired, or getting their wages reduced, or the companies they own are making lower profits, that’s called a recession. That’s economic contraction. As long as your job and your retirement fund are OK then that might not effect you directly. But a recession means lower tax revenue for your local and national governments, it means your job is at risk, it means when you ask for a raise your boss laughs at you rather than negotiates. You’re not better off during a recession are you?