How can a country’s economy apparently grow year on year without limit, and why is this thought to be desirable?
Richard Saunders, Dagenham
Send new questions to nq@theguardian.com.
Readers reply
If one takes the definition of an economy as the one based on gross domestic product (GDP), it probably can’t and it certainly shouldn’t; the pursuit of perpetual growth is destroying our planet. Such a model takes no account of parenting, care for others, voluntary activities and general wellbeing. We need a different model which is broader and more human. Kate Raworth’s Doughnut Economics is a good starting point. BigBear2
It isn’t and it can’t. More and more people consuming more and more resources and generating more and more rubbish will soon be coming up against very hard limits. Shame; it’s probably the drivers of this who will be the last standing. basil29
It can’t, but it’s the capitalist model – good luck drumming up support for the/any alternative. It’s thought to be desirable because the process of “growth” results in an increase in “wealth”, although sadly most of this goes to entirely the wrong people (Bezos, Musk, Rees-Mogg et al) and almost none of it to those who need it. Rotwatcher
Nor does it go to those who earn it or deserve it. Nickynin
Economic growth is the only way to remove absolute poverty around the world. It has been phenomenally successful. PatPending
The “economy” isn’t a monolithic thing. The simplest way to describe it is to break it down to three components: productivity, credit and money. If you looked at each component, you probably wouldn’t find them growing year on year.
Is it desirable? In a credit/debt-driven economy, the cycles happens because people overspend when there’s too much credit, then they have to cut spending when the cycle turns the other way and people lose jobs and the standard of living decreases. The consequence of the growth in money supply is, over time, your money is worth less (this is inflation). So, no, it isn’t desirable for debt or the money supply to grow year on year, but perfectly healthy for productivity to grow year on year. DrPepperIsNotARealDr
Another big part of it is inflation. The target for most developed economies is 2%. It’s upward cycle. Profits up, pay up, prices up. Productivity is the real growth. Inflation is the perceived growth. Classyrc
I know this question provides an opportunity for a critique of the capitalist system, but the answer that stays away from value judgments about the merits or otherwise of capitalism is technological progress. Technological progress provides the ability to achieve greater outputs from a given level of input. Because new technology builds incrementally on previous technology, progress is theoretically limitless.
The distribution of income and wealth that has been created by this progress is clearly a mess and whether technology can continue to develop without creating ecological catastrophe is probably the most pressing question facing human society, but these are, to my mind, different issues. Related, but different. thinksthatimacabbage
As David Attenborough once said: “Anyone who thinks that you can have infinite growth in a finite environment is either a madman or an economist.”
A more specific and uglier answer is that it is seen as desirable because for years the World Bank and the IMF have made increase in GDP and economic growth the measures of a country’s health (and ability to get loans, not have loans called in etc). Which is laughable when you consider that this standard made, for example, Sierra Leone and Liberia among the “healthiest” countries, due to economic growth related to diamonds, while they also came in at the bottom of all the countries in the world in medical health or public health infrastructure. But it’s still desirable because otherwise they call in the loans. Thomas1178
With the greatest respect to David Attenborough, the environment is not finite. Increasing knowledge and increasing culture is economic growth with negligible use of natural resources. The release of Blue Planet does not prevent us enjoying Life on Earth. The knowledge of crop-rotation creates economic growth without using more natural resources than monoculture. UpVoteThis
A modern economy is mainly services. The UK economy is about 80% services. We can continually improve the services that we provide to each other. Some growth areas are health, social care, education, entertainment and leisure. There is no reason that we cannot continually grow these things. They do not require more physical resources. ProSTEM
They don’t require physical resources (or, at least, require them less intensively). However what does go up exponentially is energy consumption, because of the computation services increasingly required. For instance, Bitcoin mining now accounts for 1% of the world’s total energy consumption (see Senate Committee on Energy and Natural Resources, August 2018), orders of magnitude more than its proportion of the economy or even the “minting” of traditional currency (physical or otherwise).
Physical resource growth now just keeps pace with population growth. Per capita growth is now limited only by the cost and availability of energy for computation. The novel Accelerando [by Charles Stross] takes this to its ridiculous but logical conclusion, where man’s exponential need for computation resources rapidly consumes the entire solar system. HaveYouFedTheFish
Bitcoin mining is nothing to do with economic growth. It’s wasteful and pointless. In the case of real digital services, cloud computing providers are building more efficient servers using more efficient processors and investing in renewable electricity. Both of these are economic growth in themselves, as well as allowing the growth in digital without the equivalent growth in energy use. theindyisbetter
Nominal GDP can go up every year just by increasing the price of things. It keeps the chancellor happy even though no extra goods and services are produced. UKClimber
Now that one of the important subjects of our era is climate control, it is not desirable for countries’ economies to keep growing. What we need is a reality check, followed by a change of basic assumptions, and a plan for how we manage economy contraction. David J Watts
The reason we think the economy is growing is because we are locked, like lemmings, in a race to the cliff edge and have no time to understand the disaster that awaits human civilisation. The planet has a finite capacity to support life and so, as the economy grows, the space for life for each human shrinks – and we thoughtlessly destroy nature along the way. Malcolm Whitmore
“Billions of us will die and the few breeding pairs of people that survive will be in the Arctic where the climate remains tolerable” – Prof James Lovelock. rumblestrips
“Growth for the sake of growth is the ideology of the cancer cell” – Edward Abbey, The Journey Home: Some Words in Defense of the American West names3
Capitalism is a snake eating its own tail. silverkaite
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