Critical here is the question of whether a growing economy is essential for economic stability. Is growth functional for stability? Do we need economic growth after all simply to keep the economy stable?
The conventional answer is certainly that we do. To see why, we need to explore a little further how such economies work. A detailed discussion of this is deferred to Chapter 6. But the broad idea is simple enough to convey.
Market economies place a high emphasis on technological efficiency. Continuous improvements in technology mean that more output can be produced for any given input of labour, capital and resources. Efficiency improvement stimulates demand by driving down costs and contributes to a positive cycle of expansion. But crucially it also means that fewer people are needed to produce the same goods from one year to the next.
As long as the economy grows fast enough to offset this increase in ‘labour productivity’, there isn’t a problem. But if it doesn’t, then increased labour productivity means that someone loses their job. If the economy slows for any reason – whether through a decline in consumer confidence, through commodity price shocks, or through a managed attempt to reduce consumption – then the systemic trend towards improved labour productivity leads to unemployment. This in its turn, leads to diminished spending power, a loss of consumer confidence and further reduces demand for consumer goods.
From an environmental point of view this may be desirable if it leads to lower resource use and fewer polluting emissions. But it also means that retail falters and business revenues suffer. Incomes fall. Investment is cut back. Unemployment rises further
and the economy begins to fall into a spiral of recession.
Recession has a critical impact on the public finances. Social costs rise with higher unemployment. But tax revenues decline as incomes fall and fewer goods are sold. Lowering spending risks real cuts to public services. Cutting spending affects people’s capabilities for flourishing – a direct hit on prosperity.
Governments must borrow more not just to maintain public spending but to try and re-stimulate demand. But in doing so, they inevitably increase the national debt. Servicing this debt in a declining economy – as we noted in Chapter 2 – is problematic at best. Just maintaining interest payments takes up a larger proportion of the national income. The best that can be hoped for here is that demand does recover and it’s possible to begin paying off the debt. This could take decades. [...] On the other hand, if the debt accumulates and the economy fails to recover, the country is doomed to bankruptcy.
Crucially, there is little resilience within this system. Once the economy starts to falter, feedback mechanisms that had once contributed to expansion begin to work in the opposite direction, pushing the economy further into recession. With a growing (and aging) population these dangers are exacerbated. Higher levels of growth are required to protect the same level of average income and to provide sufficient revenues for (increased) health and social costs.
In short, modern economies are driven towards economic growth. For as long as the economy is growing, positive feedback mechanisms tend to push this system towards further growth. When consumption growth falters the system is driven towards a potentially damaging collapse with a knock-on impact on human flourishing. People’s jobs and livelihoods suffer.
There is of course, something of an irony here. Because at the end of the day the answer to the question of whether growth is functional for stability is this: in a growth-based economy, growth is functional for stability. The capitalist model has no easy route to a steady-state position. Its natural dynamics push it towards one of two states: expansion or collapse. Later (Chapter 8) we explore the possibilities for amending this conclusion. In the meantime, we appear to have returned to the dilemma with which this chapter started. Or at least to a more precise incarnation of it. Put in its simplest form the ‘dilemma of growth’ can now be stated in terms of two propositions:
• Growth is unsustainable – at least in its current form. Burgeoning resource consumption and rising environmental costs are compounding profound disparities in social wellbeing
• ‘De-growth’ is unstable – at least under present conditions. Declining consumer demand leads to rising unemployment, falling competitiveness and a spiral of recession.
Ett svårlöst dilemma kan tyckas. Detta är bara en sida av problemet. Här problematiseras inte de gränser ("carrying capacity") som konstitueras av tillgången till naturresurser, biosfären (ex: "växthuseffekten"), ekosystemen (ex: "ekosystemstjänster") och de sociala strukturerna. Rekomenderar en genomläsning av rapporten!