Is the Era of Economic Growth Coming to an End?

If it is, that might well be a good thing.

There is a default model of economic progress and of economic success which most people are persuaded to accept with little or no scrutiny. This model of economic success, though rarely explicitly explained, is firmly implied in many of the economics or business reports we see on the television or listen to on the radio or read on the internet.

In this model, it is assumed that our demands for goods and services will never be fully satisfied because, no matter how much we consume, we will always demand more. It is assumed that the growth of demand will go on forever and that, in attempting to meet this demand, firms will supply an ever greater quantity of goods and services, thus providing our economy with never-ending economic growth.

This standard model also assumes that this never-ending economic growth is the main objective of a successful economy. The media, through regular discussions about how to achieve economic growth, encourages people to assume, without thinking, that it must be a worthwhile objective. In this way, people are conditioned to applaud ever higher production levels — as represented by ever higher GDP — without questioning why we would even want that. Once you stop to examine this model, however, it no longer seems very convincing.

One problem with this standard vision of economic success is the terrible strain that increased production and consumption places on our environment; on the planet we rely upon to sustain life itself. Ever-growing production seems more likely to lead us to global meltdown than to economic nirvana.

Another problem is that even if we could continue to supply, demand and consume ever more goods and services, doing so might not actually make us any better off. It might even make us worse off.

So let me now make a suggestion as to what should happen in a healthy society: There should come a point where we reach a natural limit to the sheer quantity of goods and services we demand. Once you’ve got a nice house, a garden, plenty of food, a comfortable bed, a reliable car, a fridge and washing machine, a decent television, a computer and a games console, your demands for more goods should ease off somewhat.

What is it you want next? If you are intelligent and sane, you might well want a loving wife or husband, a family, to spend time with your children, to read, to enjoy some culture, to play sport, to improve your mind and enjoy the arts. An advanced society should reach beyond the obsession with consumption and look towards what are ultimately the more important things in life — and these are very often things that you can’t directly buy and which aren’t provided by businesses.

One problem, however, is that many firms don’t like the sound of this particular vision of the future — because it provides them with rather limited opportunities for the ever-increasing revenues and profits that they seek. The government aren’t usually keen on such a vision either, because it is through growing revenues, incomes and profits that they manage to raise ever more tax.

In an advanced society, people would enjoy reading. However, reading provides only very limited opportunities for profits or growth. OK, so firms can make a few quid from selling you a book for £5, but a book can take you a week or more to read and it can be passed around and read many times by many people over a number of years before it finally falls apart.

Firms don’t want you to play card games with your kids, because, besides the pitifully few pence they can earn from selling you a new pack of cards once in a while, there’s no real money in it for them. They don’t want you to spend time discussing philosophy or simply sitting out and enjoying your garden. Firms would far rather you spent £50 on the latest game for your games console and completed it in a couple of days or spent £50 in a night drinking expensive alcoholic drinks.

Firms want you to obsess about new clothes, new mobile phones, new TVs, new cars and new kitchens, never being entirely satisfied with anything you buy and continually looking to replace everything you have bought with newer, updated versions of the same things long before you really need to.

The government usually encourages this obsession. People work long hours to earn the wages that pay for their excessive spending habits. Both the income and the spending generate tax revenues (thanks to income tax and either sales tax or VAT) — and you know how government just loves to spend your money! There are bureaucracies to support, regulations to be enforced, reports to be compiled and new headline-grabbing but ineffectual initiatives to be announced on a regular basis. The government relies on people pointlessly running round in their treadmills in order to sustain and grow government finances.

Furthermore, governments also tend to believe that it is our obsession with continually buying things we don’t need that is keeping the economy afloat. Ignorant of real economics, they obsess about impressing the voters with ever-higher GDP. Under the dictatorship of conventional economic wisdom, any failure to provide economic growth may well be considered as economic failure. They therefore act as if growth of GDP is the be-all-and-end-all of economic success.

Many politicians don’t seem to have the imagination or the intellect to question whether this growth of GDP is actually doing our society any good. They don’t have the courage to question the lazy economic assumptions of the media. They’ve never stopped to realise that much of the ‘economic activity’ that makes up GDP is little more than activity for activity’s sake. It isn’t actually making us better off.

To summarise the fundamental problem here: Firms want limitless demand, never-ending growth and ever-increasing profits. The government supports this drive because they want never-ending growth to provide ever-higher tax revenues, thus enabling ever-higher spending levels and ever more control over our lives. And yet never-ending economic growth is neither an aim nor necessarily a feature of an advanced and reasonably well-educated society.

And so now it’s up to us, the voters, to force politicians to put aside their obsessions with GDP and open their minds to more thoughtful ideas about what economic success really looks like.

All Rights Reserved for  Robert Jameson

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