Submitted by Germanofthebored t3_ygipar in explainlikeimfive
Every time the GDP growth dips, everybody gets upset. But it seems that we have enough stuff - why is growth so essential?
Submitted by Germanofthebored t3_ygipar in explainlikeimfive
Every time the GDP growth dips, everybody gets upset. But it seems that we have enough stuff - why is growth so essential?
> Why do developed nations need constant economic growth
They don't, technically - in fact it's not even possible to have unlimited economic growth in a world with finite resources. Eventually we won't be able to make more stuff with what's left on Earth, though hopefully that's a long, long way away. But just because we don't need growth doesn't mean it's not valuable:
This and the fact that the global economy is competitive. If one country's economy is stable but not growing, they'll fall behind every other country whose economy is growing.
They don’t. A developed country does not need to keep growing.
A country that made debt needs to keep growing.
Usually countries make huge debt to buy infrastructures, invest in research, or education. This fields are very expensive but are what make you progress. Making debt for this is an investment in the country’s future. The problem is, you have to pay back the debt. Developed or not, if you make a debt and fail to progress, you will not get the extra profits to pay back the debt.
The fact that developed countries are also in debt, is a circumstance. A coincidence. Poor countries also may have a big debt, and same as developed ones, they have to grow to pay back the debt or end up more in debt.
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Economic growth is measured in GDP growth. GDP is roughly speaking the monetary value of the goods and services a country producers. The monetary value of a good or service roughly correlates with how much people want that thing. Hence it's almost tautological (trivially true) that people want economic growth.
Indeed economic growth isn't required. It usually just happens as people produce the goods and services they or others want more efficiently or with more resources.
Can growth go on indefinitely? Basically yes. Nowadays a lot of things of value are just information (think about a computer game). We can produce a lot of information. Also, even if there were hard limits to what you could produce, you can have infinite growth by asymptotically getting closer to what is the theoretical maximum without hitting it, although growth will be slower and slower.
Its not just any developed nation, its any nation that runs on capitalism. Its quite easy really.
We've accepted that the only valid economic model is capitalism, which really means its legit to generate wealth by having wealth (capital).
This brings up a problem when wealth generated by everyone in a state in a year is limited, and it is in the real world. People only work that many hours a day, the wealth generated by any state has to be shared by its people. The problem lies in the fact that wealthy people will get a bigger and bigger share of the pie as time goes along, assume the pie (the amount of wealth generated a year) does not increase.
The poor, having little wealth to begin with, can only do actual labor to produce wealth, min-wage etc, they have no real ability to obtain the means of generating wealth, ie have wealth-generating capital. But the rich do. They can reinvest their wealth into more wealth-generating capital, and own a greater and greater share of the wealth generated by everyone in a year. The cycle never ends, until the rich own and produce everything.
GDP growth is there to ensure that while the rich get their fill, the poor also don't stare completely.
In the premodern age, there was little economic growth, the only means of the rich getting more wealth, was really to steal from someone, ie wars and imperialism. Considering capitalism and greed will probably not go away in our lifetime, GDP growth is a good alternative to thieving from others.
tiredstars t1_iu8rnz1 wrote
There are a bunch of reasons for this. I'm sure this is in no way an exhaustive list.
Most countries still have growing populations. So if the GDP isn't growing then GDP per person is falling.
Lots of people clearly don't have enough stuff. There are people in the UK going hungry or cold because they don't have enough money. Increasing GDP can offer a way of making things better for these people without making anyone else worse off.
Even people who clearly do have loads of stuff tend to want more.
Businesses usually expect to grow, and a larger economy generally makes this easier.
Many plans for the economy and government finances assume economic growth. For example plans for paying government debt or pensions are projected many years into the future, and assume the economy will grow. If it doesn't then paying for these becomes much harder. Not only that, but the impact will be felt straight away, eg. by interest rates on government debt going up.
Countries competitive with others about some things - if the UK's economy shrinks there's less money to spend on its armed forces, for example.
On a more cooperative note, more GDP means more money to spend on international aid, for example.