August 22, 2024
What Makes the Most Sense for Humanity? High Growth, Low Growth, No Growth or DeGrowth
Philip Kotler
Virtually all nations of the world pin their hopes on growth, economic growth. All nations measure their growth rate by Gross Domestic Product (GDP). If GDP rises, the nation has achieved positive growth. That nation produced more goods and services this year than last year. For several years during China’s industrialization, China reported a 10% GDP growth rate. More recently, China reported a 5% growth rate. India is reporting a 7.2% growth rate. Western economies are reporting a 2% growth rate. Some nations are reporting a zero growth rate, the sign of a stationary or stagnant economy. Some nations are reporting a negative growth rate. Some nations are actively planning for DeGrowth.
What are the good and bad features of each growth rate?
A High Growth Rate
If asked, most people would favor living in a high growth economy. If income is fairly distributed, every citizen would experience a higher income. If income is not fairly distributed, the rich would get richer and the others might gain at best a small increase in their income. Because income is not fairly distributed, the gain is likely to be small for the poor segment of the population.
China experienced several years of 10% GDP growth and the effect was highly beneficial. A great number of Chinese citizens moved out of poverty. The middle class showed good growth and several millionaires and billionaires also emerged.
A growth rate of 10% is not likely to continue for long. The higher purchasing power in the public’s hands will lead to faster growing expenditures than can be met by the available goods and infrastructure. The result will be inflation. The government will intervene to tame the inflation and the growth rate will start falling to a more normal GDP rate.
A high growth rate will also cause a high rate of carbonization that will lead ultimately to warmer temperatures. Another negative is that a high growth rate will consume energy, minerals and materials to unsustainable levels. The government might decide to tax the rich and transfer more money to the poor and this may slow down growth. The government might impose policies to protect the environment, causing a further slowdown.
A Low Growth Rate
Most countries are stuck with a low GDP growth rate, somewhere between 1–3%. Maybe this low growth rate is due to government interventions to protect the environment from irreparable damage and to protect the poor from inadequate incomes. Most citizens in these countries accept this low growth rate and the fight is mostly over how much to tax the rich and send transfer payments to the poor.
A Zero Growth Rate
The 18th century economist Adam Smith advanced the concept of a stationary economy. He believed that all national economies would eventually reach a stationary state. A stationary economy (sometimes called a steady state economy) occurs when an economy has reached the physical limits of economic growth and reproduces wealth by maintaining capital stocks, replacing worn-out goods, and carefully managing nonrenewable resources. In a stationary economy, the wealth and income of individuals remain unchanged, and the economy does not grow over time.
A stationary economy would do the least damage to the environment and temperatures. Population growth may remain small, many people will know each other, and behavior from day to day is likely to be familiar. Some people may prefer to live in a steady-state economy with its stability and lack of surprises and crises.
A Negative Growth Economy
Many poor nations experience a negative GDP. Production and sales of goods and services fall in relation to the previous year. From year to year, the country gets poorer. The effect is more hunger and hardship. More people die and many will try to leave and enter economies with positive growth rates.
A DeGrowth Economy
A degrowth economy is a special case where a normal low growth economy decides to deliberately plan to achieve a negative growth rate. The public has become super concerned about the planet’s health and people’s well-being. The public and government worry whether there will be enough energy, materials and food to support life and prevent the earth’s temperature from getting too hot. The public is urged to buy less clothes, burn fewer trees for newsprint, conserve water more carefully, avoid luxury goods, and build smaller homes. Advocates call for scaling down destructive sectors such as fossil fuels, mass-produced meat and dairy, fast fashion, advertising, private jets and mansions. There is an attack on the planned obsolescence of products and a call for lengthening the lifespans of manufactured goods and reducing the purchasing power of the rich. By making fewer goods, the nation will slow down the exhaustion of basic materials, minerals, and energy. By pursuing rapid decarbonization and reducing ecological breakdown, social outcomes will improve. Energy and materials are freed up for low- and middle-income countries. The degrowth nation would improve public services such as health care, education, housing, transportation, Internet, renewable energy and nutritious food. The underlying belief is that degrowth can create acceptable prosperity while using less materials and energy.
Conclusion
One needs to think deeper about what happens with different economic growth rates. The world has worshipped high growth but is increasingly realizing that high growth adds some negatives for the planet’s health and for what constitutes a good life for earth’s citizens.
