THE OBSESSION WITH INFINITE ECONOMIC GROWTH: Succumb or Change
Efraín Gonzales de Olarte
Economic growth is a kind of “common sense” concept that requires no explanation beyond the annual growth rate and the sectors driving it. The central question is whether economic growth is a means to improve people’s lives or an end in itself—one that has gradually acquired a life of its own.
The question arises: why has economic growth become an infinite process that has not—and does not—benefit everyone equally? The answer lies at two levels: 1. The capitalist system and modern society have created a mechanism that cannot be stopped without the risk of transforming into a different system or facing extinction. The concept is simple: growth depends on capital accumulation through investment; this increases production, and the subsequent sale of goods generates profits that must be reinvested—a cycle that continues indefinitely. 2. This system drives specific microeconomic behaviors. On one hand, capitalists invest and innovate to remain competitive, producing new goods or services—meaning there is always something new (and perhaps cheaper) to sell. On the other hand, workers consume what producers offer—new products, services, and ideas—generally doing so passively and often driven by the “pleasure of buying,” continuing to purchase whatever new items appear. Thus, the system creates a process of cumulative causation that never stops; in the long run, it is fueled by population growth, which boosts demand and leads to a corresponding rise in wage income and profits.
Complementing this, the financial system sustains growth through credit, ensuring the continuity of payment chains into the future. Obviously, banks profit from the interest they charge and will continue to extend credit as a means of securing future profits for productive sectors—and, certainly, for themselves.
Furthermore, the State needs to fund education, healthcare, infrastructure, security, public administration, and the justice system; this requires tax revenue, which in turn depends on economic growth. In a sense, the rule of law relies on economic growth. Moreover, governments are typically evaluated based on job growth and public service revenues—all of which depend on economic growth.
All these aspects have given rise to a growth ideology: more production → more wealth → greater well-being and a better society. Consequently, throughout the 20th century, progress was measured by the growth rate of the national product (GDP). In other words, the idea that growth is essential for the population’s peace of mind became part of the collective mindset. However, growing to meet essential needs is not the same as growing indefinitely once basic needs have already been met.
This is where another central problem of indefinite growth arises: the unequal distribution of its fruits. Generating social inequalities appears to be inherent to capitalism; yet, these inequalities do not necessarily trigger major social tensions, as wages continue to rise—albeit more slowly than profits—thanks to increased productivity and state-led redistribution.
As a result of this ceaseless growth, we have reached a point in the current century where economic growth has collided with the finite nature of natural resources and fueled global warming. This implies that, at some stage, further growth will become impossible—either because non-renewable resources (crucial for industry and technological development) run out, or because global warming causes such extensive damage that any growth is consumed simply by replacing what nature has destroyed (homes, forests, infrastructure, etc.). Clearly, unless significant technological shifts reduce natural resource consumption or the ideology surrounding indefinite growth changes, the future remains uncertain.
At this juncture, we might ask: is a no-growth economy possible? We could consider the possibility of a steady-state economy—characterized by relatively stable production, well-being, improved distribution, and a different institutional framework. The “stationary state” was the situation society was expected to reach at some point—a view held by classical economists such as Adam Smith, David Ricardo, and John Stuart Mill, and more recently by Robert Solow. John Maynard Keynes also maintained that humanity might eventually focus more on ends (well-being, happiness) than on means (economic growth). His vision was to arrive at a nearly stationary society, characterized by a stable population, the absence of war, and full employment.
I believe it is essential to begin considering a different future and, perhaps, a different kind of capitalism.