Shifting towards a post-growth economy might sound suicidal in our current policy schemes where governments give up even power to keep up the growing path. However, that extra surplus in the GDP might -and do- bring unbalance to the economy and cyclical crisis rise up every now and then to put up stability to the system. A new research shows how a post-growth capitalism could just clean up our economy in ways we have never thought it could.
Far from some expert’s concern that capitalism without growth will inevitable collapse over time, economist Adam Barrett has recently released a new paper showcasing both scenarios for a same example. Using a brand new mathematical macroeconomics model, his findings were most unexpected. An economy where growth wasn’t pursued or even desired made it more robust, stable and fairer over time than the same economy following our current always-growing schemes.
In both scenarios, what it made the most impact was the behaviour that some main economic actors (investors, businesses, workforce, etc.) follow when a growing or non-growing economy is given.
For that, Adam Barrett found out that “businesses should not take on extra debt when there is an economic upswing, nor should they engage in any panic-induced debt payoff during a temporary downswing. The results even suggested that low debt volatility was more important for stability than the overall level of debt.”
Also, far more important for stability and a healthy economy was how debt behaves in such given scenario. His findings were again unexpected as the more rapidly businesses try to change their level of debt in response to easily-happening fluctuations in a growing-based economy, the more a crisis is to be triggered.
To answer concerns about if a non-growth economy would be unfair and ultimately collapse, Adam Barrett found out that instead, an end to the extra surplus would not cause inequality but the share of profit going to workers actually would increase.
He also showcased in his research that moving to a stable post-growth economy could be accomplished without disassembling our whole banking system, and while keeping a positive interest rate on loans.
“There are, of course, reforms that would have to be made to the global financial system. I found that an end to growth reduces profits for business owners. Therefore, if it remains relatively easy for money to flow across borders, then investors might abandon a post-growth country for a fast-growing developing country. Also, businesses are beholden to shareholders keen on growth as a means to rapid profit accumulation,” he warned.
This experiment comes to prove that another way is possible and even desirable. The always-growing economy, followed as a mantra by governments all around the world, it is not only option. Moreover, questions arise around this critical aspect of national economic policies, questions that doubt whether if it an always-growing scheme can be maintained over long periods of time and if it really makes a difference improving the citizens’ happiness.
Nonetheless, capitalism has already showed these two traits as major flaws. In first place, Earth has limited resources, a finite number of raw materials, workforce and technology that just can keep up so far. Moreover, our current system showcases a cost-effective, profit-based productivity chain, in which extracting resources or transporting goods around the world must be growth worthy. That means that the economy will need to adapt when any of these chain links display any sign of flaw or become too expensive to work with it.
On the other end, a growing economy has been proved insufficient to provide better happiness rates for the citizens as most of the extra surplus tends to be sent away to pay off debt created by an unbalanced system. Therefore, national health systems, benefits coverage, infrastructure and mobility or improved educational strategies, aspects that clearly cope people’s concern, are left out of the GDP growth.
Hernaldo Turrillo is a freelance journalist working now for IntelligentHQ. Hernaldo was born in Spain and finally settled in London, United Kingdom, after a few years of personal growth. Hernaldo finished his Journalism bachelor degree in the University of Seville, Spain, and began working as reporter in the newspaper, Europa Sur, writing about Politics and Society. He also worked as community manager and marketing advisor in Los Barrios, Spain. Innovation, technology, politics and economy are his main interests, with special focus on new trends and ethical projects. He enjoys finding himself getting lost in words, explaining what he understands from the world and helping others. He was born journalist and became a thinker. Knowledge has no limits.