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Basic economics tells you that this is not a good growth strategy to adopt especially if you have a consumption-based economy, and not savings-based one (aka Ch

Basic economics tells you that this is not a good growth strategy to adopt especially if you have a consumption-based economy, and not savings-based one (aka China, India). In short population is going to increase over time, resources are going to decrease over time, in order to keep GDP per capita in line with an increasing population, you cannot just decrease your spending (or tighten your belt). You have to grow by increasing income levels, and thereby increasing aggregate demand. If we only increase incomes, and dont spend, then aggregate demand goes down, leading to less consumption, less investment, which leads to lower employment opportunities, which leads to even lesser consumption, and so on so forth until we get to a severely regressive cycle, where our industries shut down. Point is, more power to you if you want to spend less, but making everyone else adopt your way of life because it works for you, does not mean it will work for them, and in entirety would not promote greater economic growth. PS for those arguing 'well it works for China'; well the USA is not China, and they are big structural differences which make it unnecessary and useless to adopt that model.

erejacob 15y ago
Well, not to worry, most people won't make "the sacrifice". Maybe if we transitioned to a production based economy but producing only quality items we needed. That way we wouldn't have to work so much. Unemployment would go down because people weren't scrambling for the the ability to consume. Concepts like planned obsolescence would go away. A lot of what we refer to as "growth" is just an indicator that the volume of economic transactions is going up. However, just because the economy is getting bigger doesn't necessarily mean it's getting better. Breaking windows and replacing them creates economic growth, but it doesn't make the house better.
- ahsanhilal 15y ago
  Well you have a point, and this model of an alternative economy based on self-sustenance, producing what we need is something that is being tested by a philosopher Frithjof Bergmann. Unlike most (read all) philosophers, Bergmann actually practices his ideas which are detailed in his book, "on Being Free". He talks about such an economy based on producing little and necessary items within communes and trading them amongst each other: http://newworknewculture.com/content/frithjof-bergmann http://newworknewculture.com/content/frithjof-bergmann They are actually applying New Work to various parts of the world including South Africa, Iraq (in Kurdistan) etc. I know this because in undergrad I worked with him on this project for a year. However, the main problem regarding an alternate system is quite philosophical; that what is the basic human condition? Hobbes came up with an answer calling life "nasty, brutish and short" and that our animal spritis needed to be kindered. In government we did it through Rousseau's suggestions that we need a system through which we do not kill each other. I don't kill and take your money/land, and you do the same for me. In economics, we came up with an answer through capitalism, and saw the biggest implosion of wealth ever in the 20th century. So it is hard to argue against that capitalistic/democratic mindset unless there is a viable alternative especially in the US, where it has worked the best for the better part of the century. As far as crises go, we have seen destruction and subsequent creation of wealth throughout this century, so that is not a reason to give up I think. http://www.economist.com/blogs/dailychart/2011/10/stockmarket-returns-20th-century http://www.economist.com/blogs/dailychart/2011/10/stockmarke...
  - westicle 15y ago
    I don't think implosion means what you think it means.
awongh 15y ago
I would say that the OP understands that a growth economy is not the end-all be-all of human progress, and in the end may not be ideal. Maybe it's not about imposing a way of life on other people, but realizing that the underlying philosophy of a growth economy is flawed- it's inherently true that limitless growth is impossible, so in some sense we are all just waiting until we either slide over the top of that curve naturally, or people realize that there are other dimensions to the problem than just the x and y plot of that graph.
- ahsanhilal 15y ago
  It is hard to argue against the underlying principle of the growth economy because it is the ONLY principle that has served has so well over the past century and gotten so many people out of poverty, and increased overall wealth, distribution of wealth is still a problem though. We are unequivocally better off today in standard economic terms than we were a 100 50 or 25 years ago. Growth can be tempered and slowed but you cannot look at growth in entirety. In Europe, Japan, Singapore you have a shrinking population and as such you need to create less wealth to support growth, whereas in China India you absolutely need exemplary growth to make those lives better off.
  - awongh 15y ago
    It's true that a growth economy is needed in third-world countries, but the curve is also steepening, so it's not as if we need another hundred years of similar progress in order for everyone to come closer to parity (that is, the curve of human progress in general) It's quite easy to argue against the underlying principle of the growth economy, because it pre-supposes that the previous 100 years of industrialized capitalism are what's going to continue to fix the world's problems. It also scares me that China's growth, for instance, is tied to me being able to go to walmart and get a cheap skateboard I'm never going to use and a huge LCD TV I'm going to throw away in two years. Our economic system of moving capital and wealth creation is now dependent on being convinced to want things we don't need, and shuffling around the systems of credit we created for that system. It used to be about creating value- mostly having to do with real things that fulfilled basic human needs, and now that the market's power isn't based on that, credit default swaps are what we come up with. It's a logical conclusion of a system that only has the principal of growth behind it. Obviously our market-based capitalistic system is the only viable way to efficiently move capital around right now, but you can't blame someone for being unhappy with the underlying message that growth is the only way forward, forever. Some people would argue that we've already reached the peak of the curve in the first world.
nirvana 15y ago
I'm sorry, that's not "basic economics". That's neo-keynesian economics. (They call themselves keynesians, but they aren't following what keynes said.) The word "capitalism" comes from the word Capital. You accumulate capitals so that you can invest it in productive assets. You could blow your money on a consumptive lifestyle, as you advocate. Or you could save that money, and use it to start a business. Notice, your business has value, and if you do well, you will have turned the money you saved into a lot more money. You will employ people, and you will make products that make your customer's lives better... generally by lowering the costs for doing things, for them, making them richer. This increases productivity. Your argument is only looking at one side of the coin and kind ignoring most of economics.... but it is the perspective put forth by politicians who want to spend spend spend. They want to spend because spending gets them power. But it damages the economy (government spending.) Henry Hazlitt wrote a good book "Economics in one Lesson". It's really a really good primer on economics.
- ahsanhilal 15y ago
  Ok let's all save money and try to be entrepreneurs, is that what you are advocating? Lets see, in your economy we are going to have a lot of producers, but who is going to consume these products if people are saving. Now if you say China does it, then I would answer back that China does it because it has the US and Europe as huge consumption bases for its produced goods. You are trying to give me an economics lesson, I actually have an advanced degree in economics, and I know every economics model there is in and out. Your talking about producing things somehow making lives better by increasing productivity, and then everyone lives happily ever after. I dont what kool aid your drinking but I can share with you a hundred papers which repudiate what you are saying. Next time you want to argue regarding economics, please argue with actual theoretical knowledge rather than some flimsy theoretical base that you have created in your own mind.
  - leot 15y ago
    I'm intrigued by your comment that you have an advanced degree in economics. I don't, but it seems obvious to me that you're missing something (I'm happy to be corrected here!): the problem isn't the lack of consumers so much as a lack of incentive to produce. If everyone becomes an entrepreneur, compelled to be stingy and just do productive things for the fun of it, then they're still being productive, and the world is still getting useful stuff. But, it seems your concern is that if everyone just does the work they'd like to do then there will be a misallocation of labor: certain things that need to get done won't get done.[1] Is this really true? Are there well-organized economies that are stagnating while people are engaged in their own independently productive pursuits? Is Japan's economy stagnating because they consume too little or because they are working too little? [1] An immediate counter-argument here is that people are likely to be more productive when they love their work.

erejacob 15y ago

Well, not to worry, most people won't make "the sacrifice". Maybe if we transitioned to a production based economy but producing only quality items we needed. That way we wouldn't have to work so much. Unemployment would go down because people weren't scrambling for the the ability to consume. Concepts like planned obsolescence would go away. A lot of what we refer to as "growth" is just an indicator that the volume of economic transactions is going up. However, just because the economy is getting bigger doesn't necessarily mean it's getting better. Breaking windows and replacing them creates economic growth, but it doesn't make the house better.

ahsanhilal 15y ago
Well you have a point, and this model of an alternative economy based on self-sustenance, producing what we need is something that is being tested by a philosopher Frithjof Bergmann. Unlike most (read all) philosophers, Bergmann actually practices his ideas which are detailed in his book, "on Being Free". He talks about such an economy based on producing little and necessary items within communes and trading them amongst each other: http://newworknewculture.com/content/frithjof-bergmann http://newworknewculture.com/content/frithjof-bergmann They are actually applying New Work to various parts of the world including South Africa, Iraq (in Kurdistan) etc. I know this because in undergrad I worked with him on this project for a year. However, the main problem regarding an alternate system is quite philosophical; that what is the basic human condition? Hobbes came up with an answer calling life "nasty, brutish and short" and that our animal spritis needed to be kindered. In government we did it through Rousseau's suggestions that we need a system through which we do not kill each other. I don't kill and take your money/land, and you do the same for me. In economics, we came up with an answer through capitalism, and saw the biggest implosion of wealth ever in the 20th century. So it is hard to argue against that capitalistic/democratic mindset unless there is a viable alternative especially in the US, where it has worked the best for the better part of the century. As far as crises go, we have seen destruction and subsequent creation of wealth throughout this century, so that is not a reason to give up I think. http://www.economist.com/blogs/dailychart/2011/10/stockmarket-returns-20th-century http://www.economist.com/blogs/dailychart/2011/10/stockmarke...
- westicle 15y ago
  I don't think implosion means what you think it means.

awongh 15y ago

I would say that the OP understands that a growth economy is not the end-all be-all of human progress, and in the end may not be ideal. Maybe it's not about imposing a way of life on other people, but realizing that the underlying philosophy of a growth economy is flawed- it's inherently true that limitless growth is impossible, so in some sense we are all just waiting until we either slide over the top of that curve naturally, or people realize that there are other dimensions to the problem than just the x and y plot of that graph.

ahsanhilal 15y ago
It is hard to argue against the underlying principle of the growth economy because it is the ONLY principle that has served has so well over the past century and gotten so many people out of poverty, and increased overall wealth, distribution of wealth is still a problem though. We are unequivocally better off today in standard economic terms than we were a 100 50 or 25 years ago. Growth can be tempered and slowed but you cannot look at growth in entirety. In Europe, Japan, Singapore you have a shrinking population and as such you need to create less wealth to support growth, whereas in China India you absolutely need exemplary growth to make those lives better off.
- awongh 15y ago
  It's true that a growth economy is needed in third-world countries, but the curve is also steepening, so it's not as if we need another hundred years of similar progress in order for everyone to come closer to parity (that is, the curve of human progress in general) It's quite easy to argue against the underlying principle of the growth economy, because it pre-supposes that the previous 100 years of industrialized capitalism are what's going to continue to fix the world's problems. It also scares me that China's growth, for instance, is tied to me being able to go to walmart and get a cheap skateboard I'm never going to use and a huge LCD TV I'm going to throw away in two years. Our economic system of moving capital and wealth creation is now dependent on being convinced to want things we don't need, and shuffling around the systems of credit we created for that system. It used to be about creating value- mostly having to do with real things that fulfilled basic human needs, and now that the market's power isn't based on that, credit default swaps are what we come up with. It's a logical conclusion of a system that only has the principal of growth behind it. Obviously our market-based capitalistic system is the only viable way to efficiently move capital around right now, but you can't blame someone for being unhappy with the underlying message that growth is the only way forward, forever. Some people would argue that we've already reached the peak of the curve in the first world.

nirvana 15y ago

I'm sorry, that's not "basic economics". That's neo-keynesian economics. (They call themselves keynesians, but they aren't following what keynes said.) The word "capitalism" comes from the word Capital. You accumulate capitals so that you can invest it in productive assets. You could blow your money on a consumptive lifestyle, as you advocate. Or you could save that money, and use it to start a business. Notice, your business has value, and if you do well, you will have turned the money you saved into a lot more money. You will employ people, and you will make products that make your customer's lives better... generally by lowering the costs for doing things, for them, making them richer. This increases productivity. Your argument is only looking at one side of the coin and kind ignoring most of economics.... but it is the perspective put forth by politicians who want to spend spend spend. They want to spend because spending gets them power. But it damages the economy (government spending.) Henry Hazlitt wrote a good book "Economics in one Lesson". It's really a really good primer on economics.

ahsanhilal 15y ago
Ok let's all save money and try to be entrepreneurs, is that what you are advocating? Lets see, in your economy we are going to have a lot of producers, but who is going to consume these products if people are saving. Now if you say China does it, then I would answer back that China does it because it has the US and Europe as huge consumption bases for its produced goods. You are trying to give me an economics lesson, I actually have an advanced degree in economics, and I know every economics model there is in and out. Your talking about producing things somehow making lives better by increasing productivity, and then everyone lives happily ever after. I dont what kool aid your drinking but I can share with you a hundred papers which repudiate what you are saying. Next time you want to argue regarding economics, please argue with actual theoretical knowledge rather than some flimsy theoretical base that you have created in your own mind.
- leot 15y ago
  I'm intrigued by your comment that you have an advanced degree in economics. I don't, but it seems obvious to me that you're missing something (I'm happy to be corrected here!): the problem isn't the lack of consumers so much as a lack of incentive to produce. If everyone becomes an entrepreneur, compelled to be stingy and just do productive things for the fun of it, then they're still being productive, and the world is still getting useful stuff. But, it seems your concern is that if everyone just does the work they'd like to do then there will be a misallocation of labor: certain things that need to get done won't get done.[1] Is this really true? Are there well-organized economies that are stagnating while people are engaged in their own independently productive pursuits? Is Japan's economy stagnating because they consume too little or because they are working too little? [1] An immediate counter-argument here is that people are likely to be more productive when they love their work.