The obsession with economic growth
A recent paper by Keysser, Steinberger, and Schmelzer summarized different theories about what motivates economic growth. We can safely say that economic growth is the number one obsession of all business leaders and politicians. Generally speaking it is about the rise of the Gross Domestic Product, which measures how much stuff is produced and sold in the country during a year. It’s the stuff that has a price and a buyer who has paid that price. A forest if it just sits there cannot contribute to growth, but if it’s cut down and sold, it does add to economic growth.
This obsession with economic growth comes, as the paper shows, from various sources. They counted 21 such plausible sources.
1 Accumulation of money.
2 Income and wealth inequality.
3 Economic class and private property.
4 Market competition.
5 Monetary economy.
6 Advantages of firm size.
7 Cheap resources and energy.
8 For-profit firms and profit maximisation.
9 Sales effort.
10 Working time / Labour-saving technological change.
11 Financial market depreciation.
12 Private interest-bearing debt and money creation.
13 Consumerist culture.
14 Growthist ideology.
15 Neoliberal ideology and policy.
16 Power and domination.
17 The state, elites and geopolitics.
18 Welfare state financing.
19 Miscellaneous, such as when human needs grow faster than productivity.
20 Population structure.
21 Technology and infrastructure
These 21 general themes have 112 mechanisms that lead to economic growth dependencies and imperatives. For example, theme 3 economic class and private property has 12 such mechanisms related to how private property forces the economy to grow just to maintain its existence. If we apply a critical view to this summary, which comes from 248 publications, we may be tempted to say that the causal chain stops right here, with this list of 112 mechanisms under 21 themes.
Capitalism is the economic system that is fundamentally defined by an eternal quest of economic growth. If the growth dependency and the growth imperative have so many plausible explanations, even though many of them contradict each other, we may think that it is virtually impossible to phase out the obsession of capitalists with economic growth. Where would we even begin?
If we just take the very existence of interest on credit, this alone creates many dependencies on growth, for example the need to engage in some sort of economic activity to pay back the loan plus the interest. You must expand, you must grow your activity, to generate more money than what you have borrowed, so you can settle your debt.
Or if we look at the consumerist culture, where people buy things to signal their status, we find that when you see your fellow rich human at the private club owning a new fancy car, you will want to do the same, because you don’t want to look like a fool or stupid or incompetent. Climbing the social hierarchy always demands growth.
Behind these 112 mechanisms that demand economic growth, I argue, there lies another reality on which the very design of capitalism rests. This design comprises of 3 causal forces that some of you already know: proportionality, dispossession, and hierarchies. These forces are embedded in the written rules of capitalism. It is these 3 forces that create the wide canvas of obsessions with economic growth.
The source of primary causes for the behaviour of economic agents under capitalism are the laws, the contracts, the rules, the algorithms that are written down in one way or another. These written rules control the behaviour of economic agents. Economic agents react to the rules by wanting and seeking economic growth because the rules create those incentives. The causal chain works like this: scripts, then behaviour, then growth.
Lo and behold, it is time to upgrade my model of capitalism. I am going to add feedback loops between the three causal forces and the obsession with growth. They are represented by the smaller arrows in colour. The three forces all trigger growth, which then triggers the expansion of property, power, and capital.
For example, if we take proportionality, which links power to property, we can see how having proportionality coded into law and contracts creates some of those growth dependencies and incentives. When shares in a company represent voting power, on the principle one share, one vote, then the owners of those shares will behave according to the logic of this principle. They will want to maintain their value. They will want not to lose them. They will want to reap benefits from them, such as dividends. This creates the need to expand economic activity. Their behaviour is triggered and limited by what the law allows. Elon Musk does not want growth out of nowhere. The sources of his desire to grow are the written rules of capitalism. It is not some sort of an abstract ideology, theory, or interpretation. Had those written rules not existed, his desire to become a trillionaire may not have even have appeared in his brain.
Next, if we take dispossession, the second fundamental force, which links property to capital, we can see how it too forces an obsession with growth. One perfect example of contemporary dispossession is the taking of personal data by Big Tech platforms. Once Facebook collects your online behaviour, it wants to do something with it, such as sell it to advertisers for profit. I argue that this very process of taking, which we can call dispossession, creates a dependency on growth. It is also independent from the quest for profit. Taking creates a habit of more taking, especially when there is no opposition. The lack of opposition stimulates accumulation without having to bother with guilt or empathy, and complete exemption from punishment. It’s all legal!
Next, if we take hierarchies, the third fundamental force, which links capital to property, we can see how the very existence of economic hierarchies creates the dependency of growth because a hierarchy cannot sustain itself without a continued input of resources and increasing revenue. CEOs and executives want more and more money. Undemocratic power under capitalism allows them to get it. Employees in the corporate pyramid also make continued demands for higher salaries but they don’t always get it because they don’t have the power to get it. The more power is concentrated in a corporation, the more hierarchical it is, and the higher demand on growth.
Once the dependency on growth is established, then the entire system pushes the expansion of power, property and capital. Economic agents, represented by entrepreneurs, managers, executives, government representatives feed the economic system with their behaviour, while the economic system itself controls and limits the behaviour of these economic agents. Capitalism is full of feedback loops.
I see capitalism as a causal-scripted economic system. Growth is the nature of the system. Forces are the nurture. This perpetual feedback look between nature and nurture is our economic system. But not all growth is bad. Sometimes it can create net benefit for society, when the needs of humans are met, such as the construction of a new hospital, or a new subway line. Targeted, careful growth can be good if it does not follow the logic of the 3 forces, but left alone, the 3 forces lead to accelerating destabilization of the environment and to frequent economic recessions.
Mind you, in this analysis of economic growth under capitalism, I am doing a causal analysis based on written rules, not an interpretative analysis, such as one done by Marxists or what you see in the Financial Times. Sure, we can have many great abstract interpretations of what this causal structure means, many schools of thought. Even my approach that identifies fundamental causal forces within capitalism may be incomplete, but I come with a very specific agenda, which is to find a clear causal explanation of capitalism, and to focus the strategy of phasing out capitalism on what really matters, from a causal perspective. Which means that if these causes are identified and phased out, it will change the system itself. As you have seen in my series Undoing Capitalism, there are specific ways in which, each of the 3 causal forces can be phased out. As a consequence, all mechanisms that create a dependency on economic growth will be fundamentally transformed. We will have a very different post-capitalism economic system, where economic growth will evolve in harmony with actual human needs.