The sources of growth dependency

In the developed world, we have something of a conundrum when it comes to economic growth. We want it, and the economy needs it. But it generally means higher energy and resource use, and greater environmental harm. The maths on decarbonisation warn us that there’s really no way to reconcile further economic growth with climate safety. A growing number of people recognise this, but to challenge economic growth is political suicide. As things are currently configured, it’s a recipe for recession and collapse.

Why are we so dependent on economic growth? That’s a question taken up by Positive Money in a recent report. It’s an important one: “Addressing all the sources of growth dependency would reduce the pressure for endless economic growth and open the door to an economy that operates within the limits of nature.”

The report, called Escaping Growth Dependency, doesn’t have answers to everything. Positive Money are most interested in the money system, and so they only really deal with one aspect of the problem. But the report does set out a series of reasons why the economy is dependent on growth, and it’s a good sketch of the postgrowth challenge, and where we should be focusing on new solutions.

1. Maintain employment and living standards. If populations are increasing, then the economy needs to scale up to accomodate new workers and allow people to provide for themselves. Growth gives people more income and opportunity. The postgrowth movement has ideas here around shorter working hours, and a basic income. Steady state theory is also predicated on a stable or shrinking population.

2. Reduce poverty. This is often the first defence of economic growth – how do we solve poverty without it? That’s fair up to a point, but in an advanced economy such as Britain’s, enduring poverty isn’t because the economy is too small. The problems are to do with distribution and inclusion. As we saw recently with Oxfam’s latest research, global growth mainly goes to the richest. Ending poverty has to be much more targetted and strategic than just inflating the economy and hoping for the best.

3. Avoid problems with inequality – if the gap between the rich and poor is growing, and the share of wealth being distributed through wages is shrinking, then your country has an inequality problem. But those are politically difficult. It’s easier to promise growth, and ask those at the bottom not to worry about how much richer the richest are getting, as long as their own incomes are rising. It’s very rare (though not unheard of) for politicians to be explicit about this, but it is defacto policy.

4. Government finances – if the economy is doing well, governments get a double benefit of high tax receipts, and fewer people needing government assistance. That allows them to make tax cuts, or offer more services, and running a budget is a whole lot easier. Conversely, a stuttering economy means rising demand for government help, but less money to pay for it. So growth is pretty essential to balance the books.

5. Private debt – a growing economy means rising wages, and this makes it easier for people to pay off their debts, especially mortgages. Growth takes the pressure off private debt. This is one of the less explored areas of postgrowth thinking, though some see some form of debt ‘haircut’ or jubilee as a prerequisite for running the economy without growth.

6. Government debt – without growth, debt repayments and interest would take up a larger percentage of government spending. Governments could be overtaken by unsustainable debts.

Escaping Growth Dependency looks into solutions for the last two of those, and you can read the report for details. There are good solutions for other sources of growth dependency, and some places that are still really difficult. Nobody should be claiming that a postgrowth economy is simple. But then you have to compare it to the alternative, which is bending the laws of nature infinitely into the future.


  1. Worth commenting that you have previously reviewed a couple of good books that cover this, such as Tim jackson’s ‘Prosperity without Growth’

    1. Correct, at least as a way of rebalancing things a little. Longer term solutions would need to include more people in the wealth from the start, rather than redistributing afterwards. Things like sovereign wealth funds, citizens incomes, employee ownership and community banking.

  2. Being able to provide jobs for more people is essential for economic growth. I have seen that without the ability to make money comfortably, being able to pay all basic expenses off with plenty left over, consumers spend less and companies suffer. Even implementing technological advances, like adding new fast food technology to the fast food industry to bring customers in, people will not be open to spending as much without decent jobs, and these companies making tech strides will suffer financially. People need jobs that they can live on, and take care of themselves with, without being so dependent on borrowing money they’ll never be able to return.

  3. Chapter 16 of Keynes’ General Theory makes a good case for there being natural limits for tolerable compounding of returns on investments, best provided by voluntary or required increases in spending from savings.

    There could be a global rule for investors to spend 10% of their profit savings every year in qualified common interests, for example.

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