Since rising productivity is a key component of G. Taken together, slower growth in the labor force and the shift to services can explain almost all the recent slowdown, according to Vollrath.
If the U. If you think about growth-compounding in other rich countries, and developing economies growing at somewhat faster rates, you can readily summon up scenarios in which, by the end of the next century, global G. Is such a scenario environmentally sustainable? Democratic Presidential candidates, insist that it is. They say that, given the right policy measures and continued technological progress, we can enjoy perpetual growth and prosperity while also reducing carbon emissions and our consumption of natural resources.
We can have growth that is strong, sustainable, balanced, and inclusive. They endorse scientific research into green technology, and hefty taxes on fossil fuels, but oppose the idea of stopping economic growth. For a time, official carbon-emissions figures seemed to support this argument. The pattern was similar in the United States: G. Globally, carbon emissions were flat between and , according to figures from the International Energy Agency.
According to a recent report from the Global Carbon Project, carbon emissions worldwide have been edging up in each of the past three years. As long as G. Beckerman argued that this was the key to avoiding such conflict. But, if growth were abandoned, helping the worst off would pit winners against losers. The fact that, in many Western countries over the past couple of decades, slower growth has been accompanied by rising political polarization suggests that Beckerman may have been on to something.
Some degrowth proponents say that distributional conflicts could be resolved through work-sharing and income transfers. A decade ago, Peter A. Victor, an emeritus professor of environmental economics at York University, in Toronto, built a computer model, since updated, to see what would happen to the Canadian economy under various scenarios.
In a degrowth scenario, G. This reduction results from the decline in GDP and a very substantial carbon tax. More recently, Kallis and other degrowthers have called for the introduction of a universal basic income, which would guarantee people some level of subsistence. Last year, when progressive Democrats unveiled their plan for a Green New Deal, aiming to create a zero-emission economy by , it included a federal job guarantee; some backers also advocate a universal basic income. Yet Green New Deal proponents appear to be in favor of green growth rather than degrowth.
But they can also attempt to induce state institutions to introduce redistribution measures in their favour rent seeking. Their income has no productive quid pro quo: they receive an "income" which is financed by the productive activities of other economic actors.
In the course of time in a stable society the number of rent-seeking interest groups and their influence on income distribution increases. The more people and groups shift their economic activities away from productive ones to political redistributional ones, the lower the productivity in a society will be. The rent-seeking society thus bears the seed within itself of a self-reinforcing "vicious circle".
The more society complies with the dictates of rent-seeking interest groups the more will the incentive increase for individuals to become rent-seekers themselves. With the increase in the number of rent-seekers, the costs to the individual of disguising the fact that he is not striving for entrepreneurial success but is seeking political rents will fall. The reason for this "vicious circle" lies in the high fixed costs which have to be met by rent-seeking opponents of reform in order to get hold of the political controls.
Once the reform-opposing interest groups have established themselves in the seat of power, however, rent-seeking activities show increasing returns to scale. The more people join the rent-seeking interest groups, the higher will be the costs to the economy as a whole because the allocative distortions steadily increase and ever more resources are removed from productive activities and used for rent-seeking. The inefficiency of a rent-seeking society is of particular importance where innovative people, instead of setting up or managing businesses in the rent-creating sector and thus supporting innovations, are active in the rent-seeking sector because it appears easier to achieve political rents than business profits.
The activity of the creative, talented people in the rent-seeking sector causes this sector to expand at the cost of the rent-creating sector. This is the case, for example, if a career in the state bureaucracy, in the church or in the army is more attractive than entrepreneurship or if state regulations so limit the development opportunities of a business manager that the search for state-legitimated monopoly positions appears more attractive from the point of view of the individual firm than the striving for innovations.
The concept of the rent-seeking society illustrates why a prolonged weakness of growth leads to the insidious decline of an economy. If the cake is not or hardly becoming larger, the struggles over distribution will become harder and harder. The small rent-seeking groups are usually better organised and more powerful than the usually unorganised, comparatively heterogeneous, large rent-creating groups.
It is almost inevitable that in "developed" democracies a government will ultimately give way to the pressure of individual interests and their electorate! The rent-seeking interest groups push back all those forces which threaten to change the existing politico-economic constellation of power.
If structural change ebbs, however, development and therefore growth will also slow down. An "ossification" then takes place which leads to a sinking of the rate of real economic growth and in the long run to stagnation and decline. The political million dollar question is how can we free the rent-creating sector from the iron grip of the rent-seekers.
A potential answer is to proclaim that without a strong rent-creating sector there will be no growth and without growth there will be nothing to redistribute in the long run. In other words, a growth-oriented policy is the best social policy. That deals can be relied on is crucial for investors to feel confident in making investments, without which economic progress will be slower and fragmented.
A crucial question to consider is whether everyone makes a deal around an investment opportunity or a government contract, or is it only those who are connected to the government? Different types of development require different sorts of deals.
You can get rapid growth without strong institutions so long as deals are ordered and trusted. As important as ordered deals are open, inclusive deals. These are deals that are accessible to a wide group, so lots of investors and enterprises can participate in development. In this way, deals must evolve from closed to open, with a wider group of investors able to participate, as opposed to just the friends and cronies of politicians. This is when we see structural transformation and sustained inclusive growth.
A collusive deals space, with small groups of capitalists making deals with those in power, can lead to rapid economic take off. However, in places where rapid growth has come from close relationships between politicians and capitalists, problems can come down the line in converting growth to structural transformation.
Economic growth can catalyse seismic social shifts by generating new economic opportunities and possibilities, new ways of thinking and new technologies. Growth can encourage the evolution of new forms of institutions and new social relations, too, as society adapts to the new material status quo. We see this structural transformation occur more frequently when deals are open and the benefits of growth are widely distributed.
Transformation requires the interaction of different capitalists with new technical abilities to exploit new areas and put labour to work on new things. Closed deals are likely to block that transformative process. Structural transformation is important because it can make the gains of growth more sustainable.
This is because the productivity of capital increases with greater investment in technology and human capital. Economies move to produce higher value goods and services rather than focusing on backbreaking low value activities. This is how historically countries have been able to move forwards and overcome poverty in a sustained way over time.
Transformation shifts countries onto a different trajectory of productivity, with more and better jobs that create more value. We also see companies become more self-sufficient from a commercial point of view rather than needing to rely on direct support from the state. Today more than ever, every discussion around economic growth comes with a big caveat around sustainability and the need for targeted expansion in low polluting, green sectors.
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