Does the economy really always have to grow?

You can’t do without growth just like that.

There have been many crises. Once you have lost your savings, your own striving for more and more is demonized – and the idea of permanent growth is called into question. So why not just break away from it?

Because it’s not easy. “We have to grow – whether we like it or not,” says Swiss economist Mathias Binswanger. His position: There is a growth imperative.The competition never sleeps

In our economic system, only a few companies are out of competition. Most companies are in competition. Let’s imagine someone has a great, innovative business idea and founds a start-up. The product is well received. The start-up can still remain relaxed: it is out of competition because no one else manufactures this innovative product. If the small business can no longer keep up with all the orders, it can decide to grow. It can buy machines and hire staff to deliver the product faster. But it can also simply say: Hey, there’s just a waiting time for my product, dear customers. If you want to buy it, you have to put up with it – because I’m the only one who makes the thing. However, this changes when a competitor enters the scene. Now the question follows: How can the start-up convince customers to continue buying from him? How can it prevail against the competitor? There are a number of factors involved in achieving this. Let’s focus on two important ones. Be cheaper

The company can beat the competition by offering the product cheaper. This is usually achieved when mass production takes place. Because the company can then, for example, enforce a volume discount for raw materials or parts from its suppliers. In addition, his machines are working at full capacity and the production processes are well-rehearsed. But the competition will stay on the company’s heels. Be more innovative

And then comes the day when a competitor launches an innovative and better product – and the company passes by. If the new Primus now wants to gain a bigger advantage over the competition, it will want to be better than the rest in (almost) every respect. So also with the price. In order to be able to offer the product cheaply, he has to manufacture it in large numbers – and may need more machines, more employees, more space. It will grow. But he knows that all other competitors are still involved; continue to grow with you. They will try to bring the next hot thing to market inexpensively. Innovation through competition

Competition drives companies to innovate. “Those who stand still are displaced,” says Swiss economist Mathias Binswanger. “Because everyone else is constantly trying to get better with innovations and innovations to maximize their own profits.” On the one hand, they do this because profits are one of the expectations placed on successful companies. On the other hand, they do this because they need the profits. No profit, no investment

Because if they want to develop new or better products, they can’t do it out of nothing. You have to invest – in machines and bright minds. However, this only happens if they hope to win. They need it to finance machines, for example.Anyone who takes out a loan to buy an investment needs money to repay it – and even more to service the interest.If entrepreneurs want to collect money from shareholders, they must also generate profits. Otherwise, they will not be able to inspire anyone on the stock exchange.If a machine is bought from your own savings, you must first have the opportunity to save money. Or the machine has to be financed by foregoing other expenses.

“Only if the production promises a profit, it can be worthwhile and takes place at all,” sums up the sociologist Deutschmann. “With no prospect of winning, it’s better to wait and just keep the money.” If entrepreneurs were to do this, it would be the beginning of a downward spiral for them and for other companies.Without investment, it goes into a downward spiral

If companies stop investing – for example, in new machines – demand for them initially decreases. The companies that build machines or supply parts for them will sooner or later go bankrupt. People lose their jobs. You can’t make money anymore – and you can’t spend money. Demand continues to fall. As a result, even more companies will go bankrupt sooner or later. Even more people are losing their jobs.Corona: Concerns about the downward spiral

“To avoid this downward spiral, we need to maintain some growth,” says Swiss economist Mathias Binswanger. This is particularly evident in times of crisis – for example, now. If the state had not stepped in with aid loans and short-time work, we would be in a spiral due to the coronavirus, says the economist.

When people lose their jobs, they don’t pay taxes. So the revenue of the state decreases. At the same time, his spending is rising – namely on social benefits, because more unemployed people have to be secured. This, in turn, usually leads to the state having to take on more debt. If he does not get the economy going, in the worst case he will not be able to pay his debts. National bankruptcy would be the result. This is not an empty phrase, as the example of Argentina shows. The country has already gone bankrupt eight times. The reasons for this are manifold – including a shrinking economy and high inflation.Social developments

However, looming horror scenarios are not the only effects that the renunciation of growth and innovation would have for a country. His society would have to cope with the fact that its financial prosperity falls behind other nations. Let’s take Germany as an example: Many local companies are successful in technical fields and develop new products. If they stopped doing so, they would no longer be competitive with other companies in the world. However, if foreign companies continue to improve their goods, the technology from Germany would eventually become obsolete – and would no longer be bought at all. Companies would go bankrupt, people would become unemployed. Likewise, the country would have to come to terms with the fact that it will probably play a smaller role in the world in the future – after all, as a trading partner without innovation, it is no longer particularly interesting. Such developments could be avoided if the world collectively decided to rebuild the economic system. However, it is not so easy for nations to pull together. Problem of inequalities

Another problem is that we have a globalised economy. Less growth in industrialised countries could therefore also lead to lower demand in developing and emerging countries – and thus endanger people’s livelihoods. According to anthropologist Jason Hickel, there is still an option: “If we limited global GDP to current levels, poverty could only be eradicated through redistribution,” he says. But how likely is it that people will be able to agree on such a measure?