“It is time to move away from our focus on economic growth as a key indicator of a society’s success,” US researchers say. After all, according to them, there is a good chance that we will be heading for a prolonged decline in growth this century – and countries will have to prepare well for this.
The advanced liberal democracies have entered an unprecedented era of economic growth, which may be drawing to a close this century. Macroeconomic forecasts indicate slower growth, Writing by researchers From the University of Colorado Boulder in the magazine The nature of human behavior.
democracy and prosperity
At the beginning of the 19th century, less than 1% of the world’s population lived in a democracy, compared to about 55% today. Global prosperity has also increased exponentially since the Industrial Revolutions. There appears to be a causal relationship: on average, open democratic institutions promote growth, and in the long run, growth and prosperity promotes the formation of democratic institutions.
Furthermore, the long-term effects of COVID-19 and climate change could further slow growth.
Modern liberal democracies—which enjoy a great deal of economic and political freedom and stability—have led the way, but may now face a future of prolonged slowdown in economic growth.
Causes include an aging population, a shift from goods to services, slowing innovation and government debt. Furthermore, the long-term effects of COVID-19 and climate change could further slow growth.
Some sustainability scholars see slow growth, stagnation or even “regression” as an environmental necessity, especially in developed countries. But the researchers wrote that the slowdown in growth will affect more than just the economy and the environment, and countries will need to prepare for that.
Gross Domestic Production
Historically, economic growth has been an important measure of the success of advanced democracies such as the United States. So it was central to national identity, said lead author Matt Burgess, associate professor of environmental studies and economics at the University of Colorado Boulder.
Economic growth is measured by GDP, which the United States also uses to prepare its federal budget. But in the United States, federal debt is now expected to exceed GDP in the coming decades as growth slows, which means other ways to offset the budget deficit need to be considered.
“To prepare for a slow-growing future, we need to move away from the idea that a growing economy is central to national identity,” Burgess says.
Burgess and co-authors argue that slowing growth poses challenges to social solidarity, inequality of opportunity, personal financial resources (retirement, savings), mental health, and public confidence in government. “Whether slow growth is inevitable or planned, we argue that advanced democracies need to prepare for more financial and social tensions, some of which are already clear.”
“To prepare for a slow-growing future, we need to move away from the idea that a growing economy is central to national identity.”
To meet these challenges, the authors call for a combination of measures, which they call “assisted civic recovery”: aimed at decoupling social capital and well-being from economic growth.
The article points out several possible actions: strengthening democratic institutions and increasing social inclusion; reducing economic inequality and increasing social solidarity; Increasing investment returns on public spending by closing tax loopholes, reducing corruption and raising taxes; and finally improving the non-economic aspects of people’s well-being.
One example that Burgess gives to improve social solidarity and reduce inequality is to integrate societies further, rather than dividing them on the basis of income level. “Instead of building subsidized housing in a concentrated area, the government could give families vouchers so they can live where they want,” Burgess says. Hence families can become more integrated into society. In trials, such a program has also been successful in reducing intergenerational poverty.
The authors also say that slow growth should not necessarily be avoided. Economists have previously noted that two of the main drivers of slower growth — aging and the shift from goods to services — reflect improvements in welfare.
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