As the U.S. has just released that its GDP has grown only 0.1% in the 4th quarter of 2012 and that trend of low growth is persistent in every economic headline for seemingly every country, the question of whether this is a temporary phenomenon or the new reality is very relevant. Personally, I am of the opinion that this zero growth environment may be unavoidable.

This theory has been discussed for quite some time, beginning with the Club of Rome’s (an international thinktank) “The Limits to Growth” published in 1972.  Essentially, what “The Limits to Growth” found through advanced computer modeling was that if the world continued to consume resources and grow its current pace, there would reach a point (around 2030 according to the base model) where the finite resources of the Earth will be unable to sustain human uses. While the book was released nearly 40 years ago, revisiting its projections reveal that it is scarily accurate even today. Even GMO’s Jeremy Grantham, one of the best GDP prognosticators, has warned there may be zero GDP growth by 2050.

However, this may not be all bad news. There have been many groups and intellectuals advocating for a change from our current “growth-is-necessary” economy to a zero-growth (or steady state economy). The Center for the Advancement of the Steady State Economy is the best known of these. Essentially what a steady state economy is is an economy where growth is not the object, but rather a sustainable quality of living is. That sounds great, but the problem is transitioning from our current economic model where money requires growth to the steady state model as Charles Eisenstein shows in the Guardian. Further, the scariest prospect to most people of the steady state economy is that it necessarily means less time in the work force. However, this leads to an increase in leisure (which is not a bad thing at all!). This leisure time could be used towards the advancement of some of the “finer” points in life that are not as pursued anymore due to the economic growth myth such as philosophy, art, and literature.

One current example of a steady state economy is Japan. While Japan may not be a willing steady state economy, they have been for the last two decades as their GDP has grown by an average of 0.82% since 1992. However, as  Ed Dolan shows, this lack of economic growth has not made the Japanese any less happy or well-off in terms of quality of life compared to their growing economy peers. However, Japan could likely improve their citizens’ quality of life if it would stop trying to reignite its GDP engine and instead focus on investing in the sustainability of its economy (the unemployment rate for young Japanese is extraordinarily high). This can help serve as a warning that if you agree with myself and Richard Heinberg (author of “The End of Growth”) that a zero growth world is unavoidable—that countries and politicians must be prepared to handle the transition. Even “The Limits to Growth” talked about this, saying that unless we are prepared to accept the reality and transition accordingly, there would likely be a widespread collapse of our society which would be even more difficult to overcome.

I know this was a long and rather depressing post, but what do you think about this hypothesis of zero growth? Should countries around the world accept the reality and start to begin the transition to a steady state economy or is this theory just that—only a theory that will never come to reality?

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