Economy 101

[crazymf]

I have a question please. This may sound simple to some of you but here goes.

Why does an economy have to grow to be healthy?

What's wrong with a maintenance economy with status quo?

To me, if an economy grows, so does population, resource usage, etc. If an economy keeps growing, doesn't that signify some race to destruction when the resources run out or there's too many people to be contained in our borders, perpetuating war etc?

Doesn't there have to be checks and balances or does the free enterprise system parallel nature in survival of the fittest entrepeneurs?

Is our economy consciously maintained by government at all or simply free for all business and a result of ebbs and flows of fortune?

Try not to massacre me too much on this. I'm asking because I truly don't understand the whole picture. It's obviously not an area of expertise for me.

[Mad_Michael]

I have a question please. This may sound simple to some of you but here goes.

Why does an economy have to grow to be healthy?

An excellent question that is far deeper than you might expect.

What's wrong with a maintenance economy with status quo?

Theoretically nothing. However, our corporate masters would all loose their jobs and that is apparently unacceptable. Ergo, 1% or 2% annual growth in our economy (if only from importing people) is critically important to prove that our econonic system works. The system doesn't actually work and 0 growth would prove that, but 1% or 2% growth from immigration is enough for all the capitalists (and the politicians and the voters) to believe that corporate capitalism is good for the country.

To me, if an economy grows, so does population, resource usage, etc. If an economy keeps growing, doesn't that signify some race to destruction when the resources run out or there's too many people to be contained in our borders, perpetuating war etc?

And war is good for profits.

Doesn't there have to be checks and balances or does the free enterprise system parallel nature in survival of the fittest entrepeneurs?

No. Capitalism will consume the planet and all the entrepreneurs too if you let it. What capitalism does best is to bribe governments to control/close/regulate their markets to their satisfaction.

Is our economy consciously maintained by government at all or simply free for all business and a result of ebbs and flows of fortune?

A little of both. The ebbs and flows are there for the entrepreneurs to surf. The rest is rigged by the government for the benefit of the largest corporations who abhore free markets as unprofitable. The most profitable markets are those that are regulated by governments to keep the riff-raff for the benefit of the inside players.

Try not to massacre me too much on this. I'm asking because I truly don't understand the whole picture. It's obviously not an area of expertise for me.

<{POST_SNAPBACK}>

Massacre? I'm help defend you viewpoint as it is an interesting and important one. The question is, to whose benefit is society run? Your question indicates that you are beginning to figure out the answer and it is not a pretty one because the answer is not "us".

[crazymf]

Massacre? I'm help defend you viewpoint as it is an interesting and important one. The question is, to whose benefit is society run? Your question indicates that you are beginning to figure out the answer and it is not a pretty one because the answer is not "us".

Thanks. The whole discussion board thing seems to be geared for survival of the 'knowitall' and to actually ask a question would normally be seen as weakness and could bring an onslaught of sharks ready for the kill. I'd be the first one to admit I don't know something if it brings on useful discussion.

Thanks again. I appreciate that. I've been a tradesman for 25 years and now a successful business man for the last 10. With the time to finally study things I never had time for before, I'm playing catch up.

And war is good for profits.

So what actually causes a dollar such as the Ameribuck to devalue when a war is proceeding? Is it simply because so much currency is expended abroad?

[Riverwind]

So what actually causes a dollar such as the Ameribuck to devalue when a war is proceeding? Is it simply because so much currency is expended abroad?

The US dollar is declining because of the US trade deficit and budget deficit. It is basic supply and demand - the private sector and the government needs to sell US dollars in order to buy foreign goods or to pay for government services. This means there is an 'oversupply' of US dollars for sale so the price must go down. The Japanese gov't has a huge deficit but is currency is rising because it has trade surplus surplus at the same time that creates a 'demand' for the yen the gov't needs to sell.

[Toro]

our corporate masters would all loose their jobs and that is apparently unacceptable. 

Do not listen to Mr. Michael.

Why must we have economic growth? First understand that economic growth is both a spontaneous/intrinisic process AND a determined desired outcome which leads to laws and infrastructures to encourage growth.

It is an intrinisic process because perhaps the biggest long-term factor in growth is technology. People invent things to make people's life easier. Utility, or wealth, is created when this happens, either measurable (which is economics) or unmeasureable (i.e. intangibles such as more leisure time, longer life spans, etc.). Because we as a society have figured out this is a good thing, we pass laws that - for the most part - make growth more desirable.

[crazymf]

1% or 2% annual growth in our economy (if only from importing people) is critically important to prove that our econonic system works. The system doesn't actually work and 0 growth would prove that, but 1% or 2% growth from immigration is enough for all the capitalists (and the politicians and the voters) to believe that corporate capitalism is good for the country.

So what you are saying is that growth is vital to the economy to make a flawed system work?

Why must we have economic growth? First understand that economic growth is both a spontaneous/intrinisic process AND a determined desired outcome which leads to laws and infrastructures to encourage growth.

It is an intrinisic process because perhaps the biggest long-term factor in growth is technology. People invent things to make people's life easier. Utility, or wealth, is created when this happens, either measurable (which is economics) or unmeasureable (i.e. intangibles such as more leisure time, longer life spans, etc.). Because we as a society have figured out this is a good thing, we pass laws that - for the most part - make growth more desirable.

So economic growth is not a conscious thing. It's a spontaneous thing spurred on by inventive people who want growth. Somewhat of a circular logic there.

Wealth is created both tangible and intangible you say. We all strive to have a better life than our parents did. I guess that is the impetus for it.

What neither of you have convinced me of is the original question of why. Why is growth good for the economy? Is there an end game? Is the economy ever good enough or are we in a growth race with our neighbors that will ultimately consume all resources and leave us in a down spiral. Or does the economy merely grow in order to survive the natural checks and balances that offset it?

Hmmmm.....

[August1991]

To me, if an economy grows, so does population, resource usage, etc. If an economy keeps growing, doesn't that signify some race to destruction when the resources run out or there's too many people to be contained in our borders, perpetuating war etc?

Your question is not bad but it somehow implies that there is some lever somewhere and someone is turning it to make the economy go faster.

The "economy" is the sum result of the actions of everyone living in society. Since you mention that you run a business now, I'll assume that you want your business to succeed and prosper. Well, if everyone does as you, the "economy" will grow.

Your question about resources is a separate question. If everyone wants their business to grow, won't they all be competing for fewer and fewer resources? (I gather that's your question.) The simple answer is: yes. The more complicated answer is that we are finding new resources all the time that we didn't know existed, and we are finding new ways to use resources so that we don't need so much of them. Cars and houses, for example, are more efficient now.

Lastly, you talk about "too many people". The evidence is that as people get richer, they have fewer children.

Is our economy consciously maintained by government at all or simply free for all business and a result of ebbs and flows of fortune?

By and large, the economy functions independently of government - although governments are major players in the economy. Surprisingly, economies are largely self-regulating despite the fact that they seem like anarchy sometimes.

Why is growth good for the economy? Is there an end game? Is the economy ever good enough or are we in a growth race with our neighbors that will ultimately consume all resources and leave us in a down spiral. Or does the economy merely grow in order to survive the natural checks and balances that offset it?

You seem worried that we'll all get so rich that we'll run out of what we need.

If you go back 100 years to 1900, people didn't have cars or airplanes and they didn't need oil for transportation. A major problem in cities was horse manure. It is hard to imagine what problem we'll face in 2100, but I suspect people will look back and consider our current fear of running out of oil the same way look at the manure problem.

Incidentally, the most limited resource is time, life itself. Excepting a cataclysm, society will never run out of that resource, although as individuals we will.

The whole discussion board thing seems to be geared for survival of the 'knowitall' and to actually ask a question would normally be seen as weakness and could bring an onslaught of sharks ready for the kill. I'd be the first one to admit I don't know something if it brings on useful discussion.

I've noticed that too and I have no explanation. Maybe because the Internet is new and it attracts young males who want to show off. This board has many thoughtful posters though, and a very broad range of opinions.

[Toro]

What neither of you have convinced me of is the original question of why. Why is growth good for the economy? Is there an end game? Is the economy ever good enough or are we in a growth race with our neighbors that will ultimately consume all resources and leave us in a down spiral. Or does the economy merely grow in order to survive the natural checks and balances that offset it?

To make it simpler then.

1. The standard of living will not improve. If you think there are no more poor people, that enough disease has been cured, that mankind is at the end of history, then fine, we don't need more growth.

2. On a more practical level, if the economy doesn't grow, profits won't grow. If profits won't grow, you won't get your pension, or at least a pension to live on. Hope you enjoy workings until you're 85.

Economic growth is not a zero-sum game. If there is a limit, we are no where near it.

[crazymf]

Thanks everybody.

I think there will always be poor people and rich people. There will always be smart people who excel in life and others who aren't and don't. That's not to say everyone doesn't have a niche where they are happy.

The thing that made the most sense to me is that the economy is a sum of actions by everyone in it.

I find it very interesting how a government lives and dies with how the economy does when they sometimes merely go for the ride with it. Peter Lougheed could do no wrong and Don Getty could do no right for instance.

Good stuff.

[theloniusfleabag]

Dear crazymf,

What neither of you have convinced me of is the original question of why. Why is growth good for the economy? Is there an end game?

Some people claim that the economy can be seen as a 'pie', with everyone vying for as big a slice as they can get. So, they claim, the answer is not to divide the pie more evenly (against 'market forces') but to create a bigger pie (growing the economy). Yes, there is an 'endgame', sort of, for it is when you get 100% of the pie. It is sort of like 'Monopoly', except you aren't allowed to win.

[Bakunin]

I have a question please. This may sound simple to some of you but here goes.

Why does an economy have to grow to be healthy?

What's wrong with a maintenance economy with status quo?

To me, if an economy grows, so does population, resource usage, etc. If an economy keeps growing, doesn't that signify some race to destruction when the resources run out or there's too many people to be contained in our borders, perpetuating war etc?

Doesn't there have to be checks and balances or does the free enterprise system parallel nature in survival of the fittest entrepeneurs?

Is our economy consciously maintained by government at all or simply free for all business and a result of ebbs and flows of fortune?

Try not to massacre me too much on this. I'm asking because I truly don't understand the whole picture. It's obviously not an area of expertise for me.

Good question, the economy and population must grow a bit like a pyramid beause if they don't, all the economic pressure (debt, pension plan, healthcare, etc..) will grow and the economy will krash because the new generation won't be able to support the older population.

Population growth is necessary to keep the economy alive, if it grow too fast and the futur generation can't keep up, the next generation will face a recession. If it grow too slow, they will face a recession so IMO one of the best economic tool is to regularize immigration to correct the pyramid of growth.

Personally i think that there is not a best regime between Left and Right government. Its 2 institutions that have their strenght and failure. But When you analyse the present, past and future, often one of those government fit better than the other, its better IMO to rotate and try to use both government to have the best overall result

Left government are often complex and can give very good result on the short and medium term if they are well handled but they can also easily give poor result with ordinary politician wich is often the case. Its a good form of government to structurate, organise and take care of alot of complex things. Since they are complex government, on a long term they usually become obsolete just like almost all 70'S canadian social program like healthcare and etc... IMO, one of the best combo is a Left government with a Right prime minister. It would mean a Left government that would analyse what is working, rework it to make it better and scrap what isn't working. Lucien bouchard government was like that, even if he failed on many things specially healthcare, i think he did a great overall job.

Right government are based on keeping things simple. Its alot easyer to maintain and it often give good result. I think its the best to keep an economy healthy. Its often about what i would call rational politics. By rational politics i mean the best logical answer to make an economy grow and by itself help evry other problem we can face.

[SirSpanky]

The end game is defined by the limited resources on this planet. More efficient use of these resources will only prolong the day of reckoning.

Growth is vital due to the trend towards labour efficiency. Bigger machines in the manufacturing sector lead to lower labour percentages to achieve a given level of productivity. People then shift to service jobs, new jobs based on innovation and technology. (hi-tech businesses are very inefficient for our resources by the way, only pushing forward consumption)

Failure to grow ends in a snowball effect that touches all spheres of the economy. A bad thing.