To keep growing an economy in order to keep

To what extent is economic growth necessary for ensuring the continued well being of society?In past years world leaders have become obsessed with economic growth (GDP growth) and are convinced that the expansion of their economies will lead to increased well being for their society. For example in 2014 at a G20 summit in Australia, the most prominent declaration was: “G20 leaders pledge to grow their economies by 2.1%”. This shows the mindset that world leaders are obsessed with economic growth.This has lead to a neglect of other important issues, most notably climate change and non-renewable energy sources eg. Coal, oil, gas, and timber. This is an issue that is strongly affected by growth rates because if growth occurs too quickly these resources will be depleted. eg. India; where the government has said that it will continue to pollute as much as it wants in order to catch up with other economies. India has felt that it is necessary to grow their economy to keep up with their growing population, this is unsustainable and contributes to global warming. However India uses the argument that GDP growth needs to at least keep pace with the rate of population growth in order to maintain living standards. However there are MEDC’s that are in stage 4 of the demographic transition where population growth is slowing down and in some countries that have reached stage 5, population is decreasing eg. Japan. Therefore the need to keep growing an economy in order to keep up with population growth is no longer valid and so growth is not necessary to maintain well being when put into the context of this argument. There are of course other factors that require a growing economy in order to maintain standards of living. For example there is the question of poverty. If poverty is going to be reduced and the rich are not to be made poorer, then economic growth will be necessary. Of course, making the poor richer is not easy and there are many political obstacles in the way. But at least growth makes it easier to help poorer people pay off their loans and earn enough to make sure that they can keep up with inflation. Imagine trying to alleviate poverty without growth. Income would have to be redistributed from rich to poor and this would cause a great deal of social unrest. Therefore the solution seems obvious- shift the goal posts and ensure that GDP growth is no longer be the biggest priority and so the government are able to focus on other improving other pressing issues, especially in developed countries where the population is no longer growing and, in some cases shrinking such as Japan. An apparent perfect solution has been proposed by Economist Kate Raworth, who suggests that we should be using the “doughnut” model as a compass for where we should be steering the economy where growth is not the primary objective. In her model, there is a sweet spot where the standard of living is above the social foundation but below the environmental ceiling and so the well being of society is maintained while being sustainable for future generations.However this is all very well calling for a new economic model for the 21st century, but how do we achieve this? It turn out that shifting away from the growth ‘obsession’ is not as easy as it seems, as Richard Heinberg points out in his book: ” The End of Growth”. This is because we have created both monetary and financial systems that are dependant on growth, if the economy grows then people buy more goods, businesses take out loans and existing loans are able to be paid. However if there is no growth then people buy fewer goods, business don’t take out loans and existing loans are unable to be paid due to inflation. This negative multiplier effect can easily spiral out of control and lead to a recession. The nature of this positive or negative multiplier effect means that there is no middle-ground, either growth or contraction. Therefore in order to shift towards the doughnut model that Kate Raworth suggests, we need to move the focus away from growth whilst still ensuring that the economy doesn’t fall into a negative multiplier effect and therefore into a contraction.