Dr. Mayer, Deutsche Bank, is convinced: "Globally speaking, we need growth."
Prof. Sunde, LMU Munich, sees no way to curb the striving for growth: "The human being is never satisfied."

Changing economies – Do we need economic growth?

Dialogue forum on 17 April 2012

Speculative bubbles, scarce raw materials and the consequences of climate change - the arguments touted by growth critics are falling more and more upon listening ears. But is a world without growth even conceivable? This was the question that panellists addressed on the fourth evening of the 2012 dialogue forums.

The Munich Re Foundation invited Dr. Thomas Mayer, Chief Economist of Deutsche Bank, Prof. Uwe Sunde from Ludwig-Maximilians University in Munich and IT entrepreneur Harald Rossol as experts for the event entitled "Power and influence – Who controls the world's destiny?"

The Club of Rome published an analysis of the limits to growth as early as 1972. In it, the scientists came to the conclusion that the Earth's resources would be exhausted within just a few decades unless a fundamental rethink took place. Their gloomy prediction didn't eventuate, but at the latest since the financial crisis, an uneasiness has been spreading among the world's population about the global economy's apparent need to go ever higher, faster and further. But Thomas Mayer reminds us that: "In our affluent societies, we may have the luxury of being able to discuss whether we want more or less. But globally speaking, we need growth, because there are still very many poor people for whom that is the only way they can improve their lot." Driven by highly populated countries such as China and India, the emerging nations will soon overtake the industrialised ones in terms of aggregated added value. Contrastingly, there is stagnation in many developed countries because they are only recovering slowly from the effects of the financial crisis.

Mankind as the driving force

As Uwe Sunde sees it, there is no way to curb the striving for growth anyway: "The human being is never satisfied. Every one of us tries to find ways to improve our life." The gross domestic product – the sum of all goods and services produced within a given economy – is an indicator of prosperity because it reflects the opportunities for consumption. Professor Sunde also considers access to raw materials to be a key factor favouring growth. The accumulation of capital and know-how, globalisation and population development are also of great importance. "However, as growth increases, so does inequality," Sunde adds. He says that this is relevant from a politico-economic standpoint because it leads to an increased demand for redistribution. "If one were to do away with growth - and I am not saying that this is possible - but if one did, the consequences would be dramatic." Because if one country stagnates while another grows at a rate of 2 per cent per annum, the second country's economic performance would be 50 times that of the first after 200 years. Sunde doesn't see any limits to growth, because even if the population ceases to grow and globalisation has been completed, there will still be innovations that drive the economy forwards. However, the growth that can be achieved with them is much smaller.

Harald Rossol, on the other hand, has an entirely different opinion than these two economists. He says that the developed world is already coming up against its limitations; something that can be seen, for example, in the climate protection discussion. As a way out of this dilemma, he suggests focusing on qualitative growth, as he does with his IT consulting company erecon. "I consider the size that this enterprise has reached to be ideal. That's why I want it to grow through quality attributes now, rather than just selling more IT products," he explains. In this way, industrialised nations should also stop trying to generate more prosperity by means of ever increasing production. "It's not about forgoing affluence, we just have to deal with the resources we have more efficiently," he demands. In his opinion, the quantitative approach to growth pursued by the classical economy is misguiding. "If we want to be successful in the developed world in the next 20 to 30 years, we have to rapidly distance ourselves from the purely growth-driven prosperity indicators and move towards qualitative characteristics such as knowledge, education and efficiency."

Fighting resource scarcity with knowledge
Deutsche Bank economist Mayer is convinced that humankind disposes over sufficient inventiveness to be able to handle the problem of scarce resources. "Finites can be overcome with knowledge, and knowledge is a resource that we can consider in our human dimensions to be infinite." Sunde also assumes that humanity will always find a way to adapt to changes. "The only question is whether its incentives to do so are always the right ones," he says. Because that requires that the prices, which have an important control function, form on perfect markets, and that the expectations about the finiteness of the resources are rational. Also, indirect costs such as the burden on the environment also have to be factored in. When the incentives are false, we run the risk of overusing the resources and failing to develop next-generation technologies. If the market fails in this way, the state has to intervene with regulations.

But can growth be controlled at all, to spare resources or prevent speculative bubbles? "One mustn't fall victim to the illusion of control, and believe one can regulate human nature," Mayer warns. Speculation cycles, he says, have been around since Babylonian times, and nothing is going to change that in the future either. The only thing one can do is develop ways of minimising their consequences. He doesn't see any single instance that determines the fate of our world and the course of our economic development. "We are all stumbling along together. Over time we all determine which way things go." There will be mistakes made along the way that put us in difficult situations. "We'll never know what the future will bring," Sunde says. But mankind will find ways to extricate itself from these situations.

The next forum, entitled "New lifestyles – Perspectives for sustainable development?" will take place on 15 May 2012.
20 April 2012