Economic growth - what happens when it stops?

I have been studying the 'nature of growth' mainly in software systems, but also in the general economy over the last 4-5 years. My interest in how economies grow has been more of a side-effect, since I wanted to learn how growth is measured and understood in other fields.

[[Warning -- long post]]

This blog entry is a personal reflection on what might happens if there is no economic growth. But, what is economic growth? Simply put -- economies grow when more resources flow through the system. That is, we use more energy/people/natural-resources and transform them. To keep growing, we need to consume more and more energy.

Now, for the PREDICAMENT -- our current economic system relies on 'fossil fuels' for almost all of its energy requirements, and we need to keep getting "more and more" energy to maintain our growth. However, we are running out of cheap and easily available energy sources (as can be seen in the relatively high oil price even in a global recession). We also currently do not have a way around this predicament -- a detailed explanation of this bold claim will take far too many pages, so I will leave it for now.

Given, we are unable to increase the energy sources -- the economic system is likely to also stop growing. But, what will happen? Will the stock market collapse? Will we all slowly starve to death? Will it be a chaotic society? The short answers: ... the stock market as we currently know it will end (slowly) -- we are unlikely to starve to death, but few people will be considered obese. Economies will change (slowly) to be highly localized, but history (and my own experiences) suggest that most humans will live quite well with each other -- that is, we are not likely to start killing each other at the local level (global wars are a different matter).

The real changes will however be in how we will start using material resources and the focus of work + life. The focus will change to be on "quality", rather than on having many many things. We will have less, but "better quality" stuff. Companies that manufacture "cheap trinkets" will go bust -- even better, no sane person will start such a company in the near future.

In terms of work + life -- this is where the biggest changes are likely to be. If companies have to produce "good" quality stuff that lasts a long long time -- then you will be expected to produce really high quality stuff using the least amount of resources and energy. Efficiency and quality are valued. Things like "first to market", "growth of customer base" will be irrelevant. The aim of a company will be to maintain a stable equilibrium. There is going to be some growth at times -- but overall -- the aim is to be at a stable equilibrium.

In this "stable" economic system, there are going to be a number of benefits:

• You can have a very fulfilling work life, since the focus shifts to actually building "better" products, "caring" for your customers and producing stuff that adds value. The odd aspect, is that you do this with the full knowledge that it will make no difference to your end-pay.
  
• You can develop skills slowly and carefully over a lifetime, rather than live in the "fad" of the day. Systematic cultivation of skill will be useful and rewarded by society (in terms of respect -- rather than material reward).
• In equilibrium economies -- skills are valued. In fact, the only way to survive is to gain a good level of skill. The education system will adapt to provide these skills, the work culture will adapt to ensure that people have the time and space to grow and refine these skills.
• There will still be greed and the profit motive -- but, it will be at a different scale. Companies cannot concentrate and gain a large amount of wealth easily.
  

The downside? Well .. the process of "change" is going to be painful, slow, erratic, messy and highly stressful because of the uncertainty of how it will all play out. Of course, the govt. and those in power will try to stop it -- control it -- slow it -- only to prolong the uncertainty.

Will there be rich people? Absolutely, but there will only be 0.01% of the population, the rest will have more or less the same amount of stuff. In this world -- the rich will have to live in palaces and castles. If they are smart, they will make sure that their lifestyle is not public knowledge, they will have to "re-educate" people to accept their role as being a "divine" appointment. Again, this is not likely to happen overnight.

What will happen to the current rich people? Well ... without strong and well organized governments, the wealthy just cannot protect most of their assets. In a cheap energy starved world, the large and complex entities like big trans-national corporations, large governments are the first to go (slowly -- nothing dies in an instant like in the movies). Employees in a company do not swear a personal allegiance to work there and protect the boss, the day the pay checks stop if the day the company collapses.

What type of management model will survive and thrive? Answer: Mafia like organizations -- where the big boss has full control because all key members are family, and those that are not, have a mental attitude similar to the clan. If you do not have workers that will stick with you in hard times (i.e. work for nothing more than food/shelter for months at a time), then you are not likely to be able to build and hold anything substantial.

In this world with expensive energy, you need people with good leadership skills to control people -- not administrative-managers (that cannot inspire most workers). The alternative is to embed a mythology into the culture and society where they are inclined to accept some families to be 'divinely' appointed leaders. This is a possibility, but this level of change requires a good 70-80 years in a well established democracy, since you have to brain-wash and re-educate everyone from birth.

Though, I am convinced that the world will change, I am used to the current way of things. So, the change though anticipated, is likely to be hard for me. However, my kids will probably adapt far better and the generation after that will most likely thrive in it.

-- R. Vasa