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Why the economy must grow

September 26, 2021

Why the economy must grow

There are three main reasons why our economy grows:

• because it is easier to make money in an economy that is growing
• because we all, individuals, companies and governments, borrow money
• because we pay interest on the money we borrow.

Because it is easier to make money in a growing economy

Many people, particularly business people and people in governments, want the economy to grow continually because it’s easier for people to make money in an economy that is growing in size, because a growing economy means an ever-increasing supply of money and an ever-increasing opportunity to get some of that money and the products and resources that it represents.

Those products and resources may provide mere survival, acceptable comfort and security, or the maximum possible excess of luxury.  The individual’s drive towards survival, material gain, comfort and security, or luxury, drives the economic system.  Of itself, that drive doesn’t mean that the economy has to grow, or even that it will grow, but it is a strong supporting force for economic growth: it supports a positive attitude towards economic growth and a resistance to anything that limits economic growth.

Because we borrow money

Most people in developed countries borrow money for the things they want to own.  This money usually comes to us through our home loans, car loans, credit card loans and other forms of credit.

We are able to borrow that money because of our promise to work in the future and to repay it; we spend it now, promising that we will earn and repay it later.  This money is available to us as a result of our assumed and promised economic activity (jobs, or other income) in the future.

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