Sustainable development can be based on growth

Growth Criticism and Sustainable Development. Is there sustainable economic growth?

Table of Contents

ABSTRACT

LIST OF ABBREVIATIONS

INTRODUCTION
1.1. DEFINITION
1.2. THEORETICAL BASIS

2. REASONS FOR ECONOMIC GROWTH
2.1. GROWTH CREATES JOBS
2.2. GROWTH DRIVES INNOVATION
2.3. GROWTH AND DISTRIBUTION SPACE
2.4. GROWTH INCREASES GOVERNMENT REVENUE
2.5. FORCED TO GROW

3. GROWTH CRITIC
3.1. SCARCE OF RESOURCES AND POLLUTION
3.2. GROWTH AND CLIMATE CHANGE
3.3. FURTHER PROBLEMS

4. SUSTAINABLE DEVELOPMENT
4.1. SUSTAINABILITY, A CONTROVERSE TERM
4.1.1. SUSTAINABILITY IN THE NEOCLASSIC CONTEXT
4.1.2. SUSTAINABILITY IN THE CONTEXT OF THE ECOLOGICAL ECONOMY
4.1.3. THE BALANCED SUSTAINABILITY
4.2. THE INTEGRATING SUSTAINABILITY TRIANGLE
4.2.1. ENVIRONMENTAL SUSTAINABILITY
4.2.2. ECONOMIC SUSTAINABILITY
4.2.3. SOCIAL SUSTAINABILITY
4.3. GROWTH 2.0

5. CONCLUSION

6. REFERENCES

Abstract

Since the beginning of industrialization, the average temperature has risen by 0.85 degrees Celsius, and in three decades the oceans have warmed up to a depth of 75 meters by 0.11 degrees Celsius. The oceans have already absorbed 30% of man-made carbon dioxide (CO2) and have had a 26% more acidic pH since the beginning of the industrial revolution, which has harmed many marine life. The glaciers are melting and the main greenhouse gases (carbon dioxide, methane and nitrous oxide) have reached their highest level in 800,000 years. The main culprit is 90 - 95% of the human being. Because the enormous population and economic growth have meant that resources have been consumed faster and faster and more and more harmful waste has found its way into nature's ecosystems. But economic growth also has many positive effects that economies can hardly do without. Third world countries and developing countries can escape poverty with the help of economic growth, whereas the countries of the industrialized nations can face increasing social inequalities and increasing financing obligations with growth. So how are these two opposing concepts compatible with each other?

The result of this work shows that a decoupling of resource consumption and economic growth is possible through sustainable growth. The central insight here is that it is not necessary to achieve a single dimension of sustainability, as three different levels are correlated with one another. If a society manages to produce, consume and behave in an ecologically, economically and socially sustainable manner, then this decoupling can take place. The basic prerequisite for this is the education of individuals, cooperation between different economies and technical progress, as well as the willingness of the individual economic actors to accept and integrate these changes.

List of abbreviations

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introduction

"Growth. The mantra of capitalism. More and more, more and more. We need growth! Eternal growth! But it's difficult, ask Rainer Calmund. "

Volker Pispers is a German cabaret artist who never misses an opportunity to pretend that he considers “the mantra of capitalism”, namely constant growth, to be extremely questionable. It is of course in the nature of a cabaret artist to present these things in a humorous way, but his criticism is justified. Ever since the Club of Rome's report was published, the world population should not only be aware that the earth's natural resources are limited, but also that nature has been permanently and in some cases irrevocably damaged and is still being damaged due to man-made waste and emissions.

This topic was discussed at numerous international conferences, at which it was repeatedly emphasized that many of the economic approaches that had dominated until then were not suitable for a permanent solution to these crises. And although there is a broad international public and a common consensus that the consumption of resources and the emissions produced must be minimized, this development has been rather contrary in the last few decades. The reason for this is the unwillingness of many important actors such as consumers, companies and politicians. Because growth does not only mean the consumption of resources and environmental pollution, it also creates jobs, promotes innovation and education, creates scope for distribution, increases national income, etc. Economic growth can thus bring about prosperity and justice. This is particularly important for third world and developing countries. But even in developed countries, a growing economy is positive. After all, growth also means higher government revenues, which can offset increasing social inequality and cover the growing need for funding for pensions, health services and long-term care.

But is it even possible for an economy to grow without the environmentally damaging consequences? The present work addresses whether such growth can take place. The argumentation and finally the understanding are worked out on the basis of the neoclassical growth theory according to Solow.

Furthermore, the advantages and disadvantages of growth are discussed in detail and compared. The importance of economic growth - as well as the ecological effects - should be presented here. Finally, a middle way is presented and how such an implementation should look like.

The theoretical as well as the analytical part of this thesis is based on a detailed evaluation of relevant specialist literature. In addition, selected specialist journals, databases and scientific publications were used to support the theses. In view of the topicality of the topic, critical economic columns from leading daily and weekly newspapers could also be used.

The first part of the thesis defines and explains the theoretical concept of growth according to Solow. This knowledge serves as a foundation to be able to understand the argumentation based on it.

The second part first deals with the most important arguments in favor of a growing economy. After presenting the importance of economic growth, the third part deals with the problem and the sometimes revering effects.

In the fourth and last part, the concept of sustainability is introduced and analyzed to what extent this would have to be integrated in order to achieve sustainable economic growth.

The growth theory is that part of the economy that deals with the explanation of the causes of economic growth or the economic development of a country. The gross domestic product is seen as a classic indicator of growth.

In order to be able to discuss the question of whether sustainable growth is even possible, the economic concept of growth must first be defined and introduced into the theoretical foundations.

1.1. definition

From an economic point of view, economic growth means that the amount of goods increases quantitatively, i.e. the amount of available goods (products and services) increases. The exact expression in the professional world for this mountain of goods is the national income.1"Growth is therefore a change in performance compared to an earlier state that has a positive sign."2 In practice, the growth calculations are (almost) always based on real gross domestic products (GDP).3 GDP measures a country's production of goods and services after all intermediate consumption has been subtracted - it is primarily a measure of goods produced. The term real only means that the annual inflation rate is subtracted.4 A distinction must be made here between extensive and intensive growth, which in the former is based solely on the increase in GDP (the supply of goods per capita is not taken into account here). In the latter case, the per capita income is determined by dividing the GDP by the population of the respective country. The growth rate is generally expressed as g. Intensive growth is therefore only possible if g N 5

1.2. Theoretical basis

One of the best-known models for economic growth was developed by Robert M. Solow in the 1950s - based on the classical growth theory. In 1987 Solow was awarded the Nobel Prize for Economics for this. This assumed that growth resulted from the increase in the production factors of labor and capital. Solow extended this theory to include the variable of technical progress.6

It is based on the aggregated production function of all companies, which can be represented as the following function.

Y = A * F (K, L);

A technological advance

K capital

L work

The sources of possible growth therefore result from capital accumulation, population growth (labor) and technological progress.

Furthermore, his considerations include that physical capital wears out (depreciation), which is expressed by the negative variable δ. The depreciation can therefore be calculated using δ * K. The savings rate, which expresses the saved part of the population's income and is given exogenously, can be calculated using s * Y. In a closed economy, this is the part that is invested. Consequently, s * Y corresponds to the macroeconomic investments I. The capital stock indicates the gross fixed assets and is determined from the investments minus the wear and tear (I- δ * K). Thus, an economy only grows when more is invested than is written off.

Exogenous population growth is described as n. The population corresponds to L.

In order to simplify the model, the technological progress A can be normalized to 1, so that it would not be considered.

For a more realistic view, however, A has to be expanded by another value. Then it applies that the efficiency rate of the workforce is determined by technical progress. Here, the Neo-Classic assumes a work-increasing progress, the work equipment increases and the work input can now be measured in efficiency units Lt * Et.

In order to transfer the model to the individual citizen, i.e. per capita, the efficiency is now taken into account in the national income per citizen, which results in the following formula:

y = Y / LE;

the capital intensity (the capital that is available on average to every citizen) can be given by the following term:

k = K / LE.7

If technological progress is not included, the following conclusions can be drawn:

As has already been worked out, growth means that y increases, which is only possible by increasing k. An investment process that allows K to grow faster than L is therefore necessary. Thus, more per capita must be invested in an economy than is necessary to keep it constant with growth n and a depreciation rate δ, k, because new workers must be equipped with as much capital as the employees and the depreciation are compensated. This so-called necessary investment can be expressed by (n + δ) k. The actual investments per capita (s * y) must therefore be greater than what is required for the per capita income to grow. However, since a decreasing marginal productivity is assumed, a continuous increase in capital intensity leads to ever lower growth in per capita income. Thus the system converges towards the identity of the necessary and actual savings and the per capita growth stops at the intersection s * y = (n + δ) k. This intersection is called the Steady State Equilibrium in economics. The dilemma here is that, regardless of how much is saved, in the long term, the statement s * y = (n + δ) k always applies and, mathematically, the savings rate cannot be more than 100%.8

With A ≠ 1, however, an exogenous technical advance is assumed which, as already mentioned, increases productivity. The per capita function is steadily shifting upwards, so that more per capita can be produced per period with the same capital intensity. With a constant savings rate, the per capita saving also increases. If n and δ are now constant, there is permanent per capita growth.9 "But this is given exogenously and is referred to as manna from heaven, since technical progress is not explained endogenously."10

2. Reasons for economic growth

But why does it seem that economic growth is of vital importance? There are a number of arguments that undoubtedly speak in favor of steady economic growth.

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1 (See Frenkel & Hemmer, 1999)

2 (Oppenländer, 1988)

3 (See Frenkel & Hemmer, 1999)

4 (See Horvath, 2014)

5 N corresponds to the population of the respective country.

6 Despite numerous criticism and further developments, this model forms the basis for numerous further developments.

7 (See Hemmer, 1999, Chapter 4)

8 (See Seiter, 2015, p.3)

9 (See Seiter, 2015, p.4)

10 (Seiter, 2015, p.4)

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