222
E.F. Schumacher, Small is Beautiful (1973)
Herman Daly, Steady State Economics (1977)
Nevertheless, economic growth has remained a paramount objective to this day,
despite its apparent inconsistency with the UN Sustainable Development Goals
related to the 2030 Agenda for Sustainable Development. However, the inconsistency is only apparent because an explicit definition of the sustainable development
concept in the UN Agenda is still lacking (Montini and Volpe 2017, p. 173). By
default, the ambiguous definition of sustainable development in the 1987 Bruntland
report has helped make it possible for governments, businesses and others to adopt
the goal of sustainable development without compromising their adherence to economic growth (Victor 2008, p. 19).
6.2 Why Neoliberal Capitalism Needs Economic Growth
The reality is that the economic system of laissez fair capitalism favored by oligarchic regimes needs economic growth in order to provide full employment and hence
give it political legitimacy for the majority of the populace. Profit rates in an unregulated capitalist economic system that is dominated by large corporations in monopolistic competition are too high. Consequently, only a fraction of profits are
reinvested in the real productive capital in the economy. The rest are invested in
financial assets in the financial sector. If all profits were reinvested, capitalists would
have excess productive capacity that could not be sold and their profit rates would
fall. In these circumstances, corporate capitalists need economic growth in demand
for goods and services to utilize this excess productive capacity. That is one reason
why capitalists are promoters of free trade policies that enable them to utilize some
of their productive capacity to sell products abroad. It is also why they favour the
liberalization of international investment that will enable them to invest some of
their excess financial wealth abroad for more profits. Without external markets their
options are limited to speculative investments in financial assets in domestic markets or low returns on safe investments.
In a growing economy, where the rate of return on capital exceeds the growth in
national income, private wealth becomes more concentrated in the hands of a few
(Piketty 2014). This phenomenon arises because some of the income from their
wealth (i.e., return on their capital that includes interest on bonds, capital gains and
dividends from securities, interest from mortgage repayments, and capital gains on
their principal residences) is saved and reinvested in more financial assets that
increase their financial wealth. The middle class, who make up the largest segment
of voters, may not care as long as their incomes keep rising relative to their cost of
living. It takes a considerable time of a few decades for the general public to realize
that their employment incomes have barely kept pace with general inflation, or perhaps have declined in real terms, while the rich have gotten much richer. Indeed,
“virtually all of the pre-income tax gains in Canada between 1982 and 2010 have
gone to the top 10% of income earners (Banting and Myles 2016, p. 5).” Further
P. Venton
E.F. Schumacher, Small is Beautiful (1973)
Herman Daly, Steady State Economics (1977)
Nevertheless, economic growth has remained a paramount objective to this day,
despite its apparent inconsistency with the UN Sustainable Development Goals
related to the 2030 Agenda for Sustainable Development. However, the inconsistency is only apparent because an explicit definition of the sustainable development
concept in the UN Agenda is still lacking (Montini and Volpe 2017, p. 173). By
default, the ambiguous definition of sustainable development in the 1987 Bruntland
report has helped make it possible for governments, businesses and others to adopt
the goal of sustainable development without compromising their adherence to economic growth (Victor 2008, p. 19).
6.2 Why Neoliberal Capitalism Needs Economic Growth
The reality is that the economic system of laissez fair capitalism favored by oligarchic regimes needs economic growth in order to provide full employment and hence
give it political legitimacy for the majority of the populace. Profit rates in an unregulated capitalist economic system that is dominated by large corporations in monopolistic competition are too high. Consequently, only a fraction of profits are
reinvested in the real productive capital in the economy. The rest are invested in
financial assets in the financial sector. If all profits were reinvested, capitalists would
have excess productive capacity that could not be sold and their profit rates would
fall. In these circumstances, corporate capitalists need economic growth in demand
for goods and services to utilize this excess productive capacity. That is one reason
why capitalists are promoters of free trade policies that enable them to utilize some
of their productive capacity to sell products abroad. It is also why they favour the
liberalization of international investment that will enable them to invest some of
their excess financial wealth abroad for more profits. Without external markets their
options are limited to speculative investments in financial assets in domestic markets or low returns on safe investments.
In a growing economy, where the rate of return on capital exceeds the growth in
national income, private wealth becomes more concentrated in the hands of a few
(Piketty 2014). This phenomenon arises because some of the income from their
wealth (i.e., return on their capital that includes interest on bonds, capital gains and
dividends from securities, interest from mortgage repayments, and capital gains on
their principal residences) is saved and reinvested in more financial assets that
increase their financial wealth. The middle class, who make up the largest segment
of voters, may not care as long as their incomes keep rising relative to their cost of
living. It takes a considerable time of a few decades for the general public to realize
that their employment incomes have barely kept pace with general inflation, or perhaps have declined in real terms, while the rich have gotten much richer. Indeed,
“virtually all of the pre-income tax gains in Canada between 1982 and 2010 have
gone to the top 10% of income earners (Banting and Myles 2016, p. 5).” Further
P. Venton