De-Growth In Macroeconomics, Essay Example

Economic growth-targeted measures are among the biggest threats and stumbling blocks for future development. The initial macroeconomics state was based on a theory that highly disregarded the equality in economic growth, the size, structure, and power of multinational corporations, the environmental impact of economic growth and the demographic changes impacting economic growth. It failed to visualize the intermediate goals and targets of economic growth. It failed to consider the rate at which the economy grew and the resulting implications of the same at the rate at which the ecosystem could adapt to the large-scale and often irreversible changes (Goodwin 2). From this perspective, the 21st-century macroeconomics should be tailored to a more conducive approach to tackling economic growth. They may consider establishing a zero-growth economy which is aimed at establishing an economy that promotes human well-being by ensuring equitable distribution of resources and conserving the environment for current and future generations. A de-growth policy that is intended to ensure economic contraction rather than growth could be a good option. The policy encompasses six strategies: the Gross Domestic Product (GDP) de-growth, the consumption de-growth, the work-time de-growth, the radical de-growth, the physical de-growth and the sustainable de-growth (Padalkina 4).

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Firstly, the GDP de-growth ensures environmental sustainability through ensuring production purity. It accomplishes this by establishing pollution-free production. This includes the use of renewable sources of energy such as solar energy in place of pollutant sources such as fossil fuels. Additionally, it ascertains sustainability of natural resources through ensuring regulations in the production and consumption of products (Padalkina 3). In this case, the strategy tries to assure that aspect of the GDP such as the consumption by households, the investment in productive assets, government expenditure, imports and exports and the general spending on goods and services are all kept in check (Moss, chapter one). However, for the strategy to be attained, it would mean that GDP would not be the central objective in the production sector, and this would require a revolution which would call for an economic transformation in the framework which is logically unattainable.

Secondly, the consumption de-growth focuses on the reduction of the unnecessary consumer spending, which otherwise encourages dirty production. Also, this reduces the disposable income that ends up as savings for the consumer rather than the available income for reinvestment by the producer thus minimizing economic growth (Padalkina 3). This strategy is based on the Kaleckian growth theory which assumes a zero-growth economy. Unlike the Keynesian theory, which is propagated by the demand force and accumulation of investment, the Kaleckian theory focuses on an equilibrium between demand and supply (Boyes and Melvin 43) and ensures that the rate of savings surpasses the rate of investment. Consequently, there is negligible, close to zero economic growth (Padalkina 1). This aspect may seem as one easy to attain, however, considering that it would call for an entirely new price mechanism and a different structure of the taxation the strategy can only be accomplished through voluntary consumption decline without government intervention which is next to impossible.

Thirdly, the aspect of working hours de-growth incorporates the employment of environmentally friendly technology in production. This should create a more efficient and quality production. Regardless, the strategy will result in increased time for consumption of products due to the additional free time of the workers and also increase the chances of environmental pollution since it does not tackle the environmental constraints. Further, the strategy is aimed at providing a diverse system for income sustainability by restructuring the labor market and the employment mechanism which would be next to impossible (Padalkina 4).

Radical regrowth is the other strategy which requires exceptional changes in the values, financial systems, regulation systems, markets, work and labor, profit making and ownership (Padalkina 5). This is clearly a utopia that cannot be achieved since it would require a complete refurbishment of the political, social and ethical systems of the economy. It implies that a new regime beyond the existing capitalistic and the socialistic frameworks which can only be a mirage to fulfilling.

The fifth aspect of the policy is the physical de-growth aims at creating small size a stabilized economy that is characterized by a slightly varying capital stock, a constantly growing population level, a nearly constant rate of throughput and socially viable production with a given technological framework (Padalkina 5). It aims at impacting the economy over only a short period, which is a significant shortcoming. Furthermore, the strategy does not define the size of the economy and critically speaking, it only aims at limiting the population and introducing tradable permits.

The final aspect of the de-growth strategy is the sustainable de-growth, which basically constitutes of all activities designed to reducing the society throughput by reducing the size of the economy. The strategy is aimed at developing a balanced mechanism between the GDP, throughput and the welfare by majorly criticizing the price mechanism (Padalkina 6). It is obvious that there is a big impossibility of attaining such a balanced mechanism and at the same time attaining a socially and environmentally sustainable economy.

To sum it all up, the de-growth policy is not and cannot be a good policy for economic contraction as a way of improving the macroeconomics. Reason being as outlined above, the policy has many shortcomings. Moreover, the policy would lead to a heightened state of inflation being since, GDP, the main contribution to the government's income would be significantly reduced (Moss, chapter one). Therefore, the primary goal being to attain a sustainable economic state, de-growth is and cannot be the preferable means of attaining the goal since it proves to have very many unattainable strategies and can only remain a theoretical concept which cannot be employed for economic contraction. Hence, as much as economic growth is being suppressed recently, the de-growth policy is not the best way to attain the contraction.

Work Cited

Boyes, William J and Michael Melvin. Macroeconomics. Mason, OH.: South Western, 2013. Print.

Goodwin, Neva R. Macroeconomics For The 21 St Century. 1st ed. Medford, USA: The Global Development and Environmental Institute, 2003. Web. 3 June 2016.

Moss, David A. A Concise Guide To Macroeconomics. Boston, Mass.: Harvard Business School Press, 2007. Print.

Padalkina, Dina. The Macroeconomics Of De-Growth: Can A De-Growth Strategy Be Stable?. 1st ed. Berlin: Berlin School of Economics and Law, 2016. Web. 3 June 2016.