Growth imperative is a term in economic theory regarding a possible necessity of economic growth. On the micro level, it describes mechanisms that force firms or consumers (households) to increase revenues or consumption to not endanger their income. On the macro level, a political growth imperative exists if economic growth is necessary to avoid economic and social instability or to retain democratic legitimacy, so that other political goals such as climate change mitigation or a reduction of inequality are subordinated to growth policies. Current neoclassical, Keynesian and endogenous growth theories do not consider a growth imperative or explicitly deny it, such as Robert Solow. In neoclassical economics, adherence to economic growth would be a question of maximizing utility, an intertemporal decision between current and future consumption (see Keynes–Ramsey rule). Other sociological and political theories consider several possible causes for pursuing economic growth, for example maximizing profit, social comparison, culture (conformity), or political ideologies, but they do not regard them to be compulsive. Possible growth imperatives are discussed in Marxist theory, Schumpeterian theory of creative destruction and ecological economics, as well as in political debates on post-growth and degrowth. It is disputed whether growth imperative is a meaningful concept altogether, who would be affected by it, and which mechanism would be responsible.
Meaning and definitions At the macroeconomic or political level, the concept of growth imperatives is used by some authors when there seems to be no acceptable political alternative to economic growth, because insufficient growth would lead to economic and social instability up to "severe economic crises". The alternative to growth would not be a stable stationary economy, but uncontrolled shrinkage. The consequences of a renunciation of growth would be unacceptable; growth appears to be without a politically acceptable alternative. While some search for purely "structural theoretical explanations for the commitment to growth", others argue that this macroeconomic phenomenon must be examined at the micro level in line with methodological individualism to explain how and why individual actors (firms, consumers) act and how this interacts with collective structures, and correspondingly study the growth of enterprises with microeconomics and business administration and the increase of consumption using consumption sociology or consumer choice theory. The discussion on growth imperatives is part of a standing debate over the primacy of structure or agency in shaping human behavior. In the social sciences the term social coercion is used when situation-related circumstances or strong social pressure determine the behaviour. According to Marxist theory, a coercion for firms to "grow or die" is due to economic competition. According to these Marxists, capitalism "cannot stand still, but must always be either expanding or contracting". Similarly, the environmental economist Hans Christoph Binswanger speaks of a growth imperative for firms only when they are existentially threatened by steadily declining profits and ultimately bankruptcy; in other cases he uses the weaker term growth driver. These definitions can be summarized that a growth imperative exists if exterior conditions make it necessary for agents to increase their economic efforts as to avoid existential consequences.
Microeconomic theories
Firms
The first theory of a growth imperative is attributed to Karl Marx. In capitalism, zero growth is not possible, because of the mechanisms of competition and accumulation.
[T]he development of capitalist production makes it constantly necessary to keep increasing the amount of the capital laid out in a given industrial undertaking, and competition makes the immanent laws of capitalist production to be felt by each individual capitalist, as external coercive laws. It compels him to keep constantly extending his capital, in order to preserve it, but extend it he cannot, except by means of progressive accumulation. Therefore, a company's growth is considered necessary to ensure the survival of the company ("grow or die"): "investment is not an option, or a discretionary decision, it is an imperative that constrains every capitalists' actions and governs the overall economy" Correspondingly, some authors argue that the compulsion to grow can only be defused by overcoming structures of market economies, or by pushing back profit-oriented companies that expropriate the surplus value. Other authors criticize this Marxist perspective: a company could be profitable without growth if a positive accounting profit is distributed as dividend to the owners. Only if net income had to be retained, companies would be compelled to grow. If a company shows an accounting profit, it has not yet achieved an economic profit in the economic sense, because a return on equity and an entrepreneurial salary would have to be paid from it - the profit would not necessarily be available for growth. Therefore, a market economy with profit-oriented companies is compatible with zero growth, as it is in the models of neoclassical theory (→ zero-profit condition).
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