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Q: Is ZERO GNP GROWTH sustainable? ( Answered,   1 Comment )
Subject: Is ZERO GNP GROWTH sustainable?
Category: Business and Money > Economics
Asked by: doxeyman-ga
List Price: $15.00
Posted: 10 Mar 2003 05:01 PST
Expires: 09 Apr 2003 06:01 PDT
Question ID: 174129
In our Western economic system, is ZERO GNP GROWTH for a country
sustainable over 10 years or more? Would our system automatically
"flip" from say plus 1% to minus 2% per annum or more? It worries me
to calculate the long term consequences of a plus 2% growth over 400
years. I'm looking for an answer IN PRINCIPLE, not in detail. Whenever
I meet an economist at a party I ask them, and never seem to get a
coherent answer. Your answer would seem to influence most of the world
I live in (urban South of England).
Subject: Re: Is ZERO GNP GROWTH sustainable?
Answered By: ragingacademic-ga on 10 Mar 2003 09:43 PST
Dear doxeyman,

Thanks for your question.  First, let me request that if any of the
following is unclear or if you require any further research – please
don’t hesitate to ask me for a clarification.

You asked – “Is ZERO GNP GROWTH for a country sustainable over 10
years or more?”

Assuming full employment and no population growth, the answer is a
resounding yes (in fact, with negative population growth, lifestyle
could even improve under 0% growth…).  What you will in fact witness
in such a case is a steady-state economy.

Fear of 0% growth, however, is driven by the expectation that
populations in most of the world do continue to grow – this is further
exacerbated by the fact that at the point-of-entry to such a scenario
we are not, in fact, at full employment (popularly defined as a 4%
unemployment rate).  This is why, from an economist’s perspective, a
0% GNP growth scenario is called a recession.  See excellent
presentation with graphs at –

In most economies, therefore, 0% GNP growth would not be sustainable. 
As the population continues to grow, unemployment will rise and demand
for good and services will drop – creating a cycle that will drive the
economy to negative growth.  One can imagine that as this cycle
continues to play out civil unrest will increase etc.

Another concern in such a situation, especially for capitalist
economies, is deflation – as demand drops, prices fall and wreak havoc
on financial markets that are dependent on earnings growth; without
growth in earnings equity prices will drop and investment in the
economy will shrink – again, further impacting the downward slide.

So, again, in theory, given well-defined economic characteristics at
the onset of such a period, 0% GNP growth could be sustainable.  But
in reality it would be rare for all such factors to coincide.

I hope this response adequately addresses your request.  Please let me
know if you are in need of additional information concerning this


Search Strategy:

"zero gnp growth"
Subject: Re: Is ZERO GNP GROWTH sustainable?
From: maxhodges-ga on 10 Mar 2003 10:01 PST
Great book on human history and economics:

"Non-Zero Sum" by Robert Wright:

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