Why do we need an economic system

Does the economy really always have to grow?

There have been many crises. Once you have lost your savings, your own pursuit of more is demonized - and the idea of ​​permanent growth is questioned. So why not just break away from it?

Because it's not easy. “We have to grow - whether we want to or not,” says Swiss economist Mathias Binswanger. His position: There is one Compulsion to grow.

The competition never sleeps

In our economic system only a few companies are out of competition. Most of the companies are in the Competition. Let's imagine someone has a great, innovative business idea and is founding a start-up. The product is well received. The start-up can still relax: it is out of competition because no one else is making this innovative product. If the small business can no longer keep up with all the orders, it can decide to grow. It can buy machines and hire workers to deliver the product faster. But it can also simply say: Hey, there is a waiting period for my product, dear customers. If you want to buy it, you have to put up with it - because I'm the only one who makes it. But that changes when a competitor comes on the scene. The question now follows: How can the start-up convince customers to keep buying from them? How can it prevail against the competition? There are a few factors that go into making this happen. Let's focus on two important ones.

Be cheaper

The company can outperform the competition by making the product cheaper. This is usually achieved when mass production is used. Because the company can then, for example, enforce a quantity discount for raw materials or parts from its suppliers. In addition, his machines are working to capacity and the production processes are well established. But the competition will stay on the company's heels.

Be more innovative

And then the day comes when a competitor brings an innovative and better product onto the market - and bypasses the company. If the new Primus wants to get a bigger lead over the competition, it will want to be better than the rest in (almost) every respect. This also applies to the price. In order to be able to offer the product cheaply, he has to manufacture a large number of them - and this may need more machines, more employees, more space. He will grow. But he knows: all other competitors continue to mix; continue to grow with you. They will try to get the next hot thing out on the market cheaply.

Innovation through competition

Companies become this through competition drivenTo create innovations. “If you stand still, you will be displaced,” states the Swiss economist Mathias Binswanger. “Because everyone else is constantly trying to get better for their own with innovations and innovations Profits To maximize. ”On the one hand, they do this because profits are one of the expectations placed on successful companies. On the other hand, they do that because they need the profits.

No investment without profit

Because if you want to develop new or better products, you can't do it from scratch. You need to invest - in machines and clever minds. However, that only happens if they hope to make a profit. They need it to finance machines, for example.

  • Anyone who takes out a loan to buy a plant needs money to repay it - and even more so to service the interest.
  • If the entrepreneurs want to collect money from shareholders, they must also make a profit. Otherwise you will not be able to inspire anyone on the stock market.
  • If a machine is bought from one's own savings, one must have the opportunity to put money aside beforehand. Or the machine has to be financed by foregoing other expenses.

"Only if the production promises a profit can it be worthwhile and take place at all," the sociologist Deutschmann sums up. “With no prospect of profit, it is better to wait and make the money easy to keep. ”If entrepreneurs did that, it would be the beginning of a downward spiral for them and for other companies.

Without investment it goes into the downward spiral

When companies stop investing - for example in new machines - the demand for them initially falls. The companies that build machines or supply parts for them will sooner or later die broke. People lose theirs job. You can't make any more money - and you can't spend any more money. The demand continues to decline. The result: Even more companies will go bankrupt sooner or later. Even more people are losing their jobs.

Corona: concern about the downward spiral

"In order to avoid this downward spiral, we have to maintain a certain growth," says Swiss economist Mathias Binswanger. You can see that especially in times of crisis - for example now. If the state hadn't stepped in with aid loans and short-time work, we would be in a spiral with the corona virus, says the economist.

That would also be a problem for the state

When people lose their jobs, they don't pay taxes. So the state's income is falling. At the same time, his spending is increasing - namely for social benefits, because more unemployed people need to be covered. That in turn usually leads to the fact that the state becomes stronger fault got to. If he does not get the economy going, in the worst case scenario he will not be able to pay off his debts. National bankruptcy would be the result. This is not an empty phrase, as the example of Argentina shows. The country has already gone bankrupt eight times. There are many reasons for this - including a shrinking economy and high inflation.

Social developments

Threatening horror scenarios, however, are not the only effects that foregoing growth and innovation would have on a country. His society would have to cope with the fact that its financial prosperity falls behind other nations. Let's take Germany as an example: many local companies are successful in technical areas and are developing new products. If they stopped doing that, they would no longer be competitive with other companies in the world. However, if foreign companies continue to improve their goods, the technology from Germany will be there at some point outdated - and would no longer be bought. Companies went bankrupt, people would be unemployed. The country would also have to come to terms with the fact that it will probably play a smaller role in the world in the future - after all, as a trading partner without innovation, one is no longer particularly interesting. Such developments could be avoided if the world jointly made a decision to transform the economic system. However, it is not so easy for nations to pull together.

Problem of inequalities

Another problem is that we have a globalized economy. Less growth in the industrialized countries could therefore also result in lower demand in the developing and emerging countries - and thus endanger people's livelihoods. According to anthropologist Jason Hickel, there is still an option: "If we were to limit global GDP to current levels, poverty could only be eradicated through redistribution," he says. But how likely is it that people can agree on such a measure?