Current issues related to economics, (responsible) investment, pensions and income: every week an APG expert gives a clear answer to the question of the week. This time: chief economist Thijs Knaap on whether economic growth is absolutely necessary to maintain prosperity. “People always want to improve.”
For a long time, economic growth was seen as a positive development, but in recent years the opposing voices have continuously been getting louder: economic growth also has harmful effects, for people and for the environment. “The question in this discussion is what exactly is growing. That is the gross domestic product, or GDP. When people think of production, they often think of chemical factories where stuff rolls out that you buy at Blokker, for example. But production can just as easily be about services, such as a visit to the hairdresser, the tax consultant or a ride on the train.”
In recent decades, people have started buying more services than products. “The carbon emissions associated with manufacturing a product or providing a service have been decreasing since measurements began in the early 1990s. After World War II, the Netherlands had to be rebuilt and production in factories largely consisted of cars, bicycles and building materials for houses. Now you can also think of production as programming a computer program or visiting a psychotherapist. Especially the latter is a service that does not involve any raw materials and is therefore not really polluting. With these kinds of services, you can grow GDP for a long time, especially if people keep coming up with new forms.”
GDP growth can be broken down into three components, Knaap continued. These are higher production due to population growth, growth of capital (for example, offices, factories but also human capital in the form of training) and progress. “In the Netherlands today, growth is mainly accounted for by the latter component. But progress through new innovations, for example, is also less today than in the 1980s and 1990s.” So there is already less economic growth AND the growth that is still happening is less polluting than before.