CMV: Consumption Doesn't Drive Growth

How is it short term? Consumption is continual. [...] Consumption in one area also opens up other lateral opportunities for growth in the form of complimentary goods and services.

Because in the short run the factors of production are fixed, there is only so much that can be produced. Increasing the productive capability of an economy necessitates either further factor accumulation or technological innovation, the former of which is not determined by consumption.

More people with the means to consume more will always demand more things to consume.

Sure but a higher population growth rate doesn't translate to a higher GDP per capita / GDP per hour growth.

Capitalism is based on continual growth [...]

No, it isn't, if there were no economic growth then standards of living would cease to increase and each successive generation will live as well as the last. Capitalism is only really based on the existence of property rights.

Its how its worked and the countries that have become first world countries have had their consumption rise.

Rich countries consume less than poor countries do1

Those that argue for wealth redistribution also tend to advocate for immigration reform to make it easier to immigrate and supply the labor that redistribution will demand while driving up demand even more.

You can't just continually increase demand via fiscal expansion.2

This is why extremely low unemployment is considered a bad thing.

"Low" unemployment, which I'd just define as at the natural rate, is an undoubtedly good thing as the factors of production are being fully utilised.

There is no one explanation or solution for something as complicated as the economy, but the basics of what a capitalist society needs is consumption.

I don't dispute that consumption has to be greater than zero, what I'm disputing is that continually increasing consumption will lead to further increases in output.

Ex. Low unemployment forces tech innovation that allows fewer people to do more work in order to meet demand because they cannot find proper labor.

I'm not aware there's a meaningful correlation between increases in total factor productivity and low unemployment rates.

/r/changemyview Thread Parent