Why do we always have to have growth?

Cheming Yang

During the Eleventh National People’s Congress in March, Chinese Premier Wen Jiabao announced that the annual GDP growth targets at 7.5% for next year, first time below8 in8 years. According to the Premier’s report, this move will make the country’s economy more sustainable and efficient.

This statement spurs a lot of speculations around the world. Some have deemed this as an ominous sign of the world’s second largest economy running out of steam. What does it reflect in terms of the rise and fall of GDP? GDP is made of the total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports. In short, the annual GDP of a country stands for the total production of a country in a year. In traditional wisdom, we always think it is good for the country to produce more and more year on year. In layman’s term, you make more money when you produce more. We all know what money can buy and what money cannot buy.

As a country, why do we always want to make more money? Even when we are making more money year after year, can we accept making less more? Why isChina’s growth below 8% worrisome?

From a country’s perspective, with the rise of GDP, its people make more money. The rich might get richer and the income level of the poor might improve. But these two results do not necessarily go hand in hand. The rich might get richer and the poor might get poorer even when we constantly have good annual growth.

How rich is rich is a comparative term. Does a country always need to make more money? When the country is poor, we need to make more money as a whole. When the population is growing, it makes sense to have growth that exceeds the birth rates to maintain at least as wealthy. What if the population is decreasing? It happens to a lot of developed countries. You might not need growth at all in those countries in theory.

However, even if the population remains stationary, governments would say we need more growth to improve the life of the disadvantaged. Although it is well said, we need to pay special attention to what is actually done in the end. The life of the disadvantaged can still be improved if the decreased growth is channeled to those in need. Unfortunately, that is often not what happens. The rich will take away the major piece of growth and leave the poor with meager benefit.

To say how much we need to grow in total is meaningless. Instead, we should focus on where we need to grow. It is not necessarily good to have over 8% growth and not necessarily bad to have below 8% growth. The important thing is whether the growth takes place at where we need them most. Only when GDP can be treated in this fashion, the development of a country is efficient and sustainable.