Is there a growth imperative in capitalist economies? a circular flow perspective

This paper postulates the existence of a growth imperative in capitalist economies. The argument is based on a simple circular flow model of a pure credit economy, where production takes time. In this economy, positive growth rates are necessary in the long run in order to enable firms to make profi...

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Bibliographic Details
Published inJournal of post Keynesian economics Vol. 31; no. 4; pp. 707 - 727
Main Author Binswanger, Mathias
Format Journal Article
LanguageEnglish
Published Abingdon Routledge 01.07.2009
M. E. Sharpe
M.E. Sharpe, Inc
Taylor & Francis Ltd
SeriesJournal of Post Keynesian Economics
Subjects
Bank capital
Bank credit
Bank loans
bank money
Capitalism
credit
Economic growth
Economic growth models
Economic growth rate
Economic modeling
Economic models
Economic systems
Financial investments
growth
Growth rate
Growth rates
Keynesianism
Money and credit
Political economy
Profit
profits
Steady state economies
Studies
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Summary:This paper postulates the existence of a growth imperative in capitalist economies. The argument is based on a simple circular flow model of a pure credit economy, where production takes time. In this economy, positive growth rates are necessary in the long run in order to enable firms to make profits in the aggregate. If the growth rate falls below a certain positive threshold level, firms will make losses. Under these circumstances, they will go out of business, which moves the whole economy into a downward spiral. According to the model presented, capitalist economies can either grow (at a sufficiently high rate) or shrink if the growth rate falls below the positive threshold level. Therefore, a zero growth economy is not feasible in the long run.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0160-3477
1557-7821
DOI:10.2753/PKE0160-3477310410