Its not just any developed nation, its any nation that runs on capitalism. Its quite easy really.
We've accepted that the only valid economic model is capitalism, which really means its legit to generate wealth by having wealth (capital).
This brings up a problem when wealth generated by everyone in a state in a year is limited, and it is in the real world. People only work that many hours a day, the wealth generated by any state has to be shared by its people. The problem lies in the fact that wealthy people will get a bigger and bigger share of the pie as time goes along, assume the pie (the amount of wealth generated a year) does not increase.
The poor, having little wealth to begin with, can only do actual labor to produce wealth, min-wage etc, they have no real ability to obtain the means of generating wealth, ie have wealth-generating capital. But the rich do. They can reinvest their wealth into more wealth-generating capital, and own a greater and greater share of the wealth generated by everyone in a year. The cycle never ends, until the rich own and produce everything.
GDP growth is there to ensure that while the rich get their fill, the poor also don't stare completely.
In the premodern age, there was little economic growth, the only means of the rich getting more wealth, was really to steal from someone, ie wars and imperialism. Considering capitalism and greed will probably not go away in our lifetime, GDP growth is a good alternative to thieving from others.
zalaesseo t1_iu99wv1 wrote
Reply to ELI5:Why do developed nations need constant economic growth by Germanofthebored
Its not just any developed nation, its any nation that runs on capitalism. Its quite easy really.
We've accepted that the only valid economic model is capitalism, which really means its legit to generate wealth by having wealth (capital).
This brings up a problem when wealth generated by everyone in a state in a year is limited, and it is in the real world. People only work that many hours a day, the wealth generated by any state has to be shared by its people. The problem lies in the fact that wealthy people will get a bigger and bigger share of the pie as time goes along, assume the pie (the amount of wealth generated a year) does not increase.
The poor, having little wealth to begin with, can only do actual labor to produce wealth, min-wage etc, they have no real ability to obtain the means of generating wealth, ie have wealth-generating capital. But the rich do. They can reinvest their wealth into more wealth-generating capital, and own a greater and greater share of the wealth generated by everyone in a year. The cycle never ends, until the rich own and produce everything.
GDP growth is there to ensure that while the rich get their fill, the poor also don't stare completely.
In the premodern age, there was little economic growth, the only means of the rich getting more wealth, was really to steal from someone, ie wars and imperialism. Considering capitalism and greed will probably not go away in our lifetime, GDP growth is a good alternative to thieving from others.