Embedded Files
Helpful prior knowledge and learning objectives
Helpful prior knowledge and learning objectives
Helpful prior learning:
Section 1.1.1 The economy and you, which explains what an economy is and how it is relevant to students’ lives
Section 1.1.2 The embedded economy, which explains the relationship between the economy and society and Earth’s systems
Section 1.1.3 Degenerative economies, which outlines characteristics of degenerative economies: linear, extractive and divisive, endless and aimless growth
Section 3.2.1 Capitalism: definition and development, which explains what capitalism is and how it developed.
Section 3.2.2 Capitalism: an evaluation, which explains the positive and negative consequences of capitalism and how economic narratives support capitalism.
Section 5.1.1 The state as a system, which defines the state, its parts and their relationships, and some ways to classify states
Section 5.1.3 State functions, which explains the various roles of the state in providing goods and services, protecting the population, and stabilising and guiding change
Section S.1 What are systems?, which explains what a system is, the importance of systems boundaries, the difference between open and closed systems and the importance of systems thinking
Section S.2 Systems thinking patterns, which outlines the core components of systems thinking: distinctions (thing/other), systems (part/whole), relationships (action/reaction), and perspectives (point/view)
Section S.3 Systems diagrams and models, which explains the systems thinking in some familiar information tools as well as the symbols used to represent parts/wholes, relationships and perspectives.
Section S.5 Causal loops, feedback and tipping points, which explains the feedback loops that can stabilise or destabilise systems
Learning objectives:
define economic growth
explain how economic growth is measured, and what it misses
discuss the economic, social and ecological impacts of economic growth
Imagine a small pond with a single water lily. Each day, the lilies double in number. On day 2, there are two. On day 3, four. By day 30, the pond is completely covered.
On which day is the pond only half full? Think about it first, then click the arrow for the answer.
Day 29. Just one day before the pond is full, it is still half empty. Exponential growth starts slow, but then speeds up rapidly.
Figure 2. The story of the lily pond helps us understand how quickly a small growth rate can lead to large increases in something.
(Credit: © 2010 Diana T. Moy. All rights reserved.)
Figure 1. Imagine a lily pond, where the lilies double in number every day…
(Credit: Tra Tran, Unsplash license)
This is what happens with economic growth. Many governments aim for 2–3% growth in the economy per year. That sounds small, but because each year’s growth builds on a larger base from the previous year, the economy can double in size quickly.
The Rule of 70 allows us to calculate the doubling time of a value if we know the growth rate of something. At a 3% growth rate, the global economy will double in about 23 years, by 2050.
Doubling time (rule of 70) in years =
70 / growth rate
70 / 3% = 23.3 years
You can see this rapid exponential growth in global gross domestic product (GDP) in Figure 3. Most people don’t realise how small growth rates can quickly double the size of the economy and resource use. Earth’s systems cannot support exponential economic growth, but most politicians and business leaders still push for it. Why?
Figure 3. Global GDP over time. Notice that it is increasing very rapidly in a hockey stick shape.
(Credit: Our World in Data, CC BY 4.0)
What is economic growth and what does it do for us?
What is economic growth and what does it do for us?
Economic growth means producing more goods and services from one year to the next. People need goods and services to survive and thrive: food, shelter, energy, care, education and more (Section 1.3.3). Look around you. Nearly everything you see, from your clothes and the device you're using to the chair you’re sitting on, was made by someone, somewhere, as part of economic activity. When economies expand in ways that help meet these needs, people’s lives often improve.
Take sanitation, for example. Clean water and toilets need pipes, treatment plants, and trained workers. In 2000, just over half the world had access to improved sanitation. By 2022, that number had risen to over 80% (Figure 5). This happened because more people and resources were directed toward building and maintaining these systems.
Figure 4. All of the need satisfiers we use to survive and thrive come from economic activity.
(Credit: Quang Nguyen Vinh, Pexels license)
Figure 5. Share of the population with access to basic services.
(Credit: Our World in Data, CC BY 4.0)
What does GDP measure and what does it miss?
What does GDP measure and what does it miss?
Economic growth is usually measured by gross domestic product (GDP). This is the total value of all goods and services produced in a country each year.
GDP developed during the 1930s, when the United States faced an economic crisis and needed better data to guide decisions. Economist Simon Kuznets helped create a system to measure total production in the economy. After World War II, GDP became a key indicator for states and global organisations. They believed that producing more goods and services would lead to better lives and used GDP to compare countries’ economies. But while GDP measures total production, it misses many important details.
Figure 8. GDP is about quantity, not quality
(Credit: Alex Bush at Oxfam, used with permission)
What GDP measures
What GDP measures
GDP is calculated using this formula:
C + I + G + (X − M)
Where:
C = Consumer spending (households buying goods and services)
I = Investment (business spending on buildings, machines, etc.)
G = Government spending (on infrastructure, education, healthcare, etc.)
X - M = Exports minus imports (net trade balance)
Real GDP removes the impact of price changes on the calculations. GDP per capita shows the average income per person in a country. Figure 7 shows a comparison of GDP per capita by country.
Figure 6. The components of the GDP calculation and where they appear in the extended circular flow of income model.
(Credit: DEAL, CC BY-SA 4.0)
Figure 7. Gross domestic product per person. Hover over the countries to see the values.
(Credit: Our World in Data, CC BY 4.0)
What GDP misses
What GDP misses
GDP includes almost everything bought and sold. But it doesn’t ask whether the activity is good or harmful. Cleaning up an oil spill adds to GDP, even though the oil spill damages damages ecosystems. The same is true for many industries that pollute the air, water, and soil. GDP counts the money spent on production, not the damage done.
It also leaves out unpaid essential work. Caring for children, cooking, cleaning, and supporting family members are all key to human wellbeing, but they’re not counted unless money changes hands. A parent who stays home to care for a child adds nothing to GDP. But if they pay someone else to do the same job, GDP rises. Volunteer work is also ignored, even though it strengthens communities and helps meet social needs.
Another major gap is economic inequality. GDP per capita is an average, so it can hide the fact that income and wealth are unevenly distributed. A few people earning high incomes can make a country’s average income look high, even when many others struggle to meet their basic needs. In countries like the United States, the richest households have gained more over time, while wages for most workers have stayed the same or even declined once inflation is taken into account. At the same time, key services like healthcare and higher education have become more expensive. So, even in rich countries, people may not enjoy a high quality of life if income is unevenly shared, or essential services are too expensive to access when they have to be purchased in markets (Section 5.2.2).
As GDP rises, its ability to deliver human wellbeing also diminishes. In very poor countries, a small rise in income can make a big difference, giving people access to clean water, food, or medicine. But in wealthier countries, where many needs are already met, further increases in income bring smaller gains (Figure 9). For example, the United States has a high GDP per capita but a lower life expectancy than Spain or South Korea, which both spend less overall. This shows that beyond a certain point, more economic growth doesn’t always lead to better health or happiness.
What are the negative impacts of economic growth?
What are the negative impacts of economic growth?
Economic growth can be beneficial if it is focused on meeting real human needs, but it also causes problems when it becomes a goal in itself, a system trap discussed in Section S.9.
Ecological impacts
Ecological impacts
Human economies depend on land, water, fossil fuels, minerals and living ecosystems. These are part of Earth’s life-support systems. As our human economies grow, we use more of these resources (Section 1.2.3 and Section 1.2.4). But Earth can only provide so much. Scientists have identified nine planetary boundaries (Figure 11 and Section 1.2.7), which are limits to human economic activities on Earth that should not be crossed. Economic growth has already pushed us past six of the boundaries. One major effect is climate change, caused by burning fossil fuels (Section 1.2.6). Others include damage to land, reduced biodiversity, and pollution.
Figure 10. Planetary boundaries model
(Credit: Stockholm Resilience Centre CC BY-NC-ND 3.0)
Not all countries are equally responsible. High-income countries like the U.S., the UK, and others in Europe have caused most of the ecological harm since 1970, even though they only make up a small part of the world’s population. In contrast, countries in the Global South have taken far less than their share of Earth’s materials, yet experience more of the ecological damage.
As growth continues to overshoot ecological limits, it becomes harder for future generations to meet human needs.
Social impacts
Social impacts
Growth also brings social changes. As more people move to cities for work, housing becomes crowded and expensive. Jobs may be insecure, with long hours and poor conditions, especially in Global South countries that export goods to Global North markets. Families and communities may grow weaker as people move away or work more. At the same time, businesses often encourage people to buy more, linking social status to spending. This can create stress, debt, and pressure to consume, rather than focus on relationships or wellbeing.
Economic impacts
Economic impacts
Even from an economic point of view, growth can backfire. Producing more can help if the goods and services meet real needs. But if production focuses on luxury goods, short-lived products, or polluting industries, the benefits are limited and the damage grows. Environmental harm makes it harder and more costly to meet people’s needs. If we damage ecosystems too much, we risk crossing tipping points in Earth systems that lead to sudden collapse (Section S.5). Scientists use the J-curve (Figure 12) to show how growth can lead to collapse in populations, including human populations, when ecosystem limits are crossed (Section 1.2.5).
Figure 11. J-curve exponential population growth, followed by a crash
A 2024 study published in Nature warned that climate change alone could reduce global income by 19% by 2050. Looking further ahead, experts predict that if current trends of environmental damage continue, global GDP could fall by half and billions of people could face deadly conditions by the end of the century.
Endless economic growth is not a realistic goal. A larger economy is only useful if it improves life without damaging the systems that support it. Many economists now argue that we should focus less on growing GDP and more on ensuring human wellbeing within Earth’s limits. The economy should serve life, not the other way around.
Activity 5.3.1
Activity 5.3.1
Concept: Systems
Skills: Research skills (information literacy), Thinking skills (critical thinking, transfer)
Time: varies, depending on option
Type: Individual, pairs, or group
Option 1: Data analysis practice - GDP and life expectancy
Time: 40 minutes
Figure 13. Life expectancy vs. GDP per capita
(Credit: Our World in Data)
Examine Figure 13. Use a data interpretation strategy suggested by your teacher or your course to form some conclusions about the relationship between life expectancy and GDP per capita. Click arrow for a data interpretation strategy (if you do not have one).
What is the title of the data? Clarify any questions you have about it
If a graph, what are the axis labels? Clarify any questions you have about them.
Make sure you understand the labels, colours, or other descriptive information provided.
Identify one fact from the data. Identify a second fact from the data. You might want to focus on one country, or 2-3 countries for comparison.
Is there a pattern in the data? What story does that pattern tell?
If the data has dates, is there a trend over time? What story does that trend tell?
Are there any anomalies in the data? What might explain the anomaly?
2. You can choose to display GDP per capita on either a linear scale or a logarithmic scale in the settings of this graph.
A linear axis shows equal distances for equal amounts. For example, the space between $1,000 and $2,000 is the same as the space between $20,000 and $21,000. Each extra dollar is shown equally.
A logarithmic axis shows equal distances for equal percentage changes. For example, the space between $1,000 and $2,000 (a 100% increase) is the same as the space between $10,000 and $20,000 (also a 100% increase). Each doubling or percentage change is what matters, not the number of dollars.
Using a logarithmic axis helps us see patterns more clearly when the data covers a wide range of values, like incomes from $500 to $50,000. It can make it easier to notice important trends at lower income levels that would otherwise look squeezed together on a linear scale.
When you switch between a linear and a logarithmic axis on the graph, what changes do you notice about the way the relationship between GDP per capita and life expectancy appears? (Hint: Which areas of the graph look stretched or compressed? Which trends become easier to see?)
Why might researchers choose to use a logarithmic axis when studying relationships between income and wellbeing indicators like life expectancy? (Hint: Think about how small changes in low incomes might have a bigger effect on people's lives than changes at very high incomes.)
Option 2: Thinking critically about economic growth
Time: 40 minutes
Donella Meadows was a scientist and systems thinker who co-authored The Limits to Growth, a book that challenged the idea of endless economic growth. In the 2004 update of the book, she and her co-authors asked a powerful set of questions about economic growth:
“Growth of what? For whom? At what cost? Paid by whom? What is the real need here, and what is the most direct and efficient way for those who have that need to satisfy it? How much is enough? What are the obligations to share?” (Meadows, Randers & Meadows, 2004)
Choose three questions from the quote that you find interesting or important.
Figure 14. Limits to Growth: The 30-year update
(Credit: Meadows, Randers, & Meadows)
Discussion
In a small group, take turns sharing your thoughts on each question. Use ideas from this section to support your thinking. As a group, choose one question that more people should be asking when thinking about economic growth. Be ready to explain why.
OR
Writing
For each of your three questions, write a short paragraph explaining:
– What the question means in your own words
– How it connects to what you’ve learned in this section
– Why it matters for how we think about economic growth
Reflection (in the discussion or in writing): Which question feels most important to you, and why?
Option 3: Practicing calculating doubling time
Time: 25 minutes
Access the International Monetary Fund’s World Economic Outlook Real GDP country data here:
IMF World Economic Outlook, Real GDP
Choose 3 countries with notably different GDP growth rates
Use the Rule of 70 to calculate the doubling time for each one
With a partner, or in an oral or written reflection on your own, comment on the significance of the results of your calculations. How or why does that data and/or the differences in the data, matter?
Option 4: Exploring what living conditions look like around the world
Time: 40+ minutes
Dollar Street is a website associated with the Gapminder Foundation. The website has documented more than 250 homes in 50 countries. In each home, a photographer spends a day taking photos of up to 135 objects, like the family's toothbrushes or favorite pair of shoes. All photos are then tagged (household function, family name and income).
The photos provide a fascinating look at the material conditions of different families around the world. There are a number of different things you can do with this site:
Just explore the images, letting your curiosity guide you
Choose 2-3 families at different income levels, but from a limited geographic area. How are their need satisfiers similar? How are they different? What might account for the similarities and differences?
Choose 2-3 families at similar income levels, but from different geographic areas. How are their need satisfiers similar? How are they different? What might account for the similarities and differences?
What do those similarities and differences indicate about the role of income, or other factors, in quality of life?
Option 5: Poverty, progress and capitalism
Time: 2 x 40 minutes (could be less or more, depending how the information is used)
Many economists claim that poverty has declined significantly over the last 200 years (Figure 15) and that economic growth has been the primary driver of lower poverty. It is a key claim supporting the economic growth goal, but is disputed.
Given what you have learned so far, what would some economists say about the role of economic growth in reducing poverty? Make sure you are clear about that before proceeding.
There are at least two lines of dispute related to the claim that economic growth and capitalism are responsible for progress on poverty, captured in these two articles:
Historical poverty reductions: more than a story about 'free-market capitalism' - This article by Esteban Ortiz-Ospina from Our World in Data explains the multiple factors that contributed to the data showing a decline in poverty in the last 200 years.
Progress and its discontents - An article by economic anthropologist Jason Hickel that questions the way we measure poverty. By doing so Hickel also questions the claim that poverty has declined over time, which also undermines the claim that capitalism and economic growth are responsible for poverty reduction.
Figure 15. World population living in extreme poverty, World 1820-2015
(Credit: Our World in Data, CC BY 4.0)
Read one or both of the articles and capture the main ideas in some notes. You could also divide up the work and then share what you found with the other students and discuss. Progress and its discontents is a much longer article, but a teacher could cut it into smaller, logical chunks if they wanted to divide up the reading.
Share what you learned with other students in a small group, or share and discuss as a whole class.
Ideas for longer activities and projects are listed in Subtopic 5.5
Checking for understanding
Checking for understanding
Coming soon!
Further exploration
Further exploration
Can the economy grow forever? A short TED-Ed / World Economic Forum video explaining economic growth and outlining the green growth-degrowth debate. Difficulty level: easy
Doughnut Economics: Two short videos related to economic growth. Difficulty level: easy
What is economic growth and why is it so important? An article from Our World in Data about the relationship between production of goods and services and human wellbeing, different ways of measuring economic growth and economic inequality. Difficulty level: medium.
Our obsession with economic growth is deadly - an engaging 25-minute video explaining the problems stemming from endless economic growth. Difficulty level: easy.
Economic growth - The main webpage for economic growth from Our World in Data, with links to various articles and data on the topic. Difficulty level: medium
Tipping Points: The true story of the Limits to Growth - a fascinating 3-episode podcast about the original research behind The Limits to Growth report that first sounded the alarm about the potentially existential damage our economies were inflicting on Earth systems. The podcast also tells the story about how economists, businesses and governments undermined and discredited the research. Difficulty level: medium
Exceeding Earth's Safe Limits with Johan Rockström – In this interview, Professor Johan Rockström discusses the planetary boundaries framework, highlighting how human activities are pushing Earth's systems beyond safe operating limits. Difficulty level: medium.
The Unbearable Anthropomorphism of Our World in Data - an article critical of the poverty data used often to claim that global poverty has declined dramatically over time. The article points out that rising GDP per capita levels hide the fact that in the drive for economic growth, many people have been forced off lands that sustained them for millennia. Moving to waged labour looks like they escape poverty because they have monetary incomes, but the quality of life for many has worsened because they can’t meet basic needs any longer and traditional ways of life that brought social cohesion have been destroyed. Difficulty level: medium
Institute for New Economic Thinking Lectures on[ECO]nomics
Planetary Boundaries - [ECO]NOMICS Part 3 - In this video lecture, Professor Juliet Schor explains planetary boundaries and why we need to live within them. She counters arguments often put forward by mainstream economics that there is a tradeoff between protecting the environment and our ability to consume goods and services. Difficulty level: medium
Eradicating poverty beyond growth: Olivier De Schutter - a brief speech by the UN Special Rapporteur on extreme poverty and human rights about the need to move beyond the growth goal to eradicate poverty. Difficulty level: easy
Sources
Sources
Doughnut Economics Action Lab. 7. Thrive beyond growth, Version 1.0 November 2024. https://docs.google.com/presentation/d/16dH5hAeX7h3ynjd-nzkbywEebdXDdWe57lpoBw7M598/edit#slide=id.p98
Jackson, T. (2017). Prosperity without growth: Foundations for the economy of tomorrow (2nd ed.). Routledge.
Hickel, J. (2020). Less is More. London: William Heinemann.
Hickel, J. et al. (2022) National responsibility for ecological breakdown: A fair-shares assessment of resource use, 1970–2017. The Lancet Planetary Health, 6(4), e342–e349. https://doi.org/10.1016/S2542-5196(22)00044-4
International Monetary Fund. (2024). World Economic Outlook: Real GDP growth. IMF DataMapper. https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/OEMDC/ADVEC/WEOWORLD
Kotz, M., et al (2024, April 17). The economic commitment of climate change. Nature 628, 551–557. https://doi.org/10.1038/s41586-024-07219-0
Meadows, D. H. (2008). Thinking in systems: A primer. White River Junction, VT: Chelsea Green Publishing.
Meadows, D. H., & Randers, J. (2013). Limits to growth. Chelsea Green Publishing.
Moy, Diana T. (2010). Exponential Growth - Lily Pond. NO AI TRAINING: Without in any way limiting the artist’s exclusive rights under copyright, any use of this publication to ‘train’ generative artificial intelligence (AI) technologies to generate text is expressly prohibited. The artist reserves all rights to license uses of this work for generative AI training and development of machine learning language models. https://www.artefacts.us/wordpress/works/exponential-growth-lily-pond/
Parrique, T. (2019). The political economy of degrowth [Doctoral dissertation, Université Clermont Auvergne & Stockholms universitet]. HAL Open Science. https://theses.hal.science/tel-02499463/document
Parvez Butt, A., et al. (2023). Radical pathways beyond GDP: Why and how we need to pursue feminist and decolonial alternatives urgently. Oxfam Great Britain. https://doi.org/10.21201/2023.621532
Pilling, D. (2018). The Growth Delusion. London: Bloomsbury Publishing.
Raworth, K. (2017). Doughnut economics: seven ways to think like a 21st century economist. London: Penguin Random House.
Reardon, J. (2018). Introducing a new economics: Pluralist, sustainable, & progressive. London: Pluto Press.
Roberts, R. (2023, January 22). Unpicking growth’s triple lock. Volans. Medium. https://medium.com/volans/unpicking-growths-triple-lock-4ca5f241206e
Roser, M. (2021). What is economic growth? And why is it so important? Our World in Data. https://ourworldindata.org/what-is-economic-growth
Roser, M., et al. (2023). Economic growth. Our World in Data. https://ourworldindata.org/economic-growth
Sullivan, D., & Hickel, J. (2023). Capitalism and extreme poverty: A global analysis of real wages, human height, and mortality since the long 16th century. World Development, 161, 106026. https://doi.org/10.1016/j.worlddev.2022.106026
Trust, S., et al. (2025). Planetary solvency: Finding our balance with nature. Institute and Faculty of Actuaries & University of Exeter. https://actuaries.org.uk/document-library/thought-leadership/thought-leadership-campaigns/climate-papers/planetary-solvency-finding-our-balance-with-nature/
van Staveren, I. (2015). Economics after the crisis: An introduction to economics from a pluralist and global perspective. Routledge.
Terminology (in order of appearance)
Terminology (in order of appearance)
Coming soon!
Page updated
Google Sites
Report abuse