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Capitalism's growth imperative

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  • Myron J. Gordon
  • Jeffrey S. Rosenthal

Abstract

A capitalist firm operating in a competitive market is subject to a growth imperative, because uncertainty about the profit rate under a no-growth policy makes the firm's prospects highly unattractive in finite time and bankruptcy practically certain in the long run. A no-growth policy determines consumption and investment so that they and capital would remain constant over time if the latter's expected return were realised with certainty. Simulation is used to arrive at the probability of bankruptcy by the end of t periods and the expected values of capital and money, for relevant combinations of time and uncertainty under successively more realistic models of a no-growth firm in a competitive market. The sensitivity of the results to variation in the parameters in each of the models is evaluated. Finally, we establish that a plausible growth policy may achieve growth, but the problem of bankruptcy is not resolved. Copyright 2003, Oxford University Press.

Suggested Citation

  • Myron J. Gordon & Jeffrey S. Rosenthal, 2003. "Capitalism's growth imperative," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 27(1), pages 25-48, January.
    • Handle: RePEc:oup:cambje:v:27:y:2003:i:1:p:25-48
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    Cited by:

    1. Barrett, Adam B., 2018. "Stability of Zero-growth Economics Analysed with a Minskyan Model," Ecological Economics, Elsevier, vol. 146(C), pages 228-239.
    2. Richters, Oliver & Siemoneit, Andreas, 2017. "How imperative are the Joneses? Economic growth between individual desire and social coercion," VÖÖ Discussion Papers 4/2017, Vereinigung für Ökologische Ökonomie e.V. (VÖÖ).
    3. Wenzlaff, Ferdinand & Kimmich, Christian & Richters, Oliver, 2014. "Theoretische Zugänge eines Wachstumszwangs in der Geldwirtschaft," ZÖSS-Discussion Papers 45, University of Hamburg, Centre for Economic and Sociological Studies (CESS/ZÖSS).
    4. Jackson, Tim & Victor, Peter A., 2015. "Does credit create a ‘growth imperative’? A quasi-stationary economy with interest-bearing debt," Ecological Economics, Elsevier, vol. 120(C), pages 32-48.
    5. Jin Xue & Hans Jakob Walnum & Carlo Aall & Petter Næss, 2016. "Two Contrasting Scenarios for a Zero-Emission Future in a High-Consumption Society," Sustainability, MDPI, vol. 9(1), pages 1-25, December.
    6. Richters, Oliver & Siemoneit, Andreas, 2017. "Consistency and stability analysis of models of a monetary growth imperative," Ecological Economics, Elsevier, vol. 136(C), pages 114-125.
    7. Mair, Simon & Druckman, Angela & Jackson, Tim, 2020. "A tale of two utopias: Work in a post-growth world," Ecological Economics, Elsevier, vol. 173(C).
    8. Javier Lopez Bernardo, 2016. "A post-Keynesian theory for the yield on equity markets," Working Papers PKWP1613, Post Keynesian Economics Society (PKES).
    9. Schiemann, Christoph & Wilmsen, Felix, 2017. "Umsetzungsmöglichkeiten postwachstumsökonomischer Suffizienz- und Subsistenzansätze in der urbanen Praxis?," Beiträge zur Wirtschaftsgeographie und Regionalentwicklung 1-2017, Universität Bremen, Institut für Geographie.
    10. Richters, Oliver & Siemoneit, Andreas, 2017. "Fear of stagnation? A review on growth imperatives," VÖÖ Discussion Papers 6/2017, Vereinigung für Ökologische Ökonomie e.V. (VÖÖ).
    11. Adam B. Barrett, 2017. "Stability of zero-growth economics analysed with a Minskyan model," Papers 1704.08161, arXiv.org, revised Nov 2017.
    12. Richters, Oliver & Siemoneit, Andreas, 2019. "Growth imperatives: Substantiating a contested concept," Structural Change and Economic Dynamics, Elsevier, vol. 51(C), pages 126-137.
    13. Gordon, Myron J., 2005. "Growth, uncertainty and the Third World in the rise and fall of capitalism," Journal of Asian Economics, Elsevier, vol. 16(2), pages 153-177, April.
    14. Oliver Richters & Andreas Siemoneit, 2018. "The contested concept of growth imperatives: Technology and the fear of stagnation," Working Papers V-414-18, University of Oldenburg, Department of Economics, revised Nov 2018.

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