Why does the economy need to continue to grow, especially in countries such as Japan where population is declining?

Question

Why does the economy need to continue to grow, especially in countries such as Japan where population is declining?

In: 56

Answer 1

Two big reasons; GDP per capita is one of the best predictors of standard of living. It’s not perfect, obviously, many factors play into standard of living and there’s outliers, but generally if a country is producing more per person, those people are living better.

Second is the way retirement works. Working-age people need to produce enough to satisfy the standard of living for both themselves and retirees. This is easy when the population is growing; there are far more working-age people than retirees so the percentage of production going to retirees is low. But when population is stagnant or declining, the ratio of working-age to retired starts shrinking and workers need to produce more just to maintain GDP per capita where it is.