Why does the economy need to continue to grow, especially in countries such as Japan where population is declining?
In: 56
Well, you first need to understand what it means when a population is declining. People are not dying earlier with modern medicine and as such, it means that they are having fewer children.
Fewer children means less people in the workforce and with less people, the government will not get as much tax as it used to.
Tax is used in many areas, one of the big cost is money to keep retired people fed, medical stuff (old people are more prone to sickness), someone to take care of them.
When you have an aging population, you have more of these cost.
So now imagine you are the government. You have less money from tax because less workforce, you have more cost to keep older people well and not dying. You can borrow money to do this which you have already done (national debt) and not a long term solution. You owe some money and you need to pay back with interest and at the same time, you have less money to work with. So it’s not a long term solution to keep borrowing. OR you need people to spend more money so you can tax more.
How do you get people to spend more money? You need to export goods that other countries are willing to spend money on and/or you need your people to buy more things, buy things they do not need so you can tax more.
The cycle then continues and so the economy must grow. Why? Because that’s how we’ve set up the economy. We’ve spend money we currently have and also some from the future. We’ve spent those aging pensioners money on other things for things like roads, school, hospital which is a good thing. Your people are living in a better place with better facilities. By spending money, you have created jobs and more money to go around.
Edit: few words and some proof reading
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