The macroeconomics of near zero growth of GDP in a world of geopolitical risks and conflicts

This paper offers an analysis of the macroeconomic conditions for near zero economic growth based on a demand-led growth model, and their implications in terms of paid employment, government finances, and the rate of profit. The main finding of the paper is that a level of net investment compatible with near zero growth would lead to a lower level of paid employment in terms of total hours worked. The effects on the distribution of work and the unemployment level would depend on changes to working time, whether in terms of average hours worked per annum, ages of entry into, and exit from, the work force. Furthermore, changes in working time would be achieved through social actions and legislation, rather than market mechanisms. A government budget deficit may well be required to underpin full employment and capacity utilisation, though there may be long-term limits on the use of budget deficits in a near zero growth context. Finally, a near zero growth rate would also mean a substantial lower rate of profit than hitherto.

The implementation of these theoretical conditions require a level of cooperation between and within countries, which is much more difficult to reach in the presence of geopolitical risks and conflicts. Yet, there is no country secure from geopolitical risks and conflicts without an ecologically sustainable use of the natural resources. The theoretical conditions discussed in this paper could serve as “condiciones sine quibus non” to ecological sustainability, while navigating the complexities and uncertainties caused by the on-going conflicts and heightened geopolitical risks.