Is Economic Growth Really Essential?

The financial crisis has prompted many Germans to question the "cult" of GDP. Could we live with less economic growth and be happier?

By Alexander Jung

How is the German economy doing? Has it emerged from the worst of the economic crisis?

There is probably no one in Germany who can answer those questions—questions which are currently on everyone's mind—quicker or more precisely than Norbert Räth. His response consists of a single number.

Räth, a white-haired economist in his late 50s, is sitting in his corner office on the eighth floor of the Federal Statistical Office in the German city of Wiesbaden. He is in charge of the agency's Group III A, which addresses issues relating to the national accounts, used to measure the country's economic activity. If the national accounts can be characterized as Germany's balance sheet, then Räth is the country's senior accountant.

His office compiles all key economic data relating to Germany, including figures on building permits and hotel stays, poultry slaughter and automobile repair, even data on the amount of tax paid on sparkling wine by wineries. "We have data on every payment made," says Räth.

The sources of all this information include tax offices, associations and a monthly survey of 23,500 production companies. In the past, the data arrived in Wiesbaden on tons of paper, but today everything is done electronically. Once every three months, Räth recompiles the data and comes up with a figure representing the value of all goods and services produced in Germany: the gross domestic product, or GDP. In the second quarter of this year, German GDP amounted to €596.67 billion ($875 billion), up from the previous quarter's figure of €593.3 billion.

While the absolute totals are only of interest to the professional world, what makes headlines is the rate at which GDP changes. According to Räth's latest figures, Germany's GDP increased in the second quarter of 2009 by 0.3 percent compared to the previous quarter. It's a figure which is of vital importance to the country.

Everything revolves around this number, and everyone is fixated on it. Hardly any politician, whether they are from the center-right Christian Democrats or the center-left Social Democrats, much less the pro-business Free Democratic Party, would ever think to seriously question it. Growth generates jobs, growth produces social wellbeing, and growth creates affluence for all. This, at least, is the economic policy gospel, proclaimed and eulogized on every market square in Germany during the current election campaign. And at this week's G-20 summit in Pittsburgh, the heads of state and government in attendance will once again be invoking the dynamics of growth. But the good news has lost some of its luster.

Not Just Cranks

There are now plenty of skeptics who seriously question the value of constantly rising economic output. And these critics are not simply cranks who are opposed to change in general. In fact, they are respected individuals who have the courage to reflect on whether growth is always synonymous with progress—and whether stagnation automatically implies regression.

"Our affluence has quadrupled in the last 40 years. But at what price?" asks Kurt Biedenkopf, a member of the Christian Democratic Union (CDU) and the former governor of the eastern state of Saxony. The growth rate is "no longer a clear indicator of rising affluence," Biedenkopf told SPIEGEL in a recent interview.

Even German President Horst Köhler is suspicious of politicians' assurances that growth is indisputably beneficial to society. "We have convinced ourselves that permanent economic growth is the answer to everything," Köhler said in March, in the midst of the financial crisis. It was an astonishing statement, coming as it did from a professional economist and former head of the International Monetary Fund. And yet Köhler did not reveal what the correct answer could be. Stagnation, perhaps? Or even contraction?

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