The Growth Conundrum

BERKELEY – The world faces a major dilemma. While rapid economic growth, such as that realized over the past 50 years, is critical to support development, we now also know that it can have serious adverse consequences, particularly for the environment. How can we balance the imperatives of growth and development with the need to ensure sustainability?

The unprecedented growth of per capita income during the last 20 years has lifted more than one billion people out of extreme poverty. In developing countries, life expectancy has increased by 20 years since the mid-1970s, and the illiteracy rate among adults was almost halved in the last 30 years.

But rapid economic growth has placed enormous pressure on the environment. Moreover, it has been accompanied by rising income inequality, which has now reached historic highs within many countries (though, across countries, such inequality has declined). Given this, one might argue that slower growth would be good for the world.

In that case, the solution would be at hand. According to a new report by the McKinsey Global Institute (MGI), aging populations and declining fertility rates in many parts of the world could dampen global growth considerably over the next 50 years.