Our economic model: can growth continue?

GDP per person at constant purchasing power, 2011 international dollars, from the Maddison Project Database 2023 (Bolt and van Zanden) via Our World in Data. Constant purchasing power means that inflation and differences in price levels between countries are removed, so the figures can be compared over time and between countries. The world is a population-weighted average and is only available for some years before 1950.

1. Debt and interest

   States, companies and households borrow against future income. If the economy grows faster than the interest rate on the debt, the debt shrinks as a share of GDP by itself, even if the state does not pay it down. If the interest rate is higher than growth, budget surpluses are needed instead to keep the debt from growing. Olivier Blanchard showed in 2019 that interest rates in the United States have mostly been lower than growth since 1950, which makes debt easier to carry as long as growth continues.

   Blanchard 2019, American Economic Review

2. Pensions

   The income pension is recalculated every year with the income index, which follows average earnings in the country, minus 1.6 percentage points that have already been counted into the pension in advance. If real wages grow more slowly than 1.6 percent a year, pensions therefore lose purchasing power. If the debts to pensioners become larger than the system's assets, the brake kicks in, the so called balancing, and pensions are raised by a lower index. The brake was active from 2010 to 2017 and cut pensions in 2010, 2011 and 2014. The system does not go bankrupt without growth, but it relies on growth to keep the level of pensions. More on the pension page.

   Swedish Pensions Agency, Orange Report 2025

3. Pensions with low growth

   With low or no growth the income pension falls behind, while the guarantee pension, which people with the lowest incomes receive, is raised in line with prices. More people then end up close to the floor. Those who work longer get a higher pension, since the balance is divided over fewer expected years, but that does not protect against the whole level falling. The researchers Dario Leoni and Christine Corlet Walker compared pension systems in four European countries in 2026. Low growth puts pressure on both pay as you go systems, where today's contributions pay today's pensions, and funded systems. In a system like Sweden's, where pensions follow contributions, it is the pensioners who bear the cost. The study gives pay as you go systems some support, mainly because they are cheaper to run and costly to leave, and sees a more equal distribution as the most important tool. We have not found any study of how low incomes and long working lives fare in the Swedish system without growth.

   Leoni and Corlet Walker 2026, MAPS, University of Surrey

4. Welfare

   Schools, health care and social care are done by people, and there productivity cannot rise as fast as in industry. Wages still follow wages in the rest of the economy, so welfare becomes more expensive as a share of the economy over time. The economist William Baumol described the pattern in 1967. As the share of older people also grows, growth makes it possible to pay more without raising taxes.

   Baumol 1967, American Economic Review

5. Jobs

   When productivity rises, fewer working hours are needed to produce the same amount. If the economy then does not grow, and working hours are not shortened, unemployment rises. The link between growth and unemployment is called Okun's law after Arthur Okun, who described it in 1962. Models by Tim Jackson and Peter Victor show that shorter working hours can keep employment up even with low growth, but this has not been tried in a whole country.

   Jackson and Victor 2020, Ecological Economics

Index, 1990 = 100, per person. GDP from the Maddison Project Database 2023. Carbon dioxide from the Global Carbon Project via Our World in Data: fossil carbon dioxide and cement, not methane, nitrous oxide or land use. Production is emissions within the country's borders, excluding international aviation and shipping. Consumption is emissions anywhere in the world for what is used in the country: emissions for imports are added and emissions for exports are subtracted. For the world as a whole the two are the same.

1. Absolute decoupling is rare

   Helmut Haberl and colleagues reviewed 835 studies of decoupling in 2020. Relative decoupling was common for both materials and emissions. Absolute decoupling over a long period was rare, but some industrialised countries had in recent years decoupled GDP from territorial carbon dioxide emissions and, more weakly, from consumption emissions. The conclusion was that the rates seen so far are not enough for the rapid cuts the climate targets require.

   Haberl et al. 2020, Environmental Research Letters

2. Eighteen countries cut emissions

   Corinne Le Quéré and colleagues showed in 2019 that 18 developed countries, Sweden among them, cut their carbon dioxide emissions from 2005 to 2015 while their economies grew. This was mainly because renewable energy replaced fossil fuels and energy use fell, and not primarily because industry moved abroad.

   Le Quéré et al. 2019, Nature Climate Change

3. But the pace is not enough

   Jefim Vogel and Jason Hickel found in 2023 that eleven rich countries, Sweden among them, had absolute decoupling from 2013 to 2019. At that pace it would on average take over 220 years to cut emissions by 95 percent, and the countries would emit many times more than their share of the carbon budget for 1.5 degrees. The result rests on a calculation of each country's fair share of the budget, a choice other researchers make differently.

   Vogel and Hickel 2023, The Lancet Planetary Health

4. Planetary boundaries

   The framework of nine planetary boundaries describes the systems that keep the Earth stable, such as the climate, biodiversity and the nitrogen and phosphorus cycles. Katherine Richardson and colleagues judged in 2023 that six of nine had been crossed, and in the Potsdam Institute's follow-up in 2025 it was seven, when ocean acidification was added. Critics argue that several of the boundaries are hard to measure and that a global boundary for, for example, biodiversity cannot be set.

   Richardson et al. 2023, Science Advances; critique: Montoya et al. 2018

5. Material use keeps rising

   The world's material footprint, everything mined, harvested and felled for what is consumed, rose from 9.0 tonnes per person in 2000 to 13.8 tonnes in 2022. The UN International Resource Panel estimates that material extraction has more than tripled since 1970 and could rise by 60 percent by 2060 if nothing changes. According to the panel, extraction and processing account for over half of greenhouse gas emissions.

   UNEP IRP, Global Resources Outlook 2024; UN SDG indicator 12.2.1

6. Where researchers disagree

   No serious researcher argues that emissions can fall without new technology, and most agree that technology alone has not moved fast enough so far. The disagreement is about the future: whether renewable energy, electrification and recycling can become so cheap and fast that decoupling speeds up several times over, or whether rich countries must also reduce production. It is partly about values, such as how large a share of the carbon budget each country is entitled to, and partly about forecasts nobody can test in advance.

   Haberl et al. 2020, the section on strategies

1. Green growth

   The economy can keep growing if prices on emissions, new technology and investment in renewable energy make emissions and material use fall faster than the economy grows. This is the line followed by the OECD, the EU and most governments. The International Energy Agency's net zero scenario from 2050 assumes a world economy 40 percent larger in 2030 than in 2020 but using 7 percent less energy.

   Critique: Jason Hickel and Giorgos Kallis argue that there is no evidence that material use can fall in absolute terms while the economy grows, and that emissions are not falling fast enough. More efficient technology also often leads to using more of it, the so-called rebound effect.

   OECD 2011, IEA 2021; critique: Hickel and Kallis 2020

2. Agrowth

   Jeroen van den Bergh proposes that policy should ignore whether GDP grows. The goal should be welfare and the environment, steered with for example a price on carbon, and growth becomes whatever it becomes. He criticises both those who make growth the goal and those who make shrinking GDP the goal.

   Critique: The proposal says little about what happens to debt, pensions and jobs if growth actually fails to come, and it is politically hard to drop a goal that so much rests on.

   van den Bergh 2011, Ecological Economics

3. Prosperity without growth

   In the book Prosperity without Growth, first a report to the UK government's Sustainable Development Commission in 2009, Tim Jackson argues that society needs to be made stable without depending on growth. This means more investment in public services and green infrastructure, shorter working hours and a financial system that does not require constant expansion.

   Critique: The models rest on assumptions about productivity, investment and distribution that have not been tested in a real economy, and few explain how such a transition would win a political majority.

   Jackson and Victor 2020, Ecological Economics

4. Degrowth

   Giorgos Kallis, Jason Hickel and others want rich countries to reduce their use of energy and materials in a planned way, and with it parts of production, while protecting basic needs and equality, for example through public services and shorter working hours. Poor countries should be able to keep growing.

   Critique: Ivan Savin and Jeroen van den Bergh reviewed 561 studies on degrowth in 2024 and found that most were opinion or conceptual arguments and that few were based on data or models. Other critics point out that a shrinking economy has so far always meant crisis and unemployment, and that the idea has little support among voters.

   Kallis 2018, Degrowth; Hickel 2020, Less is More; critique: Savin and van den Bergh 2024

5. Doughnut economics

   Kate Raworth draws the economy as a doughnut: an inner social foundation, such as food, housing, health and education for all, and an outer ecological ceiling, the planetary boundaries. The goal is to land between them, not to grow. Daniel O'Neill and colleagues showed in 2018 that none of about 150 countries met basic needs without exceeding its share of the boundaries.

   Critique: The doughnut is a picture of the goal rather than a theory of how to steer the economy there, and where the floor and ceiling lie is largely a matter of values.

   Raworth 2017, Doughnut Economics; O'Neill et al. 2018, Nature Sustainability

6. Beyond GDP

   Many want to complement GDP with measures of welfare. Stiglitz, Sen and Fitoussi proposed this in a report to the French president in 2009, and the OECD Better Life Index combines eleven areas such as health, housing and leisure. Since 2017, Sweden has reported fifteen indicators in the budget bill under the heading New measures of wellbeing, and Statistics Sweden tracks the global goals of Agenda 2030. The composite measure GPI subtracts the costs of environmental damage and inequality; Ida Kubiszewski and colleagues calculated in 2013 that world GPI per person peaked in 1978 and has not risen since.

   Critique: How different things are weighed together into one number like GPI is arbitrary, and GDP has the advantage of being calculated the same way in every country under the UN rules for national accounts.

   OECD Better Life Index, Statistics Sweden, Agenda 2030, Kubiszewski et al. 2013