Zero growth and structural change in a post Keynesian growth model

Continuous albeit oscillating economic growth has become a hallmark of modern economies. Arguing on the basis of theoretical models, some authors maintain that growth is even a systemic requirement of capitalist economies. Thus the latter remain only stable as long as they grow. From an empirical point of view, phases of negative growth (recessions) often go hand in hand with economically and socially detrimental side effects, which policymakers seek to avoid at virtually all costs. This is why a stagnant or even degrowing economy is also anathema to policymakers and arguably to the public at large. Concomitantly, economic research has focused mainly on the drivers of growth rather than the conditions under which stagnant economies can exist. The present paper seeks to contribute to the analysis of stagnant economies by investigating the interrelationship of zero growth and technological progress in the context of a Kaleckian growth model. The analysis starts by showing that a Kaleckian model allows zero growth if depreciation is taken into account and if animal spirits are somewhat (but not too) pessimistic. Combining these conditions with technological progress and wage bargaining, further analysis then indicates that in a profit-driven economy, the overall stability of the system is no longer guaranteed if zero growth is actively imposed, leading to a downward spiral, while in a wage-driven economy, stability can be induced under conditions of zero growth and technological progress but it may not be guaranteed for positive growth.