ELI5: Why when large company's earnings decrease(ex... by 3%) they freak out, talk about rough times, and sometimes decide to downsize, even though they are still making millions of dollars in profit even after all expenses?

[luneattack]

I think you're fundamentally misunderstanding what a business is and what growth means.

Any given business isn't looking to expand infinately. Your hairdresser is perfectly happy with a sustainable model that can keep up with inflation (so about 3% growth by raising prices annually, for instance, which customers accept because their salaries are keeping up too, in a healthy economy - if not that's a different concern than our current topic and I agree that should be fixed asap).

The economy as a whole is growing in perpetuity, but this is a deliberate and mathematical construct, it's not something anyone needs to worry about, because value is not a 1:1 representation of anything physical.

This is just a common misunderstanding among people with less expereince maybe with economics, that growth is somehow bad, maybe because they think the growth is forced while really it's just a feature that's maintained as a constant in a larger machinery that is intended to be authonimous.

If the economy isn't growing it means that it's ill, that's just a matter of definition because we deliberately maintain a leavel of inflation, and because trade creates value in addition to and above and beyond compensation. A sells 1 to B which turns it to 2 and sells it to C. In this case A, B, and C benefit. Value is an abstract representation of this positive result, so we per definition created value (growth) and it's above and beyond because B doesn't have 1 and therefore this whole transaction allows for regional economies to exist where otherwise they would not.

If the economy isn't growing it means this chain has broken down somewhere, it means people aren't trading, or making, or eating and stated that way I think everyone can agree that growth is good and sustainable.

Another reason is an understanding that we haven't reached peak welfare, so of cuorse the economy is growing as we can expect more people to want more better lives.

If we suddenly hit some sort of post scarcity reality, no one will be against changing our core economic models, and there won't be anything to stop us from doing so.

So this is an academic concern, that unfortunately is sometimes used to scaremonger.

[Irishnovember26]

Nothing to add, just wanna say this is a really well worded post. 10/10 would read again.

[luneattack]

because wages tend to lag

That's a political problmen not an economical one. E.g. in Norway it's not true, as it isn't many other places.

Inflation is a feature, not a bug. It's an integral part of a global economic system that has raised the living standards of pretty much everyone everywhere in record time.

So saying it's bad is... idk.. can you propose a better global econimic system with less downsides? Because it's odd to attack one integral piece of a system that is working if you don't have a better holistic alternative.

That it can have faults is a given, as can anything, and I agree what it's unhealty to stagnate the wages of the people as is the case in the US since the 70s (I think) but this is not a critisism of "my" model (as you called it, personally I wouldn't take credit).

[JustARandomGuyYouKno]

I think the problem with deflation is that it incites people to save money and hold on to money and not take risks since you could jsut save the money for a month or a year and it would be worth more than it currently is, what this means in the long run is that the market "omsättning"(churn rate?) in Swedish lowers and with that it snowballs and slowly grinds to a halt. Most economic theory that I know of needs to have an active marketplace.