When the pie no longer grows, what do people, companies and countries do? In January, when new-year forecast reports pour out, the digits after the decimal point of the growth rate sit at the center of the debate. Apart from whether that decimal rises or falls, once a state in which the overall size does not increase becomes a constant, the way the economy works itself changes. Hong Sung-kook's 'Shrinking Society' (수축사회, Medici Media, 2018) is a book that gave that state a name.
The title is the concept. The author calls a situation in which institutions and habits built on the premise of expansion remain in place even after expansion has stopped a shrinking society. It was published in 2018, eight years ago. Rather than tracking the indicators of a particular quarter, the account follows how institutions, population and debt are tangled with one another and turn.
The grain of the book differs from that of a business forecast. A forecast speaks of next year's growth rate and the path of interest rates and ends there, while this book explains what behavior each sector of society chooses once those numbers have hardened at a low level. In an expansion, differing interests are adjusted with the increment of growth, but in a contraction the matter turns into dividing the same amount. That the nature of conflict changes is the book's central claim.
This point meets the concerns of industry reporting directly. An industrial transition is the work of opening a new market and at the same time the work of winding down existing plants and jobs. Who bears the cost of the transition becomes an entirely different question when the pie is growing and when it is not.
Finance is the same. The distribution of risk differs between a phase in which rising asset prices carried every participant along and a phase in which they do not.
The frame is useful when reading discussions of ESG as well. Once the period in which cutting emissions and raising revenue rolled along together has passed, the two goals compete over the allocation of resources. This is why the source of the money for carrying them out has to be checked along with the reduction targets set out in corporate disclosures.
The strength lies in the breadth of the field of view. Because population, debt, technology and the international order are bound together under a single diagnosis of the state, the connections are easier to see than when individual news items are read one by one. Where books on low growth mostly lean to one side, either analysis of causes or policy prescriptions, this book starts from the premise that we are already inside that state. Diagnosis comes first, prescription after.
There are places where it grows thin. Spread as wide as it is, the explanation of each sector concentrates on showing where things sit rather than digging deep. A reader who has to work through the transition path of a particular industry in numbers will find this book alone insufficient, and will have to attach material on each sector separately.
The fact that it was written in 2018 also has to be taken into account. The conditions that changed after that, through the pandemic and the reorganization of supply chains, are for the reader to update while reading.
The value of opening a book written eight years ago now lies not in scoring what the author got right, but in checking whether the coordinates he set hold up under present conditions. It is closer to something that tells you what that decimal point decides, before you check the decimal point of the growth rate. On a shelf where books dealing separately with population and debt, technology and the international order stand scattered, this one is worth placing as a signpost that passes between them.
