• BC
    The post WWII generations grew up with the firm belief that economic growth would proceed into the far future (like, 22nd century, at least). Economists predicted steady growth. Here we are in 2016, much closer to the far future than when we were when we were born, and economic growth is, and has been for the last 16 years, disappointingly slow to flat. Actually it wasn't all that great from 1984 to 2000, either. [Some economic historians think that an economic restructuring starting around 1960.]

    I'm not proposing a catastrophe, but I am wondering two things:

    Are economic predictions worth the paper they are printed on? and
    Are we living in a period of extended slow-to-no growth?

    "According to a new analysis by the McKinsey Global Institute, 81% of the United States population is in an income bracket with flat or declining income over the last decade. That number was 97% in Italy, 70% in Britain, and 63% in France."

    $3 trillion of US GDP is missing from the predicted 2015 GDP (less, $1.7 trillion, if it hadn't been for the recession of 2007--->). Per capita output is about half of the expected increase over the last decade. Technology hasn't (yet, anyway) had the same transformative effect as electricity and the auto did a century ago.

    Economists have mostly not seen any of this coming. (There are always people predicting that catastrophe is near, and every now and then they are going to be right.)

    I'm not proposing a catastrophe, but I wondering two things.

    Are economic predictions worth the paper they are printed on? Why? and
    Do you think we are living in a period of extended slow-to-no growth?

    Some points taken from here THE NYT
  • Cavacava
    There is a lot of historical data, and many different ways of analyzing that data. Economists question how each others' account of historical changes, so at least to my mind, little reason not to questions any predictions. The crystal ball gets cloudier the further we try to see into the future.

    I think we are in a period of structural change in the world economy, which has gone on for decades.


    1) We are now in a world market, which is primarily capitalistic. It's consumer driven and consumers typically choose products that work well based on what they cost. If corporation can mfg cheaper products in Mexico, such as cars, they move their facilities there. Same for vehicle parts...some where close to 50% of the parts in our cars are from some other country. Free trade competition is good.

    If an industry can't produce a competitive product, then it ought to be replaced. It means that people will be displaced, I know, I have been. Workers need to be trained to fill jobs that society needs. Many difficult issues here.

    2) Corporations have grown in size, to my mind beyond what is reasonable. The 'economies of scale' enable these gorgons to reduce much of the supporting layers needed by multiple companies...extra labor, facilities, are unnecessary.
    The problem here, I think, is that these huge companies, hit the wall in terms of these economies of scale after a few years. Their only route for continued growth becomes the acquisition of other smaller companies, which are absorbed, and used to add growth.

    There are a couple of major problems with monopolistic companies, that I can think of:
    a) There is a cyclic component to monopolistic growth. The AT&Ts of this world watch what Verizon and other competitors are doing. An acquisition by one competitor is viewed as a challenge, and it too makes a similar acquisition and so on...
    b) Monopolies are not driven by innovation, they don't have to innovate, they can buy.

    3) Our investment in infrastructure is minuscule compared to our historic investment in railroads, transportation, and other basic industries.

    Not all industries have had such productivity declines, technology and medical sciences productivity lead all other industry sectors. Frontier industries in general have out performed all other industries. They are currently the most resilient parts of the economy, and they are still vibrant and growing. Plums for gorgons :-|

    Future growth...get my crystal ball!
  • apokrisis
    Actually it wasn't all that great from 1984 to 2000, either. [Some economic historians think that an economic restructuring starting around 1960.]Bitter Crank

    A simple explanation is that the modern economy is based on freely burning fossil fuel and other resources. And the 1950s were the era of the gushing super oil fields. It took about one barrel of oil (in terms of all cost of drilling and transporting) to produce 100 barrels to use. And this ridiculously cheap energy allowed for massive, pretty wasteful, economic expansion.

    Then as the easy fields dwindled, the game changed. The production balance fell to 20 free barrels for every 1 barrel spent. Now with offshore oil, tar sands, etc, the balance is down to 10 to 1, or even 5 to 1.

    So the usual economic story is the west got rich because it was creative and inventive. But an ecologist would say it was really mostly just the west gobbling up a free lunch.

    Conventional oil has now peaked. The show is over there. Unconventional oil is also peaking. So if economic expansion was all about cheap energy and nothing more substantial than that, then dreams of a return to 1950s style US prosperity for all - the baby boomer experience - are dead in the water.

    In a realistic world - where people listened to the 1970s limits to growth message - the market might have been allowed to speak. Global economics might have responded to the underlying reality in some useful way.

    Instead the story since the 1990s has been about the financialisation of the economy. Massive asset bubbles have been created to load debt onto the unsuspecting. The pretence has been created that the future will see the constant growth of the past. And so people have hocked that future to have some cash to spend right now. Publicly-owned assets have then been transferred to private hands.

    But the illusions that financialisation can spin have stopped the wheels falling off so far. And after all, peak oil means that never before in history is so much actually being pumped out of the ground. It is just that the actual profits are minimal. So if you use financial trickery to manufacture cash by manufacturing credit, the current anaemic real growth can be leveraged to look like prosperity era growth. But check the oil companies and you find they are just not even investing in new exploration.

    The gloomy view is we are on the edge of Seneca's cliff.

    "It would be some consolation for the feebleness of our selves and our works if all things should perish as slowly as they come into being; but as it is, increases are of sluggish growth, but the way to ruin is rapid." - Lucius Anneaus Seneca
  • mcdoodle
    The post WWII generations grew up with the firm belief that economic growth would proceed into the far future (like, 22nd century, at least). Economists predicted steady growth.
    ...I'm not proposing a catastrophe, but I am wondering two things:

    Are economic predictions worth the paper they are printed on? and
    Are we living in a period of extended slow-to-no growth?
    Bitter Crank
    Being green and Green I think we should aim for steady state economics now, i.e. stability over the business cycle, without growth. Anything more is non-sustainable. Even a steady state economy would require innovation and productivity improvement if the economy as a whole were to improve its performance. There is a not-very-active movement (http://steadystate.org/ - always sad when 'Upcoming events' are blank).

    Of course, if you aim for that, redistribution has to be seriously addressed. The growth narrative goes with a notion that a rising tide lifts all ships. In the last 20 years it transparently hasn't. Real incomes of working people have fallen.

    Economic predictions are indeed terrible, they always have been, they're best taken as an indicator of confidence or pessimism. I began life wanting to be an economist, but gave it up at University: there is brilliant work in some small areas, but much of it is ideology with a high dose of fairly meaningless statistics. I remember a terrible notion propounded by Walt Rostow that growth could be achieved by 'third world' countries if they followed a certain number of maxims, a doctrine that lived on far too long into the late 20th century.

    Oddly enough 'economic growth' as an assumed policy target is quite a recent phenomenon. Much of it here in the UK has turned into a rhetorical game, with the need for 'austerity' a cover for deliberately redistributing resources and 'the living wage' being redefined in government-speak so that it's below the level actually required to live..
  • Cavacava

    I looked at the Green Web site...ambitious goals.

    I wonder how it will go.

    The UK population will rise by almost 10 million over the next 25 years, according to official estimates.
    The Guardian 10/29/2015

    Economic growth will be necessary, at least under the capitalistic system currently in place and I don't see this changing over the next 25 years.

    Government and business can try to control that growth, & they do...I know here in US the FED targets 2% growth, but they are often not successful...the economy has a mind of its own & it is a capitalistic mind.

    I think population growth is directly related to improved living situation for all. With more mouths to feed, to house, educate there will be greater pressure on innovations to enable us to grow. (Unlike natural resources, knowledge is sustainable)

    Perhaps good example of this type of innovation is the rise in electric vehicles. Oil as APO pointed out, has had a great effect on growth. Solar power is safer, cleaner and far more sustainable than oil. It will grow, and it is in being incorporated into our future.

    The projections I have read suggest that around 2022 the number of electric vehicles (pure) being manufactured will
    equal the number of gas models produced. The advances in autonomous driving technology suggest, to me that in the not too distant future, major roads will become autonomous driving mode only. The government will operate cars in and around large cities, for us. You punch in the destination, and the government's computer system will get you there.

    The continued growth of knowledge for all is essential for us to be able to pass on a reasonable standard of living to subsequent generations.
  • BC
    I think population growth is directly related to improved living situation for all.Cavacava

    Cities that have experienced enormous growth over the last 50 years generally have meant better living conditions than isolated villages, small towns, and gawd-awful places like Podunk, Mississippi.

    The residents of Rio's favelas, urban but still poor, probably live a better life than they did in the villages whence they came. (That's why they went to Rio.) The water may be dirty; the air may stink; crime, violence, and corruption may be rampant; but the air and water probably weren't pristine where they came from. Ugandans living in agricultural counties can grow their own food (if they have enough cash to buy seed), but their water likely comes from an inconveniently located dirty river, which might dry up. Nairobi's slums keep growing because people find that they can't survive very well in rural Kenya. The bread-basket Midwest and great plains have become less populated because a lot of people went to the coasts--not just during the dust bowl of the 1930s, but just last week when the weather was great.

    But if Nairobi's slums are better than the villages of Kenya, that doesn't mean they are great places to live. Water supplies are fitful if available at all; there are no sewers and GI disease is common. Medical facilities are not plentiful and neither are schools. Many people are malnourished, very poorly housed, and quite possibly not employed. But most likely, all those conditions apply to rural life, too.

    However good cities are, I find it difficult to believe that the principle of more=better will always apply. 10 million people can not manufacture a great urban lifestyle out of nothing. Resources, production, and markets are needed, and that depends on a larger area than the city itself.
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