We’re in a Low-Growth World. How Did We Get Here?
August 10, 2016 2:27 AM Subscribe
If you live in the US, EU or Japan, and feel like economic growth today has not been like it was for your parents' or grandparents' generation, you are correct. Growth in mature markets has been very slow since the late 1960s. Economist Robert J. Gordon calls 1870-1970, the "Special Century" because of how abnormally strong the growth was in that period.
Neil Irwin explains how, "Economic growth in advanced nations has been weaker for longer than it has been in the lifetime of most people on earth."
Using data from McKinsey Global Institute's Poorer than their parents? A new perspective on income inequality the researchers come to similar conclusions regarding the impact of low growth moving forward.
Gordon, who is widely seen as the most prominent economist on this low growth topic has a new book out: Paul Krugman Reviews ‘The Rise and Fall of American Growth’. See also Gordon speaking at LSE.
Covering similar themes, Mary Kay Magistad interviews economic historian Louis Hyman in The precarious American Dream podcast (text here).
Neil Irwin explains how, "Economic growth in advanced nations has been weaker for longer than it has been in the lifetime of most people on earth."
Using data from McKinsey Global Institute's Poorer than their parents? A new perspective on income inequality the researchers come to similar conclusions regarding the impact of low growth moving forward.
Gordon, who is widely seen as the most prominent economist on this low growth topic has a new book out: Paul Krugman Reviews ‘The Rise and Fall of American Growth’. See also Gordon speaking at LSE.
Covering similar themes, Mary Kay Magistad interviews economic historian Louis Hyman in The precarious American Dream podcast (text here).
This is what happens when you pin your economy to never-ending population and economic growth. You can't grow indefinitely. The old attitude seems to be that we ought to adopt the patterns of a cancer (pardon the cliche).
I've noticed that, even sans a deep understanding of alternative systems, many of my peers are slowly saying iterations of ,"capitalism doesn't work (as it is now),". Certainly a part of that echoes the 60's, or the 70's, where people would advocate for alternatives they thought they knew, but didn't actually *cough* soviet communism *cough*. Nonetheless it gives me hope that a post-boomer world might leave us with options as far as radical political change goes.
Trump is the final gasp of the oldest and least satisfied boomers. What happens when his demand disappears? I'm not positing that there will be no future for reactionaries and strongmen. In the next political moments, I can see demand temporarily waning.
posted by constantinescharity at 3:04 AM on August 10, 2016 [14 favorites]
I've noticed that, even sans a deep understanding of alternative systems, many of my peers are slowly saying iterations of ,"capitalism doesn't work (as it is now),". Certainly a part of that echoes the 60's, or the 70's, where people would advocate for alternatives they thought they knew, but didn't actually *cough* soviet communism *cough*. Nonetheless it gives me hope that a post-boomer world might leave us with options as far as radical political change goes.
Trump is the final gasp of the oldest and least satisfied boomers. What happens when his demand disappears? I'm not positing that there will be no future for reactionaries and strongmen. In the next political moments, I can see demand temporarily waning.
posted by constantinescharity at 3:04 AM on August 10, 2016 [14 favorites]
I'd gone through the McKinsey report in detail a couple of days ago. What I found intriguing were their recommendations for policymakers and government. Their focus countries were primarily from Europe, and the US. While I can see these policies as realistic for the European governments - their analysis showed how Sweden managed to mitigate the effects of the 2008 slowdown through various measures, - I am surprised to see such recommendations for the US, given its trenchant rejection of social oriented measures such as those used in Sweden.
Further, I noted that McK's analysis never questions their starting assumption that consumption driven growth is the only future path available. This too is as intriguing as the above as its the reverse of what European govts, especially Northern European ones like Sweden's, are promoting --> more sustainable, less consumption driven and more environmentally friendly lifestyles.
At points it seemed to me that McK struggled to articulate the pragmatic solutions to the challenges they could describe through their analysis, as they had to tread the eggshell laden path between keeping their for profit Big Biz clients happy even while attempting to discover ways in which real humans much further down the income strata could be helped.
I cannot foresee McK's client base taking the leadership roles they recommend as big business has never been volubly socially or community sensitive in those markets; otoh, the framing kept trying to provide the carrot of "Look, if you don't help 80% of the people there won't be any consumers left for you to squeeze those profits from".
posted by infini at 3:30 AM on August 10, 2016 [10 favorites]
Further, I noted that McK's analysis never questions their starting assumption that consumption driven growth is the only future path available. This too is as intriguing as the above as its the reverse of what European govts, especially Northern European ones like Sweden's, are promoting --> more sustainable, less consumption driven and more environmentally friendly lifestyles.
At points it seemed to me that McK struggled to articulate the pragmatic solutions to the challenges they could describe through their analysis, as they had to tread the eggshell laden path between keeping their for profit Big Biz clients happy even while attempting to discover ways in which real humans much further down the income strata could be helped.
I cannot foresee McK's client base taking the leadership roles they recommend as big business has never been volubly socially or community sensitive in those markets; otoh, the framing kept trying to provide the carrot of "Look, if you don't help 80% of the people there won't be any consumers left for you to squeeze those profits from".
posted by infini at 3:30 AM on August 10, 2016 [10 favorites]
I think you can grow indefinitely, in principle. The size of the economy is just a number and numbers have no upper limit.
But prolonged growth isn't inevitable and perhaps in the long run it isn't even normal.
posted by Segundus at 3:32 AM on August 10, 2016 [3 favorites]
But prolonged growth isn't inevitable and perhaps in the long run it isn't even normal.
posted by Segundus at 3:32 AM on August 10, 2016 [3 favorites]
From a different angle, this marginal growth is also a function of having grown so much that any growth, as a proportion of the existing total, is minuscule. Not like the emerging markets which started from such a low base that any growth shows up as much larger percentages of the total.
You would think that this would have been predictable, and that a shift in strategies would have begun much earlier, rather than diagnosing terminal illness. The signs were there about a decade ago.
posted by infini at 3:34 AM on August 10, 2016 [4 favorites]
You would think that this would have been predictable, and that a shift in strategies would have begun much earlier, rather than diagnosing terminal illness. The signs were there about a decade ago.
posted by infini at 3:34 AM on August 10, 2016 [4 favorites]
The size of the economy is just a number and numbers have no upper limit.
This is true for sectors that are not reliant on finite natural resources.
posted by infini at 3:36 AM on August 10, 2016 [8 favorites]
This is true for sectors that are not reliant on finite natural resources.
posted by infini at 3:36 AM on August 10, 2016 [8 favorites]
Economic growth doesn't necessarily have to be directly proportional to population size or consumption of resources. It's just that that's the kind of economy we have. We need to find a way to transition to a style of economy that isn't so tied to speculation, infinite growth and return on investment.
Above all, the economy must eventually become just another a cog in a machine that serves wider society, rather than being our sole reason for existing. The balance is totally off, and people are increasingly seeing that.
posted by pipeski at 3:48 AM on August 10, 2016 [8 favorites]
Above all, the economy must eventually become just another a cog in a machine that serves wider society, rather than being our sole reason for existing. The balance is totally off, and people are increasingly seeing that.
posted by pipeski at 3:48 AM on August 10, 2016 [8 favorites]
I think you can grow indefinitely, in principle. The size of the economy is just a number and numbers have no upper limit.
Consider this similar argument: age is only the number that measures how many years old we are. Numbers have no upper limit. So, we are immortal.
posted by thelonius at 3:54 AM on August 10, 2016 [29 favorites]
Consider this similar argument: age is only the number that measures how many years old we are. Numbers have no upper limit. So, we are immortal.
posted by thelonius at 3:54 AM on August 10, 2016 [29 favorites]
Economist Robert J. Gordon calls 1870-1970, the "Special Century" because of how abnormally strong the growth was in that period.Is this due to economic factors or is it just because of the technologies that happened to be invented in that time period? Or is that point-of-view disproved by lots of economies at different levels of technological development being strong during that interval and weak outside of it?
posted by L.P. Hatecraft at 4:02 AM on August 10, 2016
"Is this due to economic factors or is it just because of the technologies that happened to be invented in that time period?"
Gordon points to a lot of the key technologies that happened in that century, be it electricity, indoor plumbing, modern medicine with antibiotics, commercial flight, etc. Those base technologies significantly changed the lives of all who received those technologies.
posted by gen at 4:13 AM on August 10, 2016 [3 favorites]
Gordon points to a lot of the key technologies that happened in that century, be it electricity, indoor plumbing, modern medicine with antibiotics, commercial flight, etc. Those base technologies significantly changed the lives of all who received those technologies.
posted by gen at 4:13 AM on August 10, 2016 [3 favorites]
I cannot foresee McK's client base taking the leadership roles they recommend as big business has never been volubly socially or community sensitive in those markets; otoh, the framing kept trying to provide the carrot of "Look, if you don't help 80% of the people there won't be any consumers left for you to squeeze those profits from".
See, that's a problem for the next guy down the road. Hence I doubt things will change in the US until something utterly disastrous happens.
posted by gehenna_lion at 4:19 AM on August 10, 2016 [1 favorite]
See, that's a problem for the next guy down the road. Hence I doubt things will change in the US until something utterly disastrous happens.
posted by gehenna_lion at 4:19 AM on August 10, 2016 [1 favorite]
On an real income basis, an average American citizen is half as well-off as they were in 2000, where as a Chinese worker is twice as well-off. 350 million Americans living half as well and 1.2 billion Chinese living twice as well. Experientially, Americans probably feel slightly worse off – new trade-offs – whereas the Chinese probably feel ten to a hundred times wealthier – whole new lives
That readily explains the rise of the right in Europe, Brexit, and Trump. That given now a generation of falling / stagnant incomes, voters have moved from choosing between progressive and conservative parties, to voting whether or not to endorse the system itself.
Oddly, the stagnation of the Western world feels very similar to the conflicts around China's growth. In China, the coastal cities benefited first – and they benefitted massively – leading to a two-speed society of the coasts and the interior. Similarly, as the West has stagnated, it has been the interiors that suffered most, often silently, while the coasts remained vibrant.
It cannot be understated the impasse that we've reached in the West. In Europe, countries have been preserving old wealth and issuing sovereign debt. The Euro enabled Germany to rise as a global exporter and then structurally impoverished Southern Europe. The European Union was an English ideal, which has now been scuttled by wealth differentials between London and the rest of the country.
In the United States, growth is slowing. Another intergenerational conflict brews as the assets are increasingly held with ageing populations, leading to the rise of instability in the younger populations. I had a wonderful discussion earlier this year on the rise of the sharing economy, the gig economy, and the Millennials. One brilliant thinker posited that the sharing economy and technology enabled businesses are not forward-looking innovations, but rather a type of immune response to the stagnating economy.
That the stagnation came first, and the sharing economy rose on the back of it. While the sharing economy remains a fundamental innovation of the present time, at the same time, its roots are not in a society moving forward, but rather a society stuck.
To pay pensions and support older generations, it looks like we've been in a period of serious, significant inflation where the real values and nominal values of currencies have separated quite far. Regardless of the fact that incomes are rising, prices are rising commensurately. That inflation benefits existing asset holders – for the price of their assets rises – at the expense of non-asset holders – for incomes do not rise nearly as fast.
In the UK, the average house price has increased twice as fast as the average wage for the last fifteen years. That leads to less asset transfer and more rent. Given the consolidation of wealth and explosion of debt, we all now live in generation rent – where the benefits of young labour are transferred upward to pay for pensions and retiree consumption.
It's a grizzly catch-22 and why there's a growing rejection of this version of capitalism. Capitalism is based on a desire and belief that life can be better. That through competition and markets, the "best" will rise to the top and take the gains. Throughout recent history, that has proven true. The amount of wealth created in America's golden age was unprecedented, and that halo remains today. It remains today, however, largely as a halo. The reality for the majority is that life is not going to get better anytime soon – in fact it will likely continue diminishing, as the pieces state, without significant structural changes.
In Europe, more collectivist societies tend to externalise responsibility. It's not the fault of the citizen rather its the fault of the government for failing to protect the citizens. Hence the massive civil action sweeping across Europe. In America, we first went through a phase of individualism – where people assumed they were responsible. Since the American dream is predicated on individualism. However, now we see the rising backlash toward the system itself. After a generation of self-flagellation, the populous is waking up to the fact that this is not individual stagnation, but rather collective stagnation. Hence, the collective responses looming – like Trump.
The amazing thing about Trump is that the Left is fighting the man and completely missing the movement. Trump's popularity maintains despite the fact he espouses repugnant positions. He completely fabricates reality, and yet his supporters manage to demonise Hillary for errors of omission. The Left is fighting a rational battle – good governance and responsible leadership – while the Right has collapsed into an orgy of anger.
For a generation, people have sat blaming themselves for their own economic failings when the reality is that the system no longer supports them. Awakening, their anger now turns to the system and in Trump they have found a champion. But Trump could be anyone – he is irrelevant, for the support is not for Trump, the support comes from anger at the system. The Left is playing a high-stakes game now of reckoning that there are more rational people interested in defending the system in its present state than there are people who will vote for its self-immolation.
That strategy recently failed with the Brexit vote. Arguably, the stakes are much higher with the Trump decision, and therefore, the hope and likelihood is that rationalism will win – for now.
Regardless of the outcome of November, the structural problems remain. A ever more tenuous balance between promises made to the past – in the form of pensions and wealth protections – and promises made to the future – in the form of capitalism and the dominance of markets. The interests have already split, leading to a state of stagnation. We sit now precariously balanced between the past and the future – in an economic system that forces winners and losers.
The middle ground is simply to perpetuate the current system. Print more money which keeps nominal pension payments on target, while enacting untold economic violence on the next generation. The more money we print, the tighter the coil gets as the benefits accrue to asset owners and the young remain trapped in economic rent.
Paradoxically, the nationalism currently espoused in Europe and the United States will hasten that process, for barriers to trade effectively destroy economic value. Closed borders will further enrich coasts and continue to hollow out interiors. The required medicine is not less trade, but more. And not less immigration, but more. For regardless of constraints on goods and labour, the movement of capital continues its ultimate march toward freedom. These inequalities come in part from imbalances between the movement of goods, labour, and capital – and restricting the two former categories will only give greater latitude and power to the latter, which will remain free and most likely become more free, as it always has.
Underlying all of that is the fundamental reality that we have a system designed for marginal cost production increasingly operating in an environment of zero marginal cost production. The dark side of sustainability and efficiency is that it replaces long, inefficient value chains with short, highly-efficient value chains.
Look at the supply chain for coal – and the number of workers required to take it from the earth to a power plant on the other side of the world. Miners. Processing plant staff. Truck drivers. Dock workers. Sailors. Dock workers. Train conductors. Power plant staff. Replace that with solar. Build a panel. Install it. It works for 25 years. A kilowatt-hour that requires a fraction of the human labour of coal. Apply the same to oil. While we will fix the carbon problem this century, in doing that, we will bring upon ourselves a tremendous economic and social problem.
Similarly with digital media and distribution. Amazon is at least twice as efficient per worker as Wal-Mart. Netflix proving much more efficient than the studios. In that race toward efficiency, we are shedding a huge number of jobs that sit inside the value chain.
And that shift is not only in America. As the world moves toward alternative energy, social strife and economic collapse emerges across the energy producing world, from Russia to Saudi Arabia to South America. Alternative energy will come – for it is simply a better solution – but at tremendous cost of social upheaval.
In all these cases, we are replacing high marginal cost production with low/no marginal cost production. Given that capitalism's foundation is on the most efficient firm winning, when all firms are efficient, there's nowhere to go. Minimising humans in the value chain is not only the most efficient way to run an operation, it is also the most economically and socially destructive.
Functionally, capitalism may well have run its course, for we are fast approaching a static situation of permanent winners and permanent losers. When that situation arrives, the only remaining options for the losers is revolution – to physically tear down the structure and forcibly reallocate capital. If the losers are not able to compete with the winners given the current rule-set, at some point, the losers will turn on the rule-set itself.
In a world rife with nuclear weapons, space-based weapons, genetic engineering, and bioterrorism, the prospect of a violent revolution in the Western world is horrific. Europe already showed what happens when last century's advanced nations turned on themselves and each other. Weapons technology has advanced on a near exponential basis since then.
The prospect of actual revolution is so daunting and perilous, more likely we will see radical shifts in civil society – and likely much sooner than perhaps economists expect
The dominant leaders of the next 100 years will be the ones that can successfully navigate resource distribution in low-growth situations. Those who can strike parity between old pension obligations and obligations to new workers. Those who can manage the transition to a low-carbon economy without diminishing workers from the old economy.
Likely, the world that will emerge is not going to be one of greater nationalism, but rather one of greater global governance. Perhaps we are in the early death bleats of nationalism, the pendulum swinging backward, before we move to a world of greater, permanent globalisation. The trick will be to do that without enacting horrific violence and destruction on each other.
While there is a stagnation problem in the United States and Europe, it's only a problem if our imagination requires that the today's economic system is the only one available to us. Stagnating growth has always been implicit in creating a low-carbon world, and surely enough, we're seeing global carbon emissions finally slow. We're nearing the point of decoupling economic growth from carbon emissions.
So perhaps this great economic stagnation heralds the arrival of a more sustainable world. If that's the case, we will require a completely new economic model to run it. Most importantly, wealth redistribution and refactoring will be required.
As the concept of "wealth" was fabricated in a world of infinite economic growth, it will need to be reinvented for a worldwide economy that has found a stable point. So, perhaps our problem is not these economies stagnating, but rather current economic principles having reached then end of their useful lives.
posted by nickrussell at 4:30 AM on August 10, 2016 [71 favorites]
That readily explains the rise of the right in Europe, Brexit, and Trump. That given now a generation of falling / stagnant incomes, voters have moved from choosing between progressive and conservative parties, to voting whether or not to endorse the system itself.
Oddly, the stagnation of the Western world feels very similar to the conflicts around China's growth. In China, the coastal cities benefited first – and they benefitted massively – leading to a two-speed society of the coasts and the interior. Similarly, as the West has stagnated, it has been the interiors that suffered most, often silently, while the coasts remained vibrant.
It cannot be understated the impasse that we've reached in the West. In Europe, countries have been preserving old wealth and issuing sovereign debt. The Euro enabled Germany to rise as a global exporter and then structurally impoverished Southern Europe. The European Union was an English ideal, which has now been scuttled by wealth differentials between London and the rest of the country.
In the United States, growth is slowing. Another intergenerational conflict brews as the assets are increasingly held with ageing populations, leading to the rise of instability in the younger populations. I had a wonderful discussion earlier this year on the rise of the sharing economy, the gig economy, and the Millennials. One brilliant thinker posited that the sharing economy and technology enabled businesses are not forward-looking innovations, but rather a type of immune response to the stagnating economy.
That the stagnation came first, and the sharing economy rose on the back of it. While the sharing economy remains a fundamental innovation of the present time, at the same time, its roots are not in a society moving forward, but rather a society stuck.
To pay pensions and support older generations, it looks like we've been in a period of serious, significant inflation where the real values and nominal values of currencies have separated quite far. Regardless of the fact that incomes are rising, prices are rising commensurately. That inflation benefits existing asset holders – for the price of their assets rises – at the expense of non-asset holders – for incomes do not rise nearly as fast.
In the UK, the average house price has increased twice as fast as the average wage for the last fifteen years. That leads to less asset transfer and more rent. Given the consolidation of wealth and explosion of debt, we all now live in generation rent – where the benefits of young labour are transferred upward to pay for pensions and retiree consumption.
It's a grizzly catch-22 and why there's a growing rejection of this version of capitalism. Capitalism is based on a desire and belief that life can be better. That through competition and markets, the "best" will rise to the top and take the gains. Throughout recent history, that has proven true. The amount of wealth created in America's golden age was unprecedented, and that halo remains today. It remains today, however, largely as a halo. The reality for the majority is that life is not going to get better anytime soon – in fact it will likely continue diminishing, as the pieces state, without significant structural changes.
In Europe, more collectivist societies tend to externalise responsibility. It's not the fault of the citizen rather its the fault of the government for failing to protect the citizens. Hence the massive civil action sweeping across Europe. In America, we first went through a phase of individualism – where people assumed they were responsible. Since the American dream is predicated on individualism. However, now we see the rising backlash toward the system itself. After a generation of self-flagellation, the populous is waking up to the fact that this is not individual stagnation, but rather collective stagnation. Hence, the collective responses looming – like Trump.
The amazing thing about Trump is that the Left is fighting the man and completely missing the movement. Trump's popularity maintains despite the fact he espouses repugnant positions. He completely fabricates reality, and yet his supporters manage to demonise Hillary for errors of omission. The Left is fighting a rational battle – good governance and responsible leadership – while the Right has collapsed into an orgy of anger.
For a generation, people have sat blaming themselves for their own economic failings when the reality is that the system no longer supports them. Awakening, their anger now turns to the system and in Trump they have found a champion. But Trump could be anyone – he is irrelevant, for the support is not for Trump, the support comes from anger at the system. The Left is playing a high-stakes game now of reckoning that there are more rational people interested in defending the system in its present state than there are people who will vote for its self-immolation.
That strategy recently failed with the Brexit vote. Arguably, the stakes are much higher with the Trump decision, and therefore, the hope and likelihood is that rationalism will win – for now.
Regardless of the outcome of November, the structural problems remain. A ever more tenuous balance between promises made to the past – in the form of pensions and wealth protections – and promises made to the future – in the form of capitalism and the dominance of markets. The interests have already split, leading to a state of stagnation. We sit now precariously balanced between the past and the future – in an economic system that forces winners and losers.
The middle ground is simply to perpetuate the current system. Print more money which keeps nominal pension payments on target, while enacting untold economic violence on the next generation. The more money we print, the tighter the coil gets as the benefits accrue to asset owners and the young remain trapped in economic rent.
Paradoxically, the nationalism currently espoused in Europe and the United States will hasten that process, for barriers to trade effectively destroy economic value. Closed borders will further enrich coasts and continue to hollow out interiors. The required medicine is not less trade, but more. And not less immigration, but more. For regardless of constraints on goods and labour, the movement of capital continues its ultimate march toward freedom. These inequalities come in part from imbalances between the movement of goods, labour, and capital – and restricting the two former categories will only give greater latitude and power to the latter, which will remain free and most likely become more free, as it always has.
Underlying all of that is the fundamental reality that we have a system designed for marginal cost production increasingly operating in an environment of zero marginal cost production. The dark side of sustainability and efficiency is that it replaces long, inefficient value chains with short, highly-efficient value chains.
Look at the supply chain for coal – and the number of workers required to take it from the earth to a power plant on the other side of the world. Miners. Processing plant staff. Truck drivers. Dock workers. Sailors. Dock workers. Train conductors. Power plant staff. Replace that with solar. Build a panel. Install it. It works for 25 years. A kilowatt-hour that requires a fraction of the human labour of coal. Apply the same to oil. While we will fix the carbon problem this century, in doing that, we will bring upon ourselves a tremendous economic and social problem.
Similarly with digital media and distribution. Amazon is at least twice as efficient per worker as Wal-Mart. Netflix proving much more efficient than the studios. In that race toward efficiency, we are shedding a huge number of jobs that sit inside the value chain.
And that shift is not only in America. As the world moves toward alternative energy, social strife and economic collapse emerges across the energy producing world, from Russia to Saudi Arabia to South America. Alternative energy will come – for it is simply a better solution – but at tremendous cost of social upheaval.
In all these cases, we are replacing high marginal cost production with low/no marginal cost production. Given that capitalism's foundation is on the most efficient firm winning, when all firms are efficient, there's nowhere to go. Minimising humans in the value chain is not only the most efficient way to run an operation, it is also the most economically and socially destructive.
Functionally, capitalism may well have run its course, for we are fast approaching a static situation of permanent winners and permanent losers. When that situation arrives, the only remaining options for the losers is revolution – to physically tear down the structure and forcibly reallocate capital. If the losers are not able to compete with the winners given the current rule-set, at some point, the losers will turn on the rule-set itself.
In a world rife with nuclear weapons, space-based weapons, genetic engineering, and bioterrorism, the prospect of a violent revolution in the Western world is horrific. Europe already showed what happens when last century's advanced nations turned on themselves and each other. Weapons technology has advanced on a near exponential basis since then.
The prospect of actual revolution is so daunting and perilous, more likely we will see radical shifts in civil society – and likely much sooner than perhaps economists expect
The dominant leaders of the next 100 years will be the ones that can successfully navigate resource distribution in low-growth situations. Those who can strike parity between old pension obligations and obligations to new workers. Those who can manage the transition to a low-carbon economy without diminishing workers from the old economy.
Likely, the world that will emerge is not going to be one of greater nationalism, but rather one of greater global governance. Perhaps we are in the early death bleats of nationalism, the pendulum swinging backward, before we move to a world of greater, permanent globalisation. The trick will be to do that without enacting horrific violence and destruction on each other.
While there is a stagnation problem in the United States and Europe, it's only a problem if our imagination requires that the today's economic system is the only one available to us. Stagnating growth has always been implicit in creating a low-carbon world, and surely enough, we're seeing global carbon emissions finally slow. We're nearing the point of decoupling economic growth from carbon emissions.
So perhaps this great economic stagnation heralds the arrival of a more sustainable world. If that's the case, we will require a completely new economic model to run it. Most importantly, wealth redistribution and refactoring will be required.
As the concept of "wealth" was fabricated in a world of infinite economic growth, it will need to be reinvented for a worldwide economy that has found a stable point. So, perhaps our problem is not these economies stagnating, but rather current economic principles having reached then end of their useful lives.
posted by nickrussell at 4:30 AM on August 10, 2016 [71 favorites]
Hence I doubt things will change in the US until something utterly disastrous happens.
So McKinsey's current estimate of 80% of American households will have stagnant or lower real income (wages) in the coming decade is not disastrous? I guess not, given the salaries McK pays.
posted by infini at 4:45 AM on August 10, 2016
So McKinsey's current estimate of 80% of American households will have stagnant or lower real income (wages) in the coming decade is not disastrous? I guess not, given the salaries McK pays.
posted by infini at 4:45 AM on August 10, 2016
The European Union was an English ideal,
Not really. Check out the Brexit threads.
posted by infini at 4:46 AM on August 10, 2016 [2 favorites]
Not really. Check out the Brexit threads.
posted by infini at 4:46 AM on August 10, 2016 [2 favorites]
One brilliant thinker posited that the sharing economy and technology enabled businesses are not forward-looking innovations, but rather a type of immune response to the stagnating economy.
That the stagnation came first, and the sharing economy rose on the back of it. While the sharing economy remains a fundamental innovation of the present time, at the same time, its roots are not in a society moving forward, but rather a society stuck.
This can validated by the adoption of Uber enthusiastically across many frontier (Africa) and emerging markets, barring China, of course.
posted by infini at 4:48 AM on August 10, 2016
That the stagnation came first, and the sharing economy rose on the back of it. While the sharing economy remains a fundamental innovation of the present time, at the same time, its roots are not in a society moving forward, but rather a society stuck.
This can validated by the adoption of Uber enthusiastically across many frontier (Africa) and emerging markets, barring China, of course.
posted by infini at 4:48 AM on August 10, 2016
Consider this similar argument: age is only the number that measures how many years old we are. Numbers have no upper limit. So, we are immortal.
Yes, but that's a counter-argument to the proposition that we will go on getting wealthier forever. My point is simply that there is no upper limit in principle, just as there is no upper limit to how old things can be. Neither growth nor survival is inevitable.
posted by Segundus at 4:50 AM on August 10, 2016
Yes, but that's a counter-argument to the proposition that we will go on getting wealthier forever. My point is simply that there is no upper limit in principle, just as there is no upper limit to how old things can be. Neither growth nor survival is inevitable.
posted by Segundus at 4:50 AM on August 10, 2016
The required medicine is not less trade, but more.
“Your 10-Question Davos Application Test”
posted by infini at 4:55 AM on August 10, 2016 [1 favorite]
“Your 10-Question Davos Application Test”
posted by infini at 4:55 AM on August 10, 2016 [1 favorite]
For regardless of constraints on goods and labour, the movement of capital continues its ultimate march toward freedom.
an unquestioned ideological assumption, similar to all the implicit ones underpinning the McK data analysis. that's the lens which needs adjusting
posted by infini at 4:57 AM on August 10, 2016 [4 favorites]
an unquestioned ideological assumption, similar to all the implicit ones underpinning the McK data analysis. that's the lens which needs adjusting
posted by infini at 4:57 AM on August 10, 2016 [4 favorites]
This is true for sectors that are not reliant on finite natural resources.
Isn't it true even for finite sectors? No new Stradivarius violins have been made since he died, but the market in Stradivarius violins is surely worth vastly more now than it was then.
You may say that's not real growth, but when we talk about the growth of the economy we're normally talking about benchmarks expressed in monetary terms, aren't we?
posted by Segundus at 5:00 AM on August 10, 2016
Isn't it true even for finite sectors? No new Stradivarius violins have been made since he died, but the market in Stradivarius violins is surely worth vastly more now than it was then.
You may say that's not real growth, but when we talk about the growth of the economy we're normally talking about benchmarks expressed in monetary terms, aren't we?
posted by Segundus at 5:00 AM on August 10, 2016
As for the rest of the wall of text, here's an interesting article with a conclusion to mull over
posted by infini at 5:06 AM on August 10, 2016 [1 favorite]
posted by infini at 5:06 AM on August 10, 2016 [1 favorite]
You may say that's not real growth, but when we talk about the growth of the economy we're normally talking about benchmarks expressed in monetary terms, aren't we?
My point of reference was the McK data report, and the big takeaway there was continued consumption by consumers and their shrinking disposable income. That kind of growth has no bearing on the price of a violin.
posted by infini at 5:07 AM on August 10, 2016
My point of reference was the McK data report, and the big takeaway there was continued consumption by consumers and their shrinking disposable income. That kind of growth has no bearing on the price of a violin.
posted by infini at 5:07 AM on August 10, 2016
On an real income basis, an average American citizen is half as well-off as they were in 2000, where as a Chinese worker is twice as well-off.
Through 2014, real median household income in the US is down 8 percent since its peak in 1999, not 50.
posted by ROU_Xenophobe at 5:15 AM on August 10, 2016 [8 favorites]
Through 2014, real median household income in the US is down 8 percent since its peak in 1999, not 50.
posted by ROU_Xenophobe at 5:15 AM on August 10, 2016 [8 favorites]
This is true for sectors that are not reliant on finite natural resources.
I was going to suggest an economic system based entirely on Pokemon, but it turns out they actually eat quite a lot of fruits and berries.
posted by sfenders at 5:45 AM on August 10, 2016
I was going to suggest an economic system based entirely on Pokemon, but it turns out they actually eat quite a lot of fruits and berries.
posted by sfenders at 5:45 AM on August 10, 2016
As someone with a keen interest in the history of technology and its inter-relationship with economics, I keep running into quicksand in trying to build a mental picture of how all that works.
You can't easily say when something was invented - there are so many instances of an idea coming about and lying fallow until other factors make it blossom into vigorous growth - but most of the lines I can draw through the history of modern, economically important technologies converge on World War II, The biggest exception is semiconductors (which were used in WWII, but not much) and the immediately post-war invention of the transistor, but even there the primary growth was into sectors that were kicked into prominence due to WWII (and its offshoot, the Cold War). Silicon Valley was Microwave Valley beforehand - servicing the military's need for radar and associated technologies. Global war sees massive state investments in technology, and those technologies see massive use in civil peacetime, Capitalism benefits but does not call the shots.
(Things like wireless, the telephone, and mass-market electricity were different: brand new sectors springing from fundamental advances in physical understanding that enabled entirely novel products. Barring something entirely unexpected, we've mapped that out now; it's always possible - see high temperature superconductors - but you can't say much about it before it happens, The internal combustion engine is part of a longer narrative through the original Industrial Revolution.)
And that's spent, now. So is Moore's Law. This means the next fifty years cannot possibly rely on these as economic and technological drivers. Slow economies produce few surpluses to spend on R&D; it's been the tech companies with large cash reserves who've been doing a lot more of that recently, but it turns out that this is rarely sustainable.
I think there are three sectors outside actual warfare (which is highly motivating and satisfying but has various infelicitous side-effects) where something like a war footing could be justified, in the sense that a directed economical approach is justified - medical, environmental and political; the wars against dysfunction in our biology, our resource management and our behaviour towards others.
Traditional economic sectors - agriculture, infrastructure, finance, transport, etc - are still capable of growth, but in terms of configuring them to deliver what people need to a reasonable level, they don't need the equivalent of a WWII-level event to get them onto 'the next stage' where things are radically different, nor do they need to.
All those three sectors have commonalities, in particular their susceptibility to intensive empirical modelling in lieu of the old idea of scrying out fundamental principles and building up theories, We also have, at the end of Moore's Law, the ability to build very high quality modelling machinery.
If I were to pick a single thing to make the focus of wartime, directed-economy R&D spending on, with the best chance of creating economic growth and creating a better world, it would be this. Model making.
I admit, it lacks the clarion call of YOUR COUNTRY NEEDS YOU. But that's just messaging, right?
posted by Devonian at 7:36 AM on August 10, 2016 [5 favorites]
You can't easily say when something was invented - there are so many instances of an idea coming about and lying fallow until other factors make it blossom into vigorous growth - but most of the lines I can draw through the history of modern, economically important technologies converge on World War II, The biggest exception is semiconductors (which were used in WWII, but not much) and the immediately post-war invention of the transistor, but even there the primary growth was into sectors that were kicked into prominence due to WWII (and its offshoot, the Cold War). Silicon Valley was Microwave Valley beforehand - servicing the military's need for radar and associated technologies. Global war sees massive state investments in technology, and those technologies see massive use in civil peacetime, Capitalism benefits but does not call the shots.
(Things like wireless, the telephone, and mass-market electricity were different: brand new sectors springing from fundamental advances in physical understanding that enabled entirely novel products. Barring something entirely unexpected, we've mapped that out now; it's always possible - see high temperature superconductors - but you can't say much about it before it happens, The internal combustion engine is part of a longer narrative through the original Industrial Revolution.)
And that's spent, now. So is Moore's Law. This means the next fifty years cannot possibly rely on these as economic and technological drivers. Slow economies produce few surpluses to spend on R&D; it's been the tech companies with large cash reserves who've been doing a lot more of that recently, but it turns out that this is rarely sustainable.
I think there are three sectors outside actual warfare (which is highly motivating and satisfying but has various infelicitous side-effects) where something like a war footing could be justified, in the sense that a directed economical approach is justified - medical, environmental and political; the wars against dysfunction in our biology, our resource management and our behaviour towards others.
Traditional economic sectors - agriculture, infrastructure, finance, transport, etc - are still capable of growth, but in terms of configuring them to deliver what people need to a reasonable level, they don't need the equivalent of a WWII-level event to get them onto 'the next stage' where things are radically different, nor do they need to.
All those three sectors have commonalities, in particular their susceptibility to intensive empirical modelling in lieu of the old idea of scrying out fundamental principles and building up theories, We also have, at the end of Moore's Law, the ability to build very high quality modelling machinery.
If I were to pick a single thing to make the focus of wartime, directed-economy R&D spending on, with the best chance of creating economic growth and creating a better world, it would be this. Model making.
I admit, it lacks the clarion call of YOUR COUNTRY NEEDS YOU. But that's just messaging, right?
posted by Devonian at 7:36 AM on August 10, 2016 [5 favorites]
To pay pensions and support older generations, it looks like we've been in a period of serious, significant inflation where the real values and nominal values of currencies have separated quite far.
It's not our support of the elderly (who earned and paid into those pensions) that has impoverished us, but the stagnation of capital at the top income brackets enabled by relaxing taxation/allowing widespread tax evasion.
I reject wholeheartedly this type of intergenerational-warfare-inciting nonsense as the distraction it is clearly meant to be. Supporting people when they're old is a legitimate function of government. Allowing a small fraction of the population to squat on most of the capital to the detriment of everyone else is not.
posted by emjaybee at 8:08 AM on August 10, 2016 [29 favorites]
It's not our support of the elderly (who earned and paid into those pensions) that has impoverished us, but the stagnation of capital at the top income brackets enabled by relaxing taxation/allowing widespread tax evasion.
I reject wholeheartedly this type of intergenerational-warfare-inciting nonsense as the distraction it is clearly meant to be. Supporting people when they're old is a legitimate function of government. Allowing a small fraction of the population to squat on most of the capital to the detriment of everyone else is not.
posted by emjaybee at 8:08 AM on August 10, 2016 [29 favorites]
(which is highly motivating and satisfying but has various infelicitous side-effects)
Mr. President, I'm not saying we won't get our hair mussed. I do say, no more than ten to twenty million killed, tops! Depending on the breaks.
posted by briank at 8:29 AM on August 10, 2016 [5 favorites]
Mr. President, I'm not saying we won't get our hair mussed. I do say, no more than ten to twenty million killed, tops! Depending on the breaks.
posted by briank at 8:29 AM on August 10, 2016 [5 favorites]
Consider this similar argument: age is only the number that measures how many years old we are. Numbers have no upper limit. So, we are immortal.
Sure, just decouple the definition of a year from that pesky going round the sun thing, and there truly is no limit to how high the numbers can go. It doesn't necessarily mean we're getting older, but our ages can keep going up.
posted by Dysk at 8:45 AM on August 10, 2016
Sure, just decouple the definition of a year from that pesky going round the sun thing, and there truly is no limit to how high the numbers can go. It doesn't necessarily mean we're getting older, but our ages can keep going up.
posted by Dysk at 8:45 AM on August 10, 2016
Any world should be low-growth most of the time, assuming world means a fairly tightly bounded region, like a planet, and growth hold anything like the usual meaning. See Exponential Economist Meets Finite Physicist by Tom Murphy.
If you want some economic indicators to continually improve, then you must select those indicators rather carefully to admit longer-term increases. I think naive lefty indicators like "equality", "education", or "happiness" work much better than say GDP, but some could become harmful in the extreme and some might be vulnerable to manipulation.
I'd suggest "energy efficiency", "average knowledge", and maybe some measures of actual "utility of work" as a indicators that should track pretty well for quite some time. We should be working towards more automation in manufacturing because it's inefficient to manufacture our electronics with humans, even if they do not cost much because they live in Asia.
We should ultimately trying to increase something like the "meaningfulness" of people's lives, not the amount of shit they can buy. It's hard to pin that down, but mostly it should work out if we do shit efficiently, people know lots, and we do not make people waste their time on stupid busy work. And by busy work I mostly mean the jobs where a significant fraction of people feel like they wasted their lives, including white colar jobs like corporate law, advertising, etc.
posted by jeffburdges at 8:52 AM on August 10, 2016 [5 favorites]
If you want some economic indicators to continually improve, then you must select those indicators rather carefully to admit longer-term increases. I think naive lefty indicators like "equality", "education", or "happiness" work much better than say GDP, but some could become harmful in the extreme and some might be vulnerable to manipulation.
I'd suggest "energy efficiency", "average knowledge", and maybe some measures of actual "utility of work" as a indicators that should track pretty well for quite some time. We should be working towards more automation in manufacturing because it's inefficient to manufacture our electronics with humans, even if they do not cost much because they live in Asia.
We should ultimately trying to increase something like the "meaningfulness" of people's lives, not the amount of shit they can buy. It's hard to pin that down, but mostly it should work out if we do shit efficiently, people know lots, and we do not make people waste their time on stupid busy work. And by busy work I mostly mean the jobs where a significant fraction of people feel like they wasted their lives, including white colar jobs like corporate law, advertising, etc.
posted by jeffburdges at 8:52 AM on August 10, 2016 [5 favorites]
The objective is well described by jeffburdges - what is in our way to getting there?
posted by infini at 9:37 AM on August 10, 2016
posted by infini at 9:37 AM on August 10, 2016
Growth: change in GDP year over year.
GDP: a statistical measure of a nation's capacity to wage war.
Ergo:
Growth: change in a statistical measure of a nation's capacity to wage war, year over year.
Low growth is not a problem. A political system that freaks out over it is a problem.
posted by ocschwar at 10:14 AM on August 10, 2016 [2 favorites]
GDP: a statistical measure of a nation's capacity to wage war.
Ergo:
Growth: change in a statistical measure of a nation's capacity to wage war, year over year.
Low growth is not a problem. A political system that freaks out over it is a problem.
posted by ocschwar at 10:14 AM on August 10, 2016 [2 favorites]
Michael Roberts on Gordon:
I have great sympathy with the Gordon’s view, but with reservations on timing. I’m not so sure that emerging capitalism cannot provide a new period of capitalist development, if the end of this long depression does not lead to the replacement of the capitalist mode of production by political action from energised working class movements. Also, it is by no means certain that mature capitalism cannot still develop and exploit new technologies, even if it has failed so far, in areas like robotics, artificial intelligence, 3d printing and nanotechnology. Indeed, some argue that US technology in developing shale oil and gas will shift the balance of economic power in energy back towards North America and the mature capitalist economies and away from the Middle East and Asia.posted by Noisy Pink Bubbles at 10:32 AM on August 10, 2016
...
Also, capitalism could get a further kick forward from exploiting the hundreds of millions coming into the labour forces of Asia, South America and the Middle East. This would be a classic way of compensating for the falling rate of profit in the mature capitalist economies. While the industrial workforce in the mature capitalist economies has shrunk to under 150m, as unproductive labour has risen sharply; in the so-called emerging economies the industrial workforce now stands at 500m, having surpassed the industrial work force in the imperialist countries by the early 1980s. In addition, there is a large reserve army of labour composed of unemployed, underemployed or inactive adults of another 2.3bn people globally that could also be exploited for new value.
So there may be life in capitalism globally yet even if it is in ‘down mode’ right now. Or maybe this potential labour force will not be ‘properly exploited’ by the capitalist mode of production and Gordon is right. The world rate of profit (not just the rate of profit in the mature G7 economies) stopped rising in the late 1990s and has not recovered to the level of the golden age for capitalism in the 1960s, despite the massive potential global labour force. It seems that the countervailing factors of foreign investment in the emerging world, combined with new technology, have not been sufficient to push up the world rate of profit in the last decade or so, so far. The downward phase of the global capitalist cycle is still in play.
nickrussel's comment is a solid, comprehensive overview of where we are and where we're going.
I agree wholeheartedly about Trump: he is irrelevant, but he has tapped into a keen sentiment that American workers are tired of losing to the rest of the world. Trump made a speech the other day where (paraphrased) he said, "it's not fair that you're competing with countries that don't have the same environmental and labor laws that we do."
Sure, he's over simplifying and is many times flat-out-wrong, but all these people know is that a) he tells it like everyone feels it, and b) voting for the other party will simply perpetuate the existing system, which clearly isn't working for them. The end logic being: we have three branches of government. If Trump goes off the rails, we have the means to stop him. How much worse can it get?
(never ask that question)
Your average American feels this, lives this, knows it at heart. To the average American, globalization has been disastrous on many fronts. Cheap televisions and iStuff cannot compensate, and they're feeling it. Hard. Your average American grasps the concept that in a globalized economy where many jobs can be handled remotely and goods transported cheaply that we're going to be on the losing end of that equation.
This applies to much of Europe as well as the US.
I think where we're headed is not nearly as dire as nickrussel points out, but I think we're going to see more restrictions on trade. I think we're going to see environmental and labor tariffs applied to help level the playing field some more, especially between western nations and the under-industrialized world.
As an example: trade negotiations are underway to harmonize auto safety regulations between US and European car makers. The end result is that many more brands/models would theoretically be profitable to sell in each others' market. Automakers on both sides of the pond have been pretty enthusiastic about pushing this through. I suspect that if we were to include Chinese vehicles into this discussion, both the Americans and Europeans would not be nearly so keen on the proposal.
European and American automakers have similar corporate governance, regulatory bodies, environmental and labor regulations. As such, their cost structures are going to be *somewhat* more compatible.
I don't think we're going to see less trade, we're simply going to see less completely *free* trade.
posted by tgrundke at 10:50 AM on August 10, 2016 [3 favorites]
I agree wholeheartedly about Trump: he is irrelevant, but he has tapped into a keen sentiment that American workers are tired of losing to the rest of the world. Trump made a speech the other day where (paraphrased) he said, "it's not fair that you're competing with countries that don't have the same environmental and labor laws that we do."
Sure, he's over simplifying and is many times flat-out-wrong, but all these people know is that a) he tells it like everyone feels it, and b) voting for the other party will simply perpetuate the existing system, which clearly isn't working for them. The end logic being: we have three branches of government. If Trump goes off the rails, we have the means to stop him. How much worse can it get?
(never ask that question)
Your average American feels this, lives this, knows it at heart. To the average American, globalization has been disastrous on many fronts. Cheap televisions and iStuff cannot compensate, and they're feeling it. Hard. Your average American grasps the concept that in a globalized economy where many jobs can be handled remotely and goods transported cheaply that we're going to be on the losing end of that equation.
This applies to much of Europe as well as the US.
I think where we're headed is not nearly as dire as nickrussel points out, but I think we're going to see more restrictions on trade. I think we're going to see environmental and labor tariffs applied to help level the playing field some more, especially between western nations and the under-industrialized world.
As an example: trade negotiations are underway to harmonize auto safety regulations between US and European car makers. The end result is that many more brands/models would theoretically be profitable to sell in each others' market. Automakers on both sides of the pond have been pretty enthusiastic about pushing this through. I suspect that if we were to include Chinese vehicles into this discussion, both the Americans and Europeans would not be nearly so keen on the proposal.
European and American automakers have similar corporate governance, regulatory bodies, environmental and labor regulations. As such, their cost structures are going to be *somewhat* more compatible.
I don't think we're going to see less trade, we're simply going to see less completely *free* trade.
posted by tgrundke at 10:50 AM on August 10, 2016 [3 favorites]
Quality of life is not correlated with income or assets. This has been a conservative talking point for decades, but I think the left should reclaim it.
For some years, I've been trying to balance my life with regards to the environment/ecology of the globe. I'm not really an activist and I'm not really systematic, but over time, I have reduced my CO2 impact and my waste at a huge scale (like 70%-ish) without compromising my quality of life.
Back in the day, I was interviewed in a dialogue situation with a prolific boomer activist. He had been blaming me for being a "new conservative" and "climate denialist". During the interview, I challenged his practice rather than his opinions, and pushed the journalist to check the facts. In real life, my CO2 print was tiny compared to his. But at the time, I insisted we need to make sustainable life attractive to everyone. He was an old-time leftwing prepper. (The interview was never printed, he was so embarrassed).
On a different scale: for many businesses in Scandinavia and some in Germany, there is a real value in social responsibility.
More dedicated, well-educated and loyal workers are at the top of their priorities.
In big manufacturing countries like Sweden and Germany, loyal consumers are a big issue as well.
posted by mumimor at 11:13 AM on August 10, 2016 [1 favorite]
For some years, I've been trying to balance my life with regards to the environment/ecology of the globe. I'm not really an activist and I'm not really systematic, but over time, I have reduced my CO2 impact and my waste at a huge scale (like 70%-ish) without compromising my quality of life.
Back in the day, I was interviewed in a dialogue situation with a prolific boomer activist. He had been blaming me for being a "new conservative" and "climate denialist". During the interview, I challenged his practice rather than his opinions, and pushed the journalist to check the facts. In real life, my CO2 print was tiny compared to his. But at the time, I insisted we need to make sustainable life attractive to everyone. He was an old-time leftwing prepper. (The interview was never printed, he was so embarrassed).
On a different scale: for many businesses in Scandinavia and some in Germany, there is a real value in social responsibility.
More dedicated, well-educated and loyal workers are at the top of their priorities.
In big manufacturing countries like Sweden and Germany, loyal consumers are a big issue as well.
posted by mumimor at 11:13 AM on August 10, 2016 [1 favorite]
1870-1970, the "Special Century" because of how abnormally strong the growth was in that period.
Coincidently also the period in which socialism and the threat of communism kept capitalist urges in check, somewhat, while the welfare state helped transfer wealth from the elite to the common people.
posted by MartinWisse at 1:22 PM on August 10, 2016 [5 favorites]
Coincidently also the period in which socialism and the threat of communism kept capitalist urges in check, somewhat, while the welfare state helped transfer wealth from the elite to the common people.
posted by MartinWisse at 1:22 PM on August 10, 2016 [5 favorites]
I read Gordon's book a while back (recommended by a former professor who knew I enjoyed Picketty's Capital in the 21st Century). I think he makes a convincing argument that 1870-1970 was atypical and that our culture's model of constant growth just being a natural phenomena is a fantasy, but I don't think that this necessarily implies (as some people seem to be taking it) that a low-growth future is inevitable. Gordon makes a clear case that the electronic revolution of the 80's and 90's did not lead to revolutionary changes in lifestyle or to economic growth levels at all equivalent to the technological revolutions that appeared in the late 19th and early 20th centuries, but that doesn't mean that other such revolutions may not exist in our future.
1870-1970, the "Special Century" because of how abnormally strong the growth was in that period.
Coincidently also the period in which socialism and the threat of communism kept capitalist urges in check, somewhat, while the welfare state helped transfer wealth from the elite to the common people.
Also (and intertwined with this) the expansion of mass consumption societies beyond the boundaries of the relatively small elite of high consumers to the broad middle classes of the developed world. It's worth noting that a similar process could lead to a renewed period of rapid economic growth with the (at present uneven) expansion of the global middle class. One could argue that this is one of the elements which is driving growth in, for example, China, even as the old developed states of the Atlantic world are stumbling. Finding ways to benefit economically from hundreds of millions of Africans, South Americans, and Southeast Asians entering the ranks of mass consumers (and finding ways to hurry that process along) is arguably one of the best ways forward for American and European leaders who want to deal with our present economic woes. Instead, we have (at present) a consensus which either appeals to protectionism and zero-sum economic nationalism, or is caught in the post-1970 orthodoxies of neoliberal market idolatry, which tends to slow down the growth of the middle class on two levels as wealth continuously flows from less developed countries to more developed ones internationally and from poorer citizens to richer ones domestically.
xample).
posted by AdamCSnider at 1:54 PM on August 10, 2016
1870-1970, the "Special Century" because of how abnormally strong the growth was in that period.
Coincidently also the period in which socialism and the threat of communism kept capitalist urges in check, somewhat, while the welfare state helped transfer wealth from the elite to the common people.
Also (and intertwined with this) the expansion of mass consumption societies beyond the boundaries of the relatively small elite of high consumers to the broad middle classes of the developed world. It's worth noting that a similar process could lead to a renewed period of rapid economic growth with the (at present uneven) expansion of the global middle class. One could argue that this is one of the elements which is driving growth in, for example, China, even as the old developed states of the Atlantic world are stumbling. Finding ways to benefit economically from hundreds of millions of Africans, South Americans, and Southeast Asians entering the ranks of mass consumers (and finding ways to hurry that process along) is arguably one of the best ways forward for American and European leaders who want to deal with our present economic woes. Instead, we have (at present) a consensus which either appeals to protectionism and zero-sum economic nationalism, or is caught in the post-1970 orthodoxies of neoliberal market idolatry, which tends to slow down the growth of the middle class on two levels as wealth continuously flows from less developed countries to more developed ones internationally and from poorer citizens to richer ones domestically.
xample).
posted by AdamCSnider at 1:54 PM on August 10, 2016
mumimor: Except that there is ton of research showing that quality of life is clearly correlated with income, up to a point. Just google it and see all the stuff that come up.
You're starting your argument with a false point.
posted by zwemer at 3:02 PM on August 10, 2016 [1 favorite]
You're starting your argument with a false point.
posted by zwemer at 3:02 PM on August 10, 2016 [1 favorite]
quality of life is clearly correlated with income
wealth, at its most basic, is the state of being well, of having no unmet needs and wants.
https://fred.stlouisfed.org/graph/?g=6vwd is a rather incredible graph showing that as late as 1970 over 25% of the age 25-54 population was employed in manufacturing -- and since then we've gone from 1 in 4 to 1 in 10 working in that sector.
but our access to mfg goods has not collapsed of course, far from it, as we've somehow been able to run up trillions in trade deficits since 1980 and gained cheaper access thereby to unimaginable quantities of consumer goods over the decades.
And aside from that, technology has advanced a lot, too. I paid like $280 at costco last year for a pretty sweet 42" Samsung LCD TV, something that would have cost thousands 30 years ago. Today's "phones" provide the wealth -- meeting our needs and wants -- of entire Radio Shack ads from back in the day.
Food is pretty cheap still, rising with wages more or less.
But . . . the great wealth-taps of our economy -- three of the Four Horsemen -- are the high-rent sectors of Higher Education, Housing, and Health Care.
Housing is most everyone's dominant life expense, but our entire system is seemingly predicated on driving its costs up, up, up. Whenever the paper writes about housing prices, up is good and down is bad.
When consumers have money, you'll have a powerful, growing economy. The problem we have are those asymmetrical wealth-taps that strip money --spending power -- out of the consumer economy, via housing rents, educational costs, and health care costs.
All this money leaving what I call the paycheck economy and ending up in the 1%'s hands every turn is putting our economy in shackles.
My thesis is this -- real per-capita government spending -- having doubled since the 1970s from $11,000 to $22,000 per adult is what is recirculating money back into the working economy.
posted by Heywood Mogroot III at 9:20 PM on August 10, 2016 [2 favorites]
wealth, at its most basic, is the state of being well, of having no unmet needs and wants.
https://fred.stlouisfed.org/graph/?g=6vwd is a rather incredible graph showing that as late as 1970 over 25% of the age 25-54 population was employed in manufacturing -- and since then we've gone from 1 in 4 to 1 in 10 working in that sector.
but our access to mfg goods has not collapsed of course, far from it, as we've somehow been able to run up trillions in trade deficits since 1980 and gained cheaper access thereby to unimaginable quantities of consumer goods over the decades.
And aside from that, technology has advanced a lot, too. I paid like $280 at costco last year for a pretty sweet 42" Samsung LCD TV, something that would have cost thousands 30 years ago. Today's "phones" provide the wealth -- meeting our needs and wants -- of entire Radio Shack ads from back in the day.
Food is pretty cheap still, rising with wages more or less.
But . . . the great wealth-taps of our economy -- three of the Four Horsemen -- are the high-rent sectors of Higher Education, Housing, and Health Care.
Housing is most everyone's dominant life expense, but our entire system is seemingly predicated on driving its costs up, up, up. Whenever the paper writes about housing prices, up is good and down is bad.
When consumers have money, you'll have a powerful, growing economy. The problem we have are those asymmetrical wealth-taps that strip money --spending power -- out of the consumer economy, via housing rents, educational costs, and health care costs.
All this money leaving what I call the paycheck economy and ending up in the 1%'s hands every turn is putting our economy in shackles.
My thesis is this -- real per-capita government spending -- having doubled since the 1970s from $11,000 to $22,000 per adult is what is recirculating money back into the working economy.
posted by Heywood Mogroot III at 9:20 PM on August 10, 2016 [2 favorites]
To pay pensions and support older generations, it looks like we've been in a period of serious, significant inflation
inflation can only come from rising wages.
stagnant nominal wages results in reallocation.
I for one think the coming boomer retirement wave is coming to immensely stimulative to our economy this decade and next, as we'll have ~70 million retirees leaving their jobs and becoming pure consumers, spending what they're not going to leave to their kids.
The baby boom is age 52 to 70 this year, with the median boomer at 61, one year away from early SSA and 4 years from Medicare.
posted by Heywood Mogroot III at 9:38 PM on August 10, 2016
inflation can only come from rising wages.
stagnant nominal wages results in reallocation.
I for one think the coming boomer retirement wave is coming to immensely stimulative to our economy this decade and next, as we'll have ~70 million retirees leaving their jobs and becoming pure consumers, spending what they're not going to leave to their kids.
The baby boom is age 52 to 70 this year, with the median boomer at 61, one year away from early SSA and 4 years from Medicare.
posted by Heywood Mogroot III at 9:38 PM on August 10, 2016
1870-1970 also contained a bunch of wars that led to a lot of 'opportunities for growth' among the victors. (Less so for the losers. Even less so for everyone who got killed in the process.)
I wonder if the post-1970 "low growth" regime is basically the steady state when you aren't regularly killing people and breaking stuff on a global scale?
posted by Kadin2048 at 6:15 AM on August 11, 2016 [2 favorites]
I wonder if the post-1970 "low growth" regime is basically the steady state when you aren't regularly killing people and breaking stuff on a global scale?
posted by Kadin2048 at 6:15 AM on August 11, 2016 [2 favorites]
just a quick reminder that economic growth as constituted by GDP* is essentially a measure of aggregated dollar transactions that take place within a year in a given geographic location. note that 'real' GDP is backed into only by a sampling of price changes (inflation) of a 'representative' product basket.
and what is a (market) 'price'? a one-dimensional system of (allocative) values. so while v.useful in being able to literally and figuratively compare apples and oranges, particularly during the industrial era, i'd argue that market prices are increasingly going awry in an era of increasing (positive and negative) externalities, returns to scale, (lack of) public goods and digital services... so market failures in this regard i'd say are also leading to failures in the moral dimension, whereas in the past excesses of capitalism had been corrected by democratic accountability and/or labor power (depending on your views of the labor theory of value ;)
anyway, as brad delong says:the a way forward? under current (political economy) institutional arrangements it's to try and make 'say's law true in practice' such that if basic goods and services are not easily accessible (or free) to the public then equivalently a basic income (or a citizen's dividend or social credit and/or a job guarantee + some form of helicopter money) might be provided -- for the general welfare -- and, if everyone would like, ratcheted up.
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*besides enhancing/overhauling GDP, another reminder that GDP is a flow measure (analogous to an income statement) and while that's poorly understood, even less understood but i think becoming more important is its equivalent stock measure, the concept of (net) national worth -- a country's balance sheet so to speak -- and what 'national equity' means.
posted by kliuless at 12:34 PM on August 11, 2016 [2 favorites]
and what is a (market) 'price'? a one-dimensional system of (allocative) values. so while v.useful in being able to literally and figuratively compare apples and oranges, particularly during the industrial era, i'd argue that market prices are increasingly going awry in an era of increasing (positive and negative) externalities, returns to scale, (lack of) public goods and digital services... so market failures in this regard i'd say are also leading to failures in the moral dimension, whereas in the past excesses of capitalism had been corrected by democratic accountability and/or labor power (depending on your views of the labor theory of value ;)
anyway, as brad delong says:
[M]oney flows appear wherever utility and value are provided -- and those money flows are easy to track in national accounts. But non-rival, non-excludable information-age commodities are a very different beast: difficult to properly incentivize their creation, difficult to monetize their distribution, and difficult to track in national accounts. Thus a larger and larger wedge emerges between growth in utility as measured by true willingness-to-pay and growth in real measured national product...so what's
Ensuring that the workers of today and tomorrow can capture the benefits of the information age will require us to redesign our economic system. Only by finding ways to put true value on the goods we produce can we sustain a middle-class society, rather than one of techno-plutocrats and their service-sector serfs.
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*besides enhancing/overhauling GDP, another reminder that GDP is a flow measure (analogous to an income statement) and while that's poorly understood, even less understood but i think becoming more important is its equivalent stock measure, the concept of (net) national worth -- a country's balance sheet so to speak -- and what 'national equity' means.
posted by kliuless at 12:34 PM on August 11, 2016 [2 favorites]
There are many authors on growth strategically missing from this post, but I suppose OP is making this a safe space for narrowly thinking within market capitalism, or some such.
The US could revert back to historical growth, it would probably involve increasing the amount of forced labor through the 13th amendment loophole / "law and order" policies. We saw that during the BP cleanup, when there was so much more work to be done in a small amount of time than cleanup workers willing to do work; department of corrections bused in prisoners to fill the absolute void of labor supply compared to the monumental waste management task at hand.
We're also seeing corrections labor increase with LNG Export bubble on the US Gulf Coast --there aren't even enough workers to do the skilled construction work (there's not even enough housing for the theoretical number of people needed to build the "Clean Energy Empire"). Corrections steps in to do land clearing, drainage, facilities management tasks which are boring and require long days in the sun.
Increasing growth would also likely involve increasing exemptions to the Safe Drinking Water Act, Clean Water Act and Clean Air Act, for starters, and continuing to de-fund US EPA to follow up. You can see the pattern that was established for oil and gas production so long ago. Exploration and production wastes are exempted from these laws because they are defined as not "hazardous" under the law.
Large scale Fracking is another example of a whole boom-and-bust cycle that would not have happened without the key exemption to the Safe Drinking Water Act put through in 2005. The Myth that fracking is exempt from all regulation encourages bad behavior.
The law banning export of crude oil and gas was lifted (so much for US "Energy Independence"). Regulatory agency discretion is being pushed to the limit for the LNG Export boondoggle; the rubber stamps are melting hot from pushing things through the CAA / CWA / NEPA processes with the minimal amount of review necessary to avoid litigation. US FERC has declared itself 'outside of the executive branch' and immune from US Executive Orders on climate, floodplains, environmental justice, etc. I wonder how those storage facilities on Lake Charles are holding up in the historic Louisiana floods right now.
We can talk about imaginary 'growth' as numbers on a spreadsheet, or talk about what happens when political movements toward 'growth and opportunity' actually attempt to effect their agenda in the US in 2016. It's ugly; these tendencies should be fought tooth and nail.
posted by eustatic at 7:07 AM on August 15, 2016
The US could revert back to historical growth, it would probably involve increasing the amount of forced labor through the 13th amendment loophole / "law and order" policies. We saw that during the BP cleanup, when there was so much more work to be done in a small amount of time than cleanup workers willing to do work; department of corrections bused in prisoners to fill the absolute void of labor supply compared to the monumental waste management task at hand.
We're also seeing corrections labor increase with LNG Export bubble on the US Gulf Coast --there aren't even enough workers to do the skilled construction work (there's not even enough housing for the theoretical number of people needed to build the "Clean Energy Empire"). Corrections steps in to do land clearing, drainage, facilities management tasks which are boring and require long days in the sun.
Increasing growth would also likely involve increasing exemptions to the Safe Drinking Water Act, Clean Water Act and Clean Air Act, for starters, and continuing to de-fund US EPA to follow up. You can see the pattern that was established for oil and gas production so long ago. Exploration and production wastes are exempted from these laws because they are defined as not "hazardous" under the law.
Large scale Fracking is another example of a whole boom-and-bust cycle that would not have happened without the key exemption to the Safe Drinking Water Act put through in 2005. The Myth that fracking is exempt from all regulation encourages bad behavior.
The law banning export of crude oil and gas was lifted (so much for US "Energy Independence"). Regulatory agency discretion is being pushed to the limit for the LNG Export boondoggle; the rubber stamps are melting hot from pushing things through the CAA / CWA / NEPA processes with the minimal amount of review necessary to avoid litigation. US FERC has declared itself 'outside of the executive branch' and immune from US Executive Orders on climate, floodplains, environmental justice, etc. I wonder how those storage facilities on Lake Charles are holding up in the historic Louisiana floods right now.
We can talk about imaginary 'growth' as numbers on a spreadsheet, or talk about what happens when political movements toward 'growth and opportunity' actually attempt to effect their agenda in the US in 2016. It's ugly; these tendencies should be fought tooth and nail.
posted by eustatic at 7:07 AM on August 15, 2016
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