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Thread: Has growth reached its end in the developed world? Economist makes the case

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    Default Has growth reached its end in the developed world? Economist makes the case

    I've made this case before, but it'll perhaps be more interesting to see a Professor of Economics expound such a similar view in a "deliberately provocative" essay. It's specific to the USA, but it has a lot of relevance to the rest of the developed world.

    http://www.voxeu.org/article/us-economic-growth-over

    The justification for depressed growth of less than 0.5% per annum (for the bottom 99% only, the top 1% will continue to party on) for the next few decades is based on strong foundations. These are demography, education, inequality, globalisation, energy and debt.

    The core of the story is his obviously correct observation that there have been three separate industrial revolutions since 1750 which have allowed growth levels to go above 1% per year in the developed world. The first was with the steam engine. The second and by far the most important one was the widespread electrification of the late Victorian era. The third and by far least important is the IT revolution which has mostly leveled off in most of the developed world.

    Quote Originally Posted by Prof. Robert J. Gordon
    IR (industrial revolution) #3 appears to have lasted only eight years, compared to the conjectural 100 years for IR #2.
    Since 2004 productivity growth has been almost as slow as in the previous dismal period of 1972-96.
    Inventions are not all created equal

    The paper explains this history by a simple proposition. The great inventions of IR #2 were just more important than anything that has happened since. The speed of transportation was increased from that of the 'hoof and sail' to the Boeing 707. The temperature of a room was wildly variable in the 19th century but by now is a uniform 70 degrees year round. The transition from rural to urban in the US could only happen once. Only once could electricity be invented and create rapid transit, machine tools, consumer appliances, and the entire electricity-dependent set of entertainment devices from the radio to the TV to the internet and its multiple spin-offs such as the iPod, iPhone, and iPad.
    Paul Krugman disagrees with Gordon:

    Quote Originally Posted by Paul Krugman
    I’ve been looking into technology issues a lot lately, and I’m pretty sure he’s wrong, that the IT revolution has only begun to have its impact.

    Consider for a moment a sort of fantasy technology scenario, in which we could produce intelligent robots able to do everything a person can do. Clearly, such a technology would remove all limits on per capita GDP, as long as you don’t count robots among the capitas. All you need to do is keep raising the ratio of robots to humans, and you get whatever GDP you want.
    I like optimism in people, but Mr Krugman's not convincing me with that. Not at all. To be expecting anything like that seems to me to be a very bad case of what James Howard Kunstler calls "techno-grandiosity".
    When you see the words "Mises" or "Hayek" in someone's post, just ask yourself: do I really want to ban paper money and go back to gold?

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    Dylan2010
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    discussions about "growth" are hard to pin down. Would you rather have an income of100K pa growing at .5% a year or 5K growing at 10%? growth freaks only worry about this stuff when they are leveraged to the gills.
    Medecine and education are ripe for disruptive technologies so there is still a lot to do out there

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    Looking at the bigger picture, there may come a point where globalisation introduces a more obvious zero sum game where certain elements of growth come at the direct expense of others, e.g. natural resource obtained at less than market prices. And where only genuine advances in technology or productivity yield real net growth.

    So yes, maybe boomy growth in developed countries really is a thing of the past.

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    Quote Originally Posted by Dylan2010 View Post
    discussions about "growth" are hard to pin down. Would you rather have an income of100K pa growing at .5% a year or 5K growing at 10%? growth freaks only worry about this stuff when they are leveraged to the gills.
    Medicine and education are ripe for disruptive technologies so there is still a lot to do out there
    I disagree that education can change much due to technology. Unless you're talking about Matrix-style fantasies, learning is a slow organic process which technology can't help much. You want to understand something complicated? You have to put in years of effort without any guaranteed reward. That's true whether you're using wikipedia or you're a Victorian with a library card.

    I agree that Medicine is ripe for disruptive technologies, but it's not at all obvious how that could cause economic growth.

    Medicine has exploded in the last 100 years without causing any appreciable boost to economic growth.
    When you see the words "Mises" or "Hayek" in someone's post, just ask yourself: do I really want to ban paper money and go back to gold?

    You have to pity the kind of people who buy into conspiracy theories. I find the following to be the saddest words on the internet: "Re: connection between Bilderberg puppet lady gaga and viral outbreak in ukraine "

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    Quote Originally Posted by McDave View Post
    Looking at the bigger picture, there may come a point where globalisation introduces a more obvious zero sum game where certain elements of growth come at the direct expense of others, e.g. natural resource obtained at less than market prices. And where only genuine advances in technology or productivity yield real net growth.

    So yes, maybe boomy growth in developed countries really is a thing of the past.
    What does that do to pension funds? And the debts owed by developed-world entities, public and private?
    When you see the words "Mises" or "Hayek" in someone's post, just ask yourself: do I really want to ban paper money and go back to gold?

    You have to pity the kind of people who buy into conspiracy theories. I find the following to be the saddest words on the internet: "Re: connection between Bilderberg puppet lady gaga and viral outbreak in ukraine "

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    Maybe....just maybe....it might have something to do with reckless monetary policies being pursued in western economies....under the direction of chancers like Bernanke, Draghi, Carney, etc....

    I reckon the low interest rate, high leverage, high cost state option is running out of borrowing power, and that this is the real problem.
    Coveney's ambition is the be Ireland's next EU Commissar and Ireland will pay a price as he builds his CV to position himself sufficiently loyal to the nEU empire.

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    Quote Originally Posted by feargach View Post
    I've made this case before, but it'll perhaps be more interesting to see a Professor of Economics expound such a similar view in a "deliberately provocative" essay. It's specific to the USA, but it has a lot of relevance to the rest of the developed world.

    Is US economic growth over? | vox

    The justification for depressed growth of less than 0.5% per annum (for the bottom 99% only, the top 1% will continue to party on) for the next few decades is based on strong foundations. These are demography, education, inequality, globalisation, energy and debt.

    The core of the story is his obviously correct observation that there have been three separate industrial revolutions since 1750 which have allowed growth levels to go above 1% per year in the developed world. The first was with the steam engine. The second and by far the most important one was the widespread electrification of the late Victorian era. The third and by far least important is the IT revolution which has mostly leveled off in most of the developed world.



    Paul Krugman disagrees with Gordon:



    I like optimism in people, but Mr Krugman's not convincing me with that. Not at all. To be expecting anything like that seems to me to be a very bad case of what James Howard Kunstler calls "techno-grandiosity".
    An interesting OP.

    I would ignore Krugman. He was an economic advisor during the Clinton Era in which he advised ripping up all regulations on banking and finance.

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    The Victorians believed that they had reach the pinnacle of human development and everything invented or improved upon had been.

    This type of arguement is not new or progressive, it's boring and stale.
    Last edited by Mossy Heneberry; 27th December 2012 at 02:24 PM.
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    Quote Originally Posted by Nemesiscorporation View Post
    An interesting OP.

    I would ignore Krugman. He was an economic advisor during the Clinton Era in which he advised ripping up all regulations on banking and finance.


    Krugman is the self appointed successor of JM Keynes.
    Coveney's ambition is the be Ireland's next EU Commissar and Ireland will pay a price as he builds his CV to position himself sufficiently loyal to the nEU empire.

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    Dylan2010
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    Quote Originally Posted by feargach View Post
    What does that do to pension funds? And the debts owed by developed-world entities, public and private?
    are you saying you want an economic model that keeps pyramid financing working? you seem to want a model that depends on exponential growth in dividends of Western based multinationals by creating more consumers across the globe?

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