What Would We Need for Persistent 5% Growth?
Last week, I argued that Governor Tim Pawlenty’s aspiration for 5% economic growth over a full decade is implausible since the United States has achieved such steady growth only once since World War II.
Over at Economics One, Stanford economics professor John Taylor offers a more positive take, defending the goal and offering a recipe for achieving it: 1% from population growth, 1% from employment growing faster than the population, and 2.7% from productivity growth.
Add it all up and you get 4.7% growth, a bit short of Pawlenty’s target but close enough for government work.
That sounds great, and I hope it happens, regardless of who is president.
Taylor’s scenario thus assumes that everything breaks right for the U.S. economy for a full decade, with remarkable job growth and remarkable productivity growth in the economy as a whole. Not impossible but, unfortunately, not likely either.
Link -
http://seekingalpha.com/article/274944-what-would-we-need-for-persistent-5-growt...=============================================
The fact is that Economic Growth is the product of a number of issues, including the following major factors -
1) Population Growth, which means an increasing Employment pool, as well as an increasing level of Demand.
2) Abundant & Cheap Energy, which enables & drives increased levels of Productivity, by providing an increasing capacity to produce all types of Products & Services and does so, at lower Prices.
3) Innovation, in Technology & Planning, which delivers more abundant goods and does so, at a cheaper per capita Price.
That said, there are also a few other factors that need to be kept in mind -
1) Exponential growth of anything, over time, is impossible, according to the laws of nature, as we are now finding out in terms of sustainable Population levels and Energy Production, particularly of the Fossil Fuel variety.
2) Debt levels, particularly Real Debt levels, which include massive unfunded Liabilities, such as Baby Boomer Pensions & Health Care Costs are already past the point of no return in many countries, including the USA, much of Europe & Japan.
So, I've explained a little background, to tell you that 2 of those 3 major Economic Growth factors have been slowing for some time and are now set to go into reverse, over the next 20 years.
The US & Global Population/Employment pool, will first level, as 80 million Amercians & some 2 Billion Baby Boomers Globally, first retire, then start dying enmass, in the largest human population dieoff in history.
This will put a severe crimp in the Employment pool and a massive hole in the Demand for Products & Services, over the next 20 years, plus.
In addition, US & Global Energy supplies, starting with Oil are coming under increasing strains, as Demand from a still increasing Population (at least for a while yet) has started to outstrip Energy supplies and that gap will widen.
Oil Production has already effectively Peaked and if it were not for the Global GFC, which was aided & abetted by Demographics issues & rising Energy Prices, then the increasing gap between Oil Demand & Production would have been even more evident and the Oil & other Energy Prices would already be much higher!
So, as I've already said, I've explained all that, to tell you this -
There is no way that the US Economy is going to grow at 5% over the next 10 years or 20-30 years!
In fact, it is highly likely that the levels of government stimulus & bailouts will stop, because the Debt levels are becoming so enormous and as that happens it will become apparent that those enormous & increasing levels of Debt, were the main reason that "official" GDP figures remained apparently positive.
Although, if the stimulus & bailouts were detracted, then GDP over the last 3 years or so, would still have been negative, which means that the USA & many other countries have actually been in a Recession (at least) for a lot longer than commonly thought!
That said, not only is 5% growth not going to happen, neither will there be any real growth, at all, for quite some time.
Continued stimulus/bailouts will only mask a real negative GDP and the ensuing Debt increases will only exacerbate an already terrible Debt problem!
A cessation of stimulus/bailouts &/or the introduction of AUS-terity programs, will also exacerbate what will be a terrible situation in respect of the existing Demographic & Energy Decline issues!
In short, we have a "catch 22", we're damned if we do & damned if we don't".
So, good luck & watch the Debt!
I must admit, I am still surprised that the Human Psyche can carry on endlessly about something where the worst effects are still someway in the future, like Climate Change.
However, we can not bring ourselves to discuss dire issues that are on the doorstep, NOW, like the Baby Boomer Bust, the Energy Bust & the Global Debt Bust!
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