>From Keith Hudson
From: Jan Crang [mailto:[email protected]] Sent: Saturday, January 19, 2013 4:10 PM Subject: Re: FW: [Ottawadissenters] Gloomy prospects Well, at least one prof agrees with me that economic growth as we have known it has probably come to an end. I wouldn't want to quarrel with his headwinds holding back growth -- consumer demand deficits -- but rather with a break in the chain of consumer products which could accord social status -- a consumer supply deficit, if you like. We're also both agreed that the present recession could go on for a long time. Prof Gordon thinks that it will end in due course with the resumption of economic growth as we have known it. I suggest, however, that we will stay locked into our urban based existence for centuries perhaps unless a brand new technology, or a family of them, takes over in rather the same way that the steam engine took over from the watermills and windmills of medieval times. Whether every basement will have a basement child or teenager in it as Ed suggests is another matter. Birthrates in advanced countries are already declining at a fast clip. If, in coming years populations decline pari passu with decreases in overall production (keeping standard of living reasonably constant) I don't know. Accepting the fact of widespread automation in due course there's no reason why much small populations than we have now will not only be able to run the present sort of infrastructure and services that we have now but also have a far more interesting leisure life and a more beautiful environment than we have now. Keith At 17:24 19/01/2013, you wrote: From: [email protected] [ mailto:[email protected] <mailto:[email protected]> ] On Behalf Of Ed Weick Sent: Saturday, January 19, 2013 9:53 AM To: 'RE-DESIGNING WORK, INCOME DISTRIBUTION,EDUCATION' Cc: [email protected] Subject: [Ottawadissenters] Gloomy prospects Two pieces from today's Ottawa Citizen. The first is about the young who, try as they might, can't really find a themselves or a sense of purpose in today's economic world. Follow the URL for that one. The second, copied from the paper, is a Bloomberg article on what one economist, Robert Gordon, sees as the death of growth. If what he predicts is really coming, every basement will have at least one basement boy (or girl) in it. Ed http://www.ottawacitizen.com/life/Boys+basement/7834172/story.html Is Growth Dead? LONDON During the course of 2012, the U.S. economy rebounded with all the vitality of a slug waking from a long nap. In debt-strapped, recession-hit Europe, investors fret about a Spanish bailout, a Greek default and whether the euro itself will shatter. In Asia, slowing growth in China and India has called into question the national narratives of the two emerging-markets giants and dragged down earnings and commodities prices around the globe. If all of that werent bad enough, last summer saw the publication of a much-talked-about paper by Northwestern University economics professor Robert Gordon titled, Is U.S. Gordon doesnt mean over in some happy-days-arent-quite-here- again-yet-just-wait-another-quarter kind of way. He means over as in finished, fin- ito, happy days aint never coming back. Future growth in real GDP per capita will be slower than in any extended period since the late 19th centur he writes. The 72-year-old macroeconomist elaborated on his argument in an email exchange with Bloomberg Markets. The inevitable decline in future growth required by the need to reduce government and consumer debt will güarantee a contentious political landscape, not just over the next year, but over the next several decades, he said. With all of this evidence of crushing stagnation, its surprising, or at least contrarian, that this year high-powered World Economic Forum in Davos, Switzerland, should take place under the cheery rubric Resilient Dynamism. The logic of the organizers, as spelled out in the program for the Jan. 23-27 event, is that hard times require successful organizations to master strategic agffity and to build risk resilience? The corporate leaders of those organizations wont find much cause for optimism in Gordons work. He starts out with a baseline projection for growth in U.S. real gross domestic product per capita of 1.4 per cent per year during the next 15 years. Thats more than one full percentage point lower than the average growth rate the U.S. experienced from 1928 to 1950 and four-tenths of percentage point lower than the average annual growth from 1987 to 2007. Wait, it gets worse. In his paper, Gordon identifies six head winds that he says will subtract from U.S. growth: an aging population, declining educational attainment, rising income inequality, increasing offshoring and automation, climate change and the prospect of a carbon tax to combat it, and the high debt burden on both households and the government. Together, he says, these head winds could flatten 1.4 per cent growth to near zero. Gordon argues that extremely low growth rates were the norm in earlier periods of human history he cites data from British researchers showing that Englands GDP grew only 0.2 per cent per year on average from 1300 to 1750 and could be the norm again. Other economists extend Gordons thesis to Europe and beyond. The forecast sets off alarm bells for Bill Gross, Co chief investment officer at Pacific Investment Management Co the worlds largest bond investor. A one per cent differential means a lot in terms of unemployment, and it means a lot in terms of profits: Gross says Corporate profits grow more after overall economic growth hits two per cent Below that, they stall out Gross is among those who think Gordon is onto something. He says he wornes that as growth ebbs, the US and most developed economies will be tempted to paper over the problem by printing money, as they have with recent quantitative easing policies. That will eventually mean higher inflation, the nemesis of bond investors, which is why Gross says hes looking for returns in frontier markets and in real assets, such as cornmodities. The idea that the world has reached the limits of growth has a long pedigree, running from Thomas Malthus m the late 18th century to the Club of Rome in the early 1970s. All of these doomsayers wound up looking like Chicken Littles. 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