Thursday, August 23, 2012

Has Obama Ended The Era Of Economic Growth?

We've come to believe that, aside from brief interruptions, the inevitable trajectory of human progress is upward. But that's not supported by human history. And Obama may have put an end to 250 years of economic progress.
Are the good times really over for good?

A provocative new paper from economist Robert Gordon, “Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds,” makes just that case, or at least questions the assumption “that economic growth is a continuous process that will persist forever. There was virtually no growth before 1750, and thus there is no guarantee that growth will continue indefinitely …  the rapid progress made over the past 250 years could well turn out to be a unique episode in human history.”

Indeed, as the above chart shows, growth may be headed on trajectory back to the zero-growth (or super slow growth) era before the Industrial Revolution.:
Doubling the standard of living took five centuries between 1300 and 1800. Doubling accelerated to one century between 1800 and 1900. Doubling peaked at a mere 28 years between 1929 and 1957 and 31 years between 1957 and 1988. But then doubling is predicted to slow back to a century again between 2007 and 2100
Or to put it another way, per-capita real GDP growth could slow down to a rate of a mere 0.2 percent by 2100. That is roughly what it was for the 400 years before the Industrial Revolution.
It's worth recalling the wit and wisdom of Robert Heinlein: "Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty.
This is known as "bad luck."


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