Economic Growth Hell
Again yesterday, we heard the promise of 4%-plus U.S. GDP growth in the coming years. Monday, I believe it was President-Elect Donald Trump’s new Treasury Secretary appointee Steven Mnuchin I saw across the gym on MSNBC making the promise. A few weeks ago we heard him promise 3 to 4 percent.
Of course, a goal like this by necessity includes plans to ignore the need to reduce greenhouse gases, and I think it also requires leaving caution to the wind in every aspect of environmental protection and stewardship. It would appear that is in our future here in the U.S.
But such a goal also requires the cooperation of nature, and this is where I have my biggest doubts. I think we’ve exceeded the limits to growth, and finally the Earth is pushing back. I suspect 3% annual GDP growth for the U.S. is history, though I expect we’ll waste much time, energy and resources trying to gin it up.
Today I want to compliment Harry S. Dent of Dent Research for writing about the impossibility of 4% GDP growth in:
Dent offers a sobering dose of reality:
“We don’t need more supply, except in a few little places here and there – like nurses!
We need more demand, and we’re not going to get it. Not while the greatest generation in history (both in size and influence) are saving more and retiring in droves.”
The system we’ve created may “need more demand,” but our planet does not. Being in the finance industry, Dent doesn’t appear to understand the physical limits to growth, or the great damage economic growth on a full planet does to our life-supporting ecosystems. So he writes as though 4% growth would be nice, but just isn’t possible in today’s circumstances. He considers 3%+ growth “a great boom,” instead of the destructive binge it actually would be.
“The U.S. population grew at 1.1% between World War II and now. Even by rosy government estimates, population growth will be 0.6% into 2060. My estimates, adjusted for the reality of falling birth rates since 2007 and immigration in this slow and much slower ahead economy into 2023 or so, is 0.27%.
With 1.1% growth and a little over 2% productivity on average, you get 3%-plus growth in GDP over a long period of time. That compounds into a great boom, especially with rising debt growth at 2.6 times GDP to leverage that. But I’ve got news for you Mnuchin. Our debt simply can’t continue to grow at 2.6 times GDP. We won’t see population growth higher than 0.27% for decades (if ever again). And productivity today is close to zero (where it will stay for the foreseeable future). There is absolutely zero chance that we’ll see 3%-4% GDP growth, now or ever again!”
Bravo to Dent for explaining that the days of 3% GDP growth are behind us. Now, if he would just get on board the sustainability train and explain how no growth would be a good thing for our life-supporting ecosystems! On the chance Mr. Dent should read this critique, I’ll recommend some of the reading at More About Limits to Growth.
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