On December 12, 2012, Joe Weisenthal writes on the Business Insider:
At the Dealbook conference, a panel just wrapped up hosted by NYT econ reporter Annie Lowrey, along with Jared Bernstein, Glenn Hubbard, and the economist Robert Gordon.
Gordon presented the scariest chart at the conference from his paper: Is US Economic Growth Over?
He basically sees the end of huge growth trends, and six huge headwinds that could drag down future growth. From the NBER:
“The analysis links periods of slow and rapid growth to the timing of the three industrial revolutions (IR’s), that is, IR #1 (steam, railroads) from 1750 to 1830; IR #2 (electricity, internal combustion engine, running water, indoor toilets, communications, entertainment, chemicals, petroleum) from 1870 to 1900; and IR #3 (computers, the web, mobile phones) from 1960 to present. It provides evidence that IR #2 was more important than the others and was largely responsible for 80 years of relatively rapid productivity growth between 1890 and 1972. Once the spin-off inventions from IR #2 (airplanes, air conditioning, interstate highways) had run their course, productivity growth during 1972-96 was much slower than before. In contrast, IR #3 created only a short-lived growth revival between 1996 and 2004. Many of the original and spin-off inventions of IR #2 could happen only once – urbanization, transportation speed, the freedom of females from the drudgery of carrying tons of water per year, and the role of central heating and air conditioning in achieving a year-round constant temperature.”
“Even if innovation were to continue into the future at the rate of the two decades before 2007, the U.S. faces six headwinds that are in the process of dragging long-term growth to half or less of the 1.9 percent annual rate experienced between 1860 and 2007. These include demography, education, inequality, globalization, energy/environment, and the overhang of consumer and government debt. A provocative “exercise in subtraction” suggests that future growth in consumption per capita for the bottom 99 percent of the income distribution could fall below 0.5 percent per year for an extended period of decades.”
Below, the key chart showing the possible end of growth is here:
We can no longer ignore the relevancy of healing the economy and halting the steady disintegration of the middle class and working poor. Without a policy shift to broaden productive capital ownership simultaneously with economic growth, further development of technology and globalization will undermine the American middle class and make it impossible for more than a minority of citizens to achieve middle-class status. As a result, the national debt and budget deficits will continue to widen to provide “safety nets” for the masses.
We must reform the system, which at present relies on the slavery of past savings against which binary economist Louis Kelso and philosopher Mortimer Adler inveighed in their second collaboration, The New Capitalists (1960). We must free our thinking from the idea that it is impossible to finance new capital formation without first cutting consumption and accumulating money savings.
As Michael Greaney of the Center for Economic and Social Justice (www.cesj.org) states: “Reliance for financing on prior reductions in consumption instead of future increases in production, however, forces economic growth — and thus job creation and whether anyone can find a “job” — into complete subservience to whoever controls past savings. In a capitalist economy, it’s the rich who control savings. In a socialist economy, it’s the State. In today’s Servile State, it’s the State under the control of the rich.
“The assumption that the only way to finance new capital formation is to cut consumption and accumulate money savings, and the belief that labor alone is responsible for all production are responsible for much of the moral, political and economic confusion in the world today, and for much of the social chaos as well.
“The solution is, paradoxically, rather simple. It is, however, far from easy: restore political power by restoring economic power, and restore economic power by vesting each child, woman and man with direct ownership of an adequate capital stake.”
Otherwise, the result is a continuous widening of the national debt and budget deficits to prop-up the economy with artificial make-work employment through subsidies and government contracts with the private sector, which in the name of JOB CREATION really further concentrates ownership of FUTURE productive capital assets among a wealthy minority of the population. Under this scenario deficit financing and ever-growing national debt is necessary to prop up the economy in the name of JOB CREATION. The national debt that appears to be never-ending will never be paid down to elimination under current Democratic and Republican leadership. The system must be reformed to eliminate deficits and reward growth. At present, further borrowing, even at 0 percent interest, will ONLY work if new OWNERS of the productive capital asset growth are created.
Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm
Sign the Petition at http://signon.org/sign/reform-the-federal-reserve.fb23?source=c.fb&r_by=3904687
Sign the WhiteHouse.gov petition at https://petitions.whitehouse.gov/petition/reform-federal-reserve/PhY3Jswk
