Summary: Economists get excited about aggregate GDP (today’s hot economic news dot). People — you, me, our neighbors — care about per capita GDP. GDP that grows along with the population does nothing for our standard of living, (and less than nothing if the 1% cream off most of it). It is important to us, so journalists ignore it (hence the newsroom layoffs).
The economy has recovered since the crash (the doomsters saying otherwise are, as usual, wrong). But the stories about the wonderful economy are also bogus. Per capita real GDP has grown a total of 3.4% since its previous peak in Q4 of 2007 — only 0.4% per year (which is also its YoY growth in Q2 2016). This is secular stagnation. The causes are only somewhat understood; economists have only guesses as to its cure (as usual, delusionally confident guesses).
Growing at 1% – 2% per year since the crash. Slowing fast since 2014.
The latest and best book about this
The essential reading to understand this aspect of modern America — shaping our future while we sleep — is The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War. From the publisher…
“In the century after the Civil War, an economic revolution improved the American standard of living in ways previously unimaginable. Electric lighting, indoor plumbing, home appliances, motor vehicles, air travel, air conditioning, and television transformed households and workplaces. With medical advances, life expectancy between 1870 and 1970 grew from 45 to 72 years. Weaving together a vivid narrative, historical anecdotes, and economic analysis, The Rise and Fall of American Growth provides an in-depth account of this momentous era. But has that era of unprecedented growth come to an end?
“Gordon challenges the view that economic growth can or will continue unabated, and he demonstrates that the life-altering scale of innovations between 1870 and 1970 can’t be repeated. He contends that the nation’s productivity growth, which has already slowed to a crawl, will be further held back by the vexing headwinds of rising inequality, stagnating education, an aging population, and the rising debt of college students and the federal government. Gordon warns that the younger generation may be the first in American history that fails to exceed their parents’ standard of living, and that rather than depend on the great advances of the past, we must find new solutions to overcome the challenges facing us.
“A critical voice in the debates over economic stagnation, The Rise and Fall of American Growth is at once a tribute to a century of radical change and a harbinger of tougher times to come.”
Gordon has the blinders typical of economists. He is strong on description, weak on visions of possible solutions. There are no easy fixes. Not even the causes are well understood (economists have lists, with little agreement about their relative importance or interrelationships). But there are ways to restart growth, from easy short-term measures (borrow to rebuilt America’s aging infrastructure) to better education and more & better research and development. We are on the verge of a new industrial revolution, if America has the will to grasp it.
What can you and I do?
Both slow growth and rising inequality have afflicted America before. But the combination, if it continues long enough, will destroy the post-WWII society we think of as America. It is a death sentence for the Republic.
So why is secular stagnation another missing issue in Campaign 2016? It, foreign wars and growing inequality form a trifecta of serious issues ignored amidst the lavish promises and childish bickering. Seldom in US history have so many obvious problems been ignored simultaneously — a clear sign of our dysfunctional politics.
But we control the agenda. We can send letters and emails to the candidates, journalists, and political gurus. Talk to people you know. Demand serious proposals, not vague promises with magic asterisks for the key steps. Make the campaign about America’s future, not a war of memes and silly photos.
We are citizens, not spectators of political theater or consumers in Cafe America. Let’s act like it. Start by changing the Man in the Mirror.
For More Information
- Why America’s growth is slowing, and a solution — Imagine bringing June Cleaver from her 1957 home to today’s equivalent; she’d be astonished at our lack of progress. Look at how we’ve underperformed futurist Herman Kahn’s 1967 expectations for the year 2000.
- Larry Summers gives us the bad news. Worse, the only solution is more of the same.
- Do we face secular stagnation or a new industrial revolution?
- The IMF warns us of economic stagnation & suggests fixes. We should listen.
- Ben Bernanke sees the great slowdown in technological progress.
- The Fed sees years of slowing growth. Prepare for years of political turmoil.
- Trump & Clinton ignore America’s too-slow economic growth. We can change that!