Tag Archives: productivity

The IMF warns us of economic stagnation & suggests fixes. We should listen.

Summary: Today’s post looks at an important new report about the IMF, another step by economists towards recognition that we’ve left the post-WWII order for a new world. Now that’s a world of persistent slow growth, in which repeated rounds of fiscal and monetary stimulus (conventional and unconventional) prevents recessions but cannot reignite strong growth. The IMF’s economists discuss possible causes and solutions.  {1st of 2 posts today.}

Slow Economic Growth


  1. The IMF discovers secular stagnation.
  2. Slowdown since the crash.
  3. What comes next?
  4. What should we do?
  5. For More Information.


(1)  The IMF discovers secular stagnation

One of the great issues of our time concerns our future. Do we face continued slow growth (aka secular stagnation) or the accelerating growth of a new industrial revolution? These paths offer different challenges and require radically different central bank policies.

But central banks have been unable to prepare for either alternative because they’re stuck in the first — and often the most difficult — phase of the problem resolution process: recognition. Since the crash they’ve expected economic growth to return to normal. Year after year they’ve been disappointed, responding to a series of ad hoc improvisations that have poor grounding in economic theory and history. Yet time brings insight, and the international economic agencies have slowly come to grapple with these questions.

This post looks at the April 2015 IMF report “Where Are We Headed? Perspectives on Potential Output“.  Here’s a summary for a general audience from the IMF’s survey magazine. They open by comparing forecasts made in 2007 and 2008 with actual economic growth through 2014. Slowing, slowing, slower.

Continue reading


Do we face secular stagnation or a new industrial revolution?

Summary:  US growth is slowing when it should be accelerating as we shake off the effects of the crash. The possibility of a fifth year of slow growth strengthens fears of stagnation like that afflicting Japan since 1990. Yet there’s good reason to suspect that a new industrial revolution has begun, potentially generating incredible new wealth — if we manage the process well politically. Which future is correct? Both of them.  {1st of 2 posts today.}

“There are decades when nothing happens; and there are weeks when decades happen.”
— Attributed to Lenin.

Future Industry


  1. We’re becoming Japan.
  2. We’re accelerating to take off speed!
  3. The 3rd industrial revolution?
  4. Conclusions
  5. For More Information.

(1)  We’re becoming Japan.

Compare growth in per capita GDP of America and Japan. We following in their footsteps.

  • US since the crash:  1.4%/year (2010-2014: 1.7, 0.8%, 1.6%, 1.5%, 1.6%).
  • Japan before the crash: 2.0%/year (2003-2007: 1.2%, 2.6%, 1.9%, 2.1%, 2.3%).

This is a big story. It’s called secular stagnation (see the posts describing this theory, with links). Readers of the FM website have known about this since 2010, with more details given in 2013 and even more last year.  Larry Summers introduced it to the world in 2013. It’s still controversial, as seen in Ben Bernanke’s rebuttal this week (see Larry Summers devastating reply). I suspect time will prove Summers is correct.

Also, Japan has still not pulled out of their stagnation, despite the 3 arrows of Abenomics.

(2)  But we’re accelerating to take off speed!

No, we’re slowing, as shown by the Atlanta Fed’s GDPnow forecast for Q1 of zero growth. Yet the experts remain hopeful for a better year than 2014. The Fed foresees growth in 2015 of 2.3% – 2.7%. But then in September 2012 they expected growth in 2015 of 3.0 – 3.8%. The February survey of Professional Forecasters shows a median expectation of 3.2% for 2015 (note this calculates annual GDP slightly differently than does the Fed). I expect they will be disappointed, yet again.

Continue reading

At last economists see the robot revolution. Here’s why they worry.

Summary:  When I first warned about the “robot revolution” (the 3rd industrial revolution) 3 years ago, I was one of a minority. Experts assured us it would produce quick benefits without much disruption (unlike the previous 2). Time has brought new evidence, and now concern has replaced confidence. Today we review the problem. The next few posts will consider solutions. {1st of 2 posts today.}

“An increase in the productivity of labour means nothing more than that the same capital creates the same value with less labour, or that less labour creates the same product with more capital.”

— Karl Marx’s “A Contribution to the Critique of Political Economy” (1857/58).

Robot Evolution

Matthew Yglesias gave a strong rebuttal to people blaming automation for the slow growth in jobs and wages since the recession ended. But it’s happening nonetheless, slowly but accelerating. People tend to underestimate short-term change, and over estimate it over the long term. But now people are noticing the drumbeat of announcements, as automation affects more jobs of all kinds. Even economists are doubting their easy confidence that the future must be like the past.

Previous posts list scores of examples. Every month brings more, such as …”The computer will see you now. A virtual shrink may sometimes be better than the real thing.” “Here come the autonomous robot security guards.”  Robots help deliver meals for patients.  “Eerily lifelike androids join staff at Tokyo tech museum.Journalists reporting the end of journalism as a profession,  “Watch out, coders — a robot may take your job, too.

The problem is structural on three levels, and just beginning. First there is the shift of rewards from labor to capital (those who own the machine), as we see in the workers’ falling share of GDP, and the rise in corporate profits as a percent of GDP.

The second structure factor: technology changes the distribution of income in many fields. We’re shifting to a winner-take-all economy, as explained in “Welcome To Extremistan! Please Check Your Career At The Door.” Excerpt:

Continue reading

A graph showing the end of America as we know it.

Summary: This is third in a series showing that we’re losing America. This post examines rising inequality of income, one of the major forces reshaping our society and politics. It’s not a class war if we don’t fight back.  {2nd of 2 posts today.}

The one graph that ties together the strands making a New America.
Click to enlarge.

The Great Decoupoling

Andrew McAfee, 12 Dec 2012 — Click to enlarge.

This one powerful but dense graph shows the transformation of what we know of as America — born in the fires of the New Deal, WWII, and the civil rights revolution — into the America of the Gilded Age. The top 2 lines (blue and grey) show America’s increasing economic strength: rising labor productivity and GDP. The bottom two show what we get from that (private sector jobs and median household income).

Here you see the slowly widening break in the early 1980s — the Reagan years, an inflection in so many American political and economic trends — as the 1% siphoned off an increasing fraction of America’s income. That growing gap gives them ever more power, allowing them to restructure America’s institutions to better serve them.

Labor unions were crushed. Workers increasingly became contingent, disposable — either “independent contractors” (often de facto employees without the protections of formal employment), or temps, or just pawns to be fired as needed to boost profits. Open borders brought in more workers to drive down wages (e.g., H-1B visas for skilled workers). Enforcement of labor regulations were gutted, allowing growing exploitation of workers, such as illegally treated cheerleaders in professional sports, plus dubiously legal “managers” (no overtime), unpaid interns, and not-independent independent contractors.

Continue reading

Three stories of America’s decline for your weekend reading

Summary:  Here are three stories about the decline of America. They’re too complex and too good to abstract. Please read them. The Republic is happening on our watch. It need not be so. That is the vital thing we must realize. Everything flows from that.

Liberty cries


I use Twitter (@FabiusMaximus01) to flag interesting and valuable articles, replacing the weekly posts. But here are three powerful stories about the decline of America, each examining a different facet, that deserve special attention.

(I) Losing Sparta: The Bitter Truth Behind the Gospel of Productivity“, Esther Kaplan, VQR, Summer 2014 — The best reporting I’ve seen in a long time. It’s told in long form, capturing not just the deep dynamics of this event but also its emotional impact on the people involved. It’s about the deindustrialization of America, about the myths we’re told about it, about its madness, about the evil complicity of our political leaders, and the devastation left in its wake.

(II) Oligarchy Blues“, Michael Ventura, The Austin Chronicle, 27 June 2014 — “Without fair elections and a viable legislative process at federal and state levels, the republic no longer exists.” Yes. But couch potatoes are ruled by oligarchs. As we learned as children from Disney films, it’s the great circle of life.

(III) ISIS and Iraq: The T-Shirts, the Cats, the App, the Hasbara“, Lambert Strether, Naked Capitalism, 11 July 2014 — A brilliant forensic analysis of the “news” about ISIS. In addition to useful guide to stories about the latest we must wet our pants in fear threat, it provides powerful evidence about two themes of the FM website.

  1. Yes, we’re among the most gullible people that have ever walked the Earth. We fall for the same propaganda again and again, from the same people.
  2. No, our shiny new tech — instantaneous access to all the world’s knowledge — has not given us the superpowers we need. It has made us neither smarter nor better informed.

Continue reading

A look at the wonders coming from the Third Industrial Revolution

Summary: We can understand our potential future only by comparison with our pasts. On the cusp of the Third Industrial Revolution, we can look to the Second for insights as to what lies ahead. First we look at the grim facts of our current slow growth, then at how the Second IR reshaped America. The Third IR might do the same.

Industrial revolution

A vision of our future:

The Demise of U.S. Economic Growth: Restatement, Rebuttal, and Reflections

Robert J. Gordon, Professor of the Social Sciences, Northwestern U

National Bureau Economic Research (NBER)
February 2014 — Gate


The United States achieved a 2.0% average annual growth rate of real GDP per capita between 1891 and 2007. This paper predicts that growth in the 25 to 40 years after 2007 will be much slower, particularly for the great majority of the population. Future growth will be 1.3 percent per annum for labor productivity in the total economy, 0.9% for output per capita, 0.4% for real income per capita of the bottom 99% of the income distribution, and 0.2% for the real disposable income of that group.

  1. The primary cause of this growth slowdown is a set of 4 headwinds, all of them widely recognized and uncontroversial.
  2. Demographic shifts will reduce hours worked per capita, due not just to the retirement of the baby boom generation but also as a result of an exit from the labor force both of youth and prime-age adults.
  3. Educational attainment, a central driver of growth over the past century, stagnates at a plateau as the U.S. sinks lower in the world league tables of high school and college completion rates.
  4. Inequality continues to increase, resulting in real income growth for the bottom 99% of the income distribution that is fully half a point per year below the average growth of all incomes.

A projected long-term increase in the ratio of debt to GDP at all levels of government will inevitably lead to more rapid growth in tax revenues and/or slower growth in transfer payments at some point within the next several decades.

There is no need to forecast any slowdown in the pace of future innovation for this gloomy forecast to come true, because that slowdown already occurred 4 decades ago. In the 8 decades before 1972 labor productivity grew at an average rate 0.8% per year faster than in the 4 decades since 1972. While no forecast of a future slowdown of innovation is needed, skepticism is offered here, particularly about the techno-optimists who currently believe that we are at a point of inflection leading to faster technological change.

The paper offers several historical examples showing that the future of technology can be forecast 50 or even 100 years in advance and assesses widely discussed innovations anticipated to occur over the next few decades, including medical research, small robots, 3-D printing, big data, driverless vehicles, and oil-gas fracking.

Here is the story Gordon tells in two graphs, comparing growth during our golden years vs today’s slow trod.


Robert J. Gordon (2014)

Gordon gives a breakdown to the factors accounting for this large slowing in growth, looking at a different metric:

Continue reading

Good news about the US economy!

Summary: Many people look at the US economy since the crash and deny there has been a recovery. Or a “real” recovery. That’s false. This is the 5th in a series about our recovery; today we examine those parts of the US economy that have recovered — some even making new highs. That’s too bad for the laggards, such as most Americans, but does not make the recovery less real. It does mean that the recovered sectors are unlikely accelerators of future growth.

Works well for money & power

Works well for money & power


  1. Wages – the big “tell”
  2. Vehicles
  3. Business capital expenditures
  4. Consumer Credit outstanding
  5. Housing – our savior?
  6. Other posts in this series
  7. For More Information

(1) Wages

Before we look at the strong sectors, note the big “tell”. The government’s stimulus programs have boosted profits and increased wealth of the 1%. But they have not brought much benefit to most Americans. Inequality has risen, real wage growth stagnate. Here’s the latest in a long stream of evidence, from the Bureau of Labor Statistics. This suggests that a fundamental shift has occurred in the structure of the US economy, as we passed a tipping point beyond which prosperity only trickles down.

BLS: Wages


(2). Motor Vehicles

Already recovered, and has risen slightly above the Q3 2005 peak to a new high.

Continue reading