Too much wealth is tied up in making more wealth quickly, and very little is being spent on preparing for the future. Investment into roads, bridges, tunnels, the electric grid, water systems, and such has come to a near stand still, while equity markets consume trillions of dollars. Work is no longer necessary to create money, which has lessened the utility of money in representing real work.
Huge sums have been written off as debt, so much so that it threatens the value of the what we consider to be wealth. The structure of the community is under threat because of the stagnation of incomes. So much wealth is being extracted from consumers that they have little left to spend on schools, hospitals, roads, and health care. We are creating money at an unsustainable rate, which we use to pretend that we are not really broke.
'Toys 'R' Us' went out of business primarily because of debt that was incurred by people that owned the company, used its good name and stability to borrow a lot of money, which they pocketed, and then they sold the company. That kind of management destroys value, and we are seeing too much of it. The wealthy are destroying the value of money. By trying to make money without putting any energy into the process, bearing some of the cost, we are taking energy out of the process, resulting in a net loss. Most of the growth has been a bubble.
5
@Scott Holman
I am an elected official in a small municipality, which has $500 for every resident in unencumbered accounts. My colleagues and I are, and have been, moving these funds into community infrastructure.
1
There is an easy answer. Raise the minimum wage. Dramatically. $15 per hour may not be enough, at least in New York.
As Henry Ford famously said, when he offered stunningly high wages for his time, why build a car that my employees cannot afford?
A $20 minimum wage today would bring 6% GDP growth in 2020.
5
People keep repeating that bogus Henry Ford story. He paid higher wages (actually half the amount was a bonus and you only got it after company reps visited your home) because working in his factories was not a good experience and turnover was killing him. In those days, auto workers had to be skilled, not the human robots that worked the assembly lines in the 1950’s and onward. The real story is get a skill that people want and you get paid a market rate. It was that way in 1915. It is that way in 2019. Mere existence is not a skill.
3
@Jeffrey Wood A higher minimum wage will only produce positive effects for a short time, then the supply-side costs will be factored into rents, food and energy prices, and so on. What is more effective in improving financial outlooks is an increase in the 'average' wage, the one that some person with several years experience earns. Jacking up minimum wages means that more people will be working for the minimum wage, and fewer will be receiving wages higher than minimum.
When the average wage is 1.5 times the minimum wage, there is more disposable income for people to consume with, which is what drives economic activity. Increase the average wage to twice the minimum and you will see tremendous increases in demand for goods and services. You also might see some of the workers who have dropped out of the labor force reappear.
So much wealth has accumulated to the upper fraction of a percent of the population that economic activity is seriously impaired. Taking too much profit out of something is one way to kill it, and extreme profit taking has been going for a while. Capitalism without some form of restraint ends up concentrating all the wealth in the hands of a few, and that is what we are seeing today.
3
When are World economic leaders and Institutions going to start rewarding sustainable growth, vrs just growth for sake of growth. Long term contraction toward sustainable growth should be a focus.
3
This article recycles the same set of "business-cycle" indicators without touching the more fundamental underlying structural issues facing the U.S. economy. The latter led to the "Great Recession," so focusing on the weak post-recession recovery blocks attention from the longer-term economic growth problem, which is inadequate productivity growth. Most western economies suffer from the same misdirected mind set, which is why right-wing populous movements are gaining traction. If the investment and growth policy void is filled to redirect the Nation's economic policy focus, it won't make any difference what the Fed does or how much the left wing of the Democratic Party succeeds in income redistribution. Try https://issues.org/make-america-great-again/ for a better economic growth strategy.
1
Maybe what it means is that we’ll have to rely more on profits from producing something rather than on “income” from that great gambling casino in the sky called ... the stock market.
1
Combating global warming means consuming less.
3
@Bob If we consume less that means corporations don't get profits to make more products/services and pay their employees. If employees aren't paid that means they can't consume which eventually leads to them not being paid. It's a madhouse!
1
@William Smith
And the future....until the gov't accepts global warming as the future reality and restructures the economy to get us, as a nation, in place for the cost of this colossal economic burden in our foreseeable future. Maybe the top 0.1% will be able to afford climate change "life boats", but the rest of us will drown in calamity.
1
The problem is quite simple. World-wide, the wealthy are sucking up too large a share of the money. The pot shared by all the rest of us keeps shrinking. Politicians almost always support the wealthy who fund their campaigns. And it is getting worse every day.
8
I write as a Canadian and as it relates to Canada.
1. An aging population is a problem in many western countries. As we are not reproducing to sustain growth we require youthful immigration to stimulate our economies.
2. In an interconnected world, where nations can not entrench themselves behind trade barriers and walls, it serves our self interest to work towards achieving economic stability for all nations.
6
@Heidi Developed countries will stay in economic depression for as long as the globalization policies of the last 25 years remain in place. Until the populations and economies of developing countries catch up at our expense and a new equilibrium is established. By the time that happens, the West will lie in ruins.
1
I'm an investory, and I’m not worried.
"The new reality beneath every macroeconomic question" is that a new kind of economy is emerging. We read of so many aspects of the current economy being contrary to history, so one can't turn to history to warrant pessimism (if not fueling self-fulfilling projections).
Obvious years ago, before the Great Recession, was that China had to convert its economy from hot exporting to warming of domestic demand (turning a very large ship), which has transformed the nature of its GDP (which remains healthy) and cooled volatility in commodity markets (though the financial markets are their own world).
There is a leveling of the global economy that portends long-term slow growth and low interest rates—not good for opportunists and profiteers of volatility, but good for long-term economic development in emerging markets, which is good for balance of trade globally.
The phony China-U.S. trade war will wane, as Trump's bravado loses credibility (still has any?). Brexit won't happen (bet laid). Russian maliciousness in Britain (part of Brexit panic!) and the EU will be undermined. OPEC is on board for long-term stability.
Trump will go play golf permanently in early 2021. The U.S. will have a president again. U.S. leadership will be healthy again.
1
@gary e. davis You consider the continued impoverishment of the middle class in the developed world due to cheap foreign labor to be "healthy". They don't. And they outnumber you.
2
Starving and homeless people really don't care about all that.
1
The overwhelming majority of responses here, undoubtedly from dutiful, lockstep Democrats, cite income inequality. And not one recognizes the actual cause of it - a dramatically increased labor supply, as a result of immigration, outsourcing and increased female work force participation over the past 40-50 years. Cheap labor is the result of those agendas. When you dramatically increase the supply of something beyond the demand for it, the price falls.
The current environment of low growth, low prices and low wages is the direct result of those trends, bought and paid for by donors to both parties. The growth that should have been happening in the West has been happening- in China.
If you buy the Democrat line that raising taxes will solve all of this, while maintaining open borders for immigration and outsourcing and bowing to the false gods of "intersectionality" and "social justice", you are the ultimate sucker. You are the ultimate dupe. The wealthy elites, who want cheap labor, have you right where they want you.
The moldy fiction that this was all caused by Ronald Reagan's tax cuts is like an opiate Democrats take to ignore the fact that wage stagnation started ten years before Reagan, in the 60s, due to the twin forces of feminism and the 1965 Ted Kennedy immigration bill.
After the end of the Cold War, this was all put into hyperdrive - by Bill Clinton. And then accelerated by Barack Obama, who thought it was "justice" to send American wages abroad.
3
Wrong answer. The wealthy Ellie's have YOU right where they want you. Fighting to keep them rich, and making more money in one year, than most of us will make in a lifetime of hard work.
2
@Joe
We need to decide what the definitions of "growth" is. Organic growth or growth through debt expansion, aka pulling future growth forward. China went from 7 trillion in debt to 40 trillion in 10 years. Is that model sustainable? To keep that pace up China's debt will have to be 228 trillion in 10 years.
Wow!
1
@Joe
Then explain the massive explosion in average worker:executive pay since 1980. Only way is that they have gotten very, very greedy at the top and are sucking the rest dry. Just one data point, there are so many others that prove the same point. Income inequality is real and has significantly increased since dot.com era.
1
Heraclitus said "You cannot step into the same river twice.".
There is a massive pile of capital that has been accumulated by the 1%. You have to go back to the 1890's to find equivalents. But back then, they were on the gold standard. It's a whole new ride.
Stay safe.
2
Growth is a function of supply and demand. We don't have a supply problem so look at demand. Prices must deflate to match wages. This means the supply "pie" must adjust as it contracts, without impacting wages negatively. We may be suffering shrinking pains as we transition from a skilled industrial economy to a low wage service economy in many countries.
2
@Beaconps
"Growth is a function of supply and demand. "
Not really, or at least not entirely.
1
Growth is a function of unsatisfied demand and efficient means of supply.
1
@Beaconps
Tell that to the long haul truck drivers. Wages are 30% lower in inflation adjusted terms since 1980 while there is a shortage of 60,000 drivers.
1
Then there’s a mismatch. When you expect higher interest rates, then buying a home, a car, or other financing-based purchases seem forbidding. So, why are we putting people through that when there is no reason to?
1
Yes...deflation happens when excessive debt creation is seen as the solution to all economic problems, and then money printing is layered on top AS THE SOLUTION to the excessive debt! Growth will NOT happen again until the "destruction" side of the creative destruction dynamic is again allowed to take hold. Why do you think there are so few business startups in the U.S. today? Could it be because all the bailouts and ten years of nearly free money have made it possible for unproductive, entrenched businesses to continue to exist, with little hope for growth? We deserve what we get at this point.
4
There are very simple explanations.
1 - During the past 50,000 years prices have fallen because of productivity enhancements. This is the natural state of affairs. Prices only rise during wars because of supply reductions.
2- The slowing of economic growth since the 1960's is due to a reduction in productivity caused by the increasing size of the Government in the economy.
We all know Governments are inefficient (think DMV). Historically, European Governments have been larger than the US and European growth has been weaker than the US.
The consumer has benefited from global trade & productivity growth.
If we want stronger economic growth we need to reduce the waste in Government.
1
@Peter
We don't all know the DMV is inefficient.
People just complain about it. Do you have any proof that it is over-resourced and delivers less for more?
What are you comparing it to?
2
But in some ways wouldn't that be ideal? Low inflation, low growth. People content with what they have and not greedy for more. The rich couldn't keep getting infinitely richer and maybe some of the poor could slowly move up into the middle class. Of course, once you have the taste for excess, it's like any other addiction. The well-to-do would keep finding new angles.
6
@Refugio Enriquez You have no concept of how economics works. The problem has been access on the part of employers to cheap foreign labor, which has had a downward impact on both inflation and demand. And because people are paid less, there is less savings, which means less capital for investment. The virtuous circle that produces growth and prosperity has been punctured like a leaking bathtub, with money flowing out of the developed world into third world countries, mainly China, and uncontrolled immigration reducing wages domestically.
For a time, the shortfalls were made up by debt. That bubble burst in 2008, at least on the consumer side. Governments continued to explode debt to keep themselves afloat.
The only way to restore equilibrium to the economy is to tighten the labor supply by restricting immigration and outsourcing, forcing the real, natural redistribution of wealth downward through increased wages. Which in turn spurs demand, consumer spending, and savings, which then increases revenues for business, and further investment and expansion, which creates more jobs, and so on.
1
I’m sure this is all enormously complicated, but hopefully policymakers and the people who influence them will keep in mind the old adage about the cure being worse than the disease, especially when a proposed cure for a chronic condition involves something like promoting higher levels of consumer debt and inflation.
It got my attention when in the aftermath of 9/11 one of the big early messages was essentially “go to the mall this weekend and shop or the terrorists have won.” I began to wonder whether the health of the world economy had wandered into a place where for a time it depended on Americans buying stuff they didn’t really need and couldn’t really afford.
Then policy and financial practices combined to give us a debt-fueled housing boom that didn’t work out so well. That in turn makes me wonder about the idea that higher levels of growth protect us from the possibility of slipping into recession. People used to talk about boom and bust cycles ...
And speaking as an amateur I hope economists are wondering whether the old models about the ways consumer debt stimulates the economy can be depended on when the economy and policy don’t combine to offer many young people the prospect of steady decent employment.
4
There is no getting around that the economy is not providing quality middle class employment, everyone is stretched, the middle class is contracting and automation and AI is likely to be deflationary. No one promised us we could live as well as our parents, especially in the absence of any political movement to protect middle class gains and lift the working class economically.
The benefits of the economy are wasted on the .01% and abject tax policy has given them another boost. That is not investment in institutions and infrastructure that will likely lead to growth. It is wasted capital.
10
The primary driver behind the low growth scenario which Irwin accurately describes is the 'hoarding' of wealth by the world oligarchy. These funds are not used to stimulate economic growth or even day to day consumption. Anyone who understands the hard work involved in constructive and successful business activity knows that an oligarch sitting on a pile of debt instruments is simply a rent seeker, they are contributing nothing constructive, and in fact are taking a potentially constructive financial asset out of circulation.
The more we allow and even encourage this behavior through the tax and inheritance laws, the slower any real growth and progress will be.
12
@Paul...So, the way to achieve high growth is to take the oligarch's rent seeking pile of debt instruments - courtesy of tax and inheritance laws - and give it to potentially constructive and successful businesses. Then, if the entrepreneur busts her bottom and accumulates her own rent seeking devices, repeat the cycle of redistribution. One catch in this progressive plan is that entrepreneurs might say "Why the aitch should I bust my bottom if I have to give it back after all the hard work?" Of course, instead of relying on entrepreneurs to be the economic drivers of real growth and progress, we could hitch our future to politicians and bureaucrats.
1
@Albert Edmud
What do you have to offer as a vision?
2
If the term "low unemployment" is simply masking severe underemployment - one of the essential attributes of the gig economy we are living in - then low growth is inevitable. It is simple arithmetic - when people earn less they spend less. And even this low growth has only existed because of the government's intervention. Remove that (or the ballooning government borrowing), and the continuing automation and robotization will lead us to even more underemployment and a prolonged economic contraction with no end in sight.
3
Too big to fail...the government controls the economy, and everyone knows it. If you think you live in a capitalist economy, just try to increase interest rates and watch the investors run. It is amazing to me that every news cast in the US includes what happened in the capital markets and people think that is how the economy is doing. The capital markets are not the economy, and the government is becoming, or perhaps has always been, the capital market of last resort...
2
Well, perhaps the reason why the erudite and elite class are pushing the capitalism greed button so darn hard isn't because they're only purely self centered, but because they know with such a large population of humans, if we all had a higher standard of living there'd need to be much greater exploitation of the ecology and increasing climate change and resource wars. If 90% of the world can be kept to a dollar a day living, we all have much smaller carbon foot prints and the damage of slovenly masses is minimized for the good of all: we're going to impoverish you to save you.
A more cynical person than I would suggest that the known fact that we could more than easily feed the whole world's population of humans so no one goes hungry, but that the owners of the political economy choose not to do so letting 1/7th of the population go hungry, is intentional. Since food equals population, it's just a way of keeping a lid on the number of humans.
The cats need to catch all the mice to save them, they need to burn down the village to save it, and we need to starve humanity to feed it. We're in the age of Neoliberalism: we're gonna save you from yourself whether it kills you or not.
6
@Chris My sentiments exactly. Reducing inequality without addressing the size and growth rate of the population (big taboo) would accelerate resource depletion, land degradation, pollution, and climate change.
Personally I'd be fine with a zero growth or degrowth economy as long as we started spreading the existing wealth around a bit more equitably.
3
I suppose this report would seem shocking for Rip Van Winkle after awakening from a deep sleep. For everyone else though, the analysis seems self-evident. Why investors soared around Trump is a mystery. Growth is not going to magically rebound after deregulation or corporate tax cuts. Most of the economy doesn't care about the investor class. Most people aren't investors. Not in any significant way.
The global economy in general, and the US economy in particular, have severe structural handicaps right now. We might have been able to wipe the slate mostly clean with an infrastructure package back in 2012. But no, we got Republican obstruction and German austerity. Sorry but the Great Recession is here to stay as a result. I've been saying this for ten years. Investors are simply trying to scare the Fed in the 4th quarter where President Trump failed.
Why investors think this is a good strategy for long-term economic health though is, again, a mystery. Businesses are pushing governments in unhealthy directions rather than helping them correct course. We are extremely vulnerable as a result.
3
Inflation has been much higher than reported here ('back to 2%). The calculation for inflation was changed in the early 90s to a bogus nonsense calculation that exclude necessary purchases like food and energy. But I find this article stunning after reading that the House will increase Federal worker's salaries. Does the House not follow any logic, like raising salaries for the public sector in the face of minimal raises for the private sector makes any sense? It does not. When the government raises the salaries of it's own while the private sector holds on with minimal raises, it's a recipe for disaster. And elitism of government workers is astounding. And for those insisting that it's the fault of the uber rich, nonsense. Economies cannot be on a steady growth curve forever. You could take all the money away from the rich and take their homes and yachts and bling, but it would do nothing to solve the real issue. Over population with increased expectations from birth.
1
@Ma...Bingo! "Over population with increased expectations from birth." Malthus meets the Free Lunch Clan. "It's a recipe for disaster".
1
Two observations:
FIRST
Growing 10% from $10 means adding $1.
Growing 10% from $10,000 means adding $1,000.
As the world’s economy grows it seems unreasonable to expect the same percentage growth. Perhaps it makes more sense to look at $ growth.
SECOND
Maybe it is a deliberate attempt to not inject politics into what is meant to be an economics discussion, but it is puzzling that no mention was meant of the trade war started in March of last year, and, I believe, too much is made of the Fed’s actions. Based on the forward yield curve and the predictions markets, further rate increases were expected, and the Fed delivered them. There was no real surprise there, but certain people would rather blame the Fed...
3
@Rjv
But isn't the absolute value of the baseline tempered by inflation?
The numbers are getting more zeros, but in terms of actual output of things that money can buy, like sandwiches, we aren't making that big of a leap.
Let's say a sandwich was $1 40 years ago, and now it's $10. We could reasonably expect to grow in our capacity to produce 2 more sandwiches ($2) 40 years ago, and we can reasonably expect to grow our capacity to produce 2 more sandwiches ($20) today.
That doesn't seem so unrealistic.
1
In the developed nations young people are ready, willing and able to work, earn, spend and consume. But concentration of ownership, asset inflation, a decline in small enterprise growth, and wealth inequality has limited their ability to make wage gains, even in a tight labour market. If the market won’t do the right thing, then surely politics needs to intervene. Generational unfairness is a real thing, and it is hurting everybody.
2
With the advent of globalization, dominant capitalist economies have minimized wage increases for workers by controlling the effectiveness of organized labor and by transferring production and services to low wage Countries. Low wage workers from these Countries, in turn, migrate to higher wage economies, thus limiting income growth for workers in these economies and causing deflationary pressures.
1
The future risk is deflation. Companies do not have any pricing power due to worldwide competition in manufacturing and services coupled with the constant pressure for increased profits to keep the markets viable and lenders lending. This is not going to change.
With systematic suppression of wages in addition to massive amounts of debt, the next generations will not have sufficient money to fuel any type of inflationary pressure. (plus the added caveat of indentured servant clauses masquerading as “non-compete” contracts.) The long-term equations seem simple….but economist assume growth is the guiding light and that everything is fine if we have growth.
But energy doesn’t grow and debt growth has outpaced he ability to pay it back. Interest rates are still low and tax rates in the US are low. Therefore, there is essentially nothing left as the federal levels to combat any future recession. What could go wrong?
1
" But it now looks as if the era of persistently low growth, low inflation and low interest rates isn’t over after all." But yet the era of the highest corporate profits ever, the highest ratio ever of executive pay to employee average wage, and the lowest ratio of total employee compensation to corporate profit.
No, despite what the pundits and critics say, progressives are not against capitalism, just against the virulent form it has taken in America these days.
6
Income and wealth distribution are extremely skewed, thus so should taxation. The curve for tax rate should mirror exactly the curve for income distribution. Wealth is not taxed, but it needs to be. We must eliminate hoarding, put money back into circulation. Tax on wealth needs to be based on real investment (derivatives and other complex paper shuffling schemes do not constitute real investment).
Nobody has ever EARNED a billion dollars. Most either inherited it or found some way to game it out of the economy. If Bezos is rich, it's because he does not pay he employees well, or does not pay his fair share of taxes.
4
@oldBassGuy OK, now define income. See how it all works?
2
@oldBassGuy If you think incomes are skewed now, just wait for tech to wipe out more and more lower level jobs to spike productivity and profits for the fat cats. By 2050, according to McKinsey, not Marx, on the front page of the Times, tech will have eliminated 47% of ALL American jobs. Who will tell the people?
2
"But what does it mean when a mere 2.4 percent interest rate — the rough level of the Fed’s target after a December increase — is enough to risk breaking the economy?"
It means that this probably isn't the case.
The economy is at risk on an ongoing basis due to the ongoing preference being shown for Capital over Labor. Something that has been going on for nearly fifty years.
The hot topic at Davos was the use of AI to augment and then reduce the need for labor.
Imagine what the world will look like when less than ten percent of the population is able to design, produce and deliver 100% of the goods and services that the population requires.
What will be done with the other 90%?
Economists have been discussing this at one level or another since the 60's and the only thing that anyone has come up with is an entirely new system of wealth distribution. Well, that and just eliminating a whole lot of people which is known as the "Republican Scenario".
AOC is ahead of her time but not by much...
3
Good. Here's why:
GREED is truly the most terrible challenge of our times, and capitalism is its tool, its means to power and more greed.
Greed is a (contagious) mental illness, an unfillable hole, a hunger that denies justice, a brutal expression of broken egos.
Greed is having a million times as much as the poor and still feeling you don't have enough.
Greed consumes the earth without respite, and is a cancer on humanity.
Greed destroys us and our children and their future.
Greed is death.
7
@William
Greed isn't nearly as problematic as avarice.
That is the death sentence..
2
Funny how austerity works in a *free* market capitalism, eh?
2
According to many experts, we are over-populated for our resources and jobs. We have little control over the birth rate of India and Africa, but we could certainly do something about our own population problem. Traffic congestion, smog, polluted water, poverty, all these things are a result of too many people for our jobs and natural resources. Too many fish in the aquarium spoils the environment for everyone. Let's encourage birth control and more education about the real cost of having a cute little baby. There is a direct link between big families and world poverty. Tinkering with the value of a dollar won't solve the problem.
4
@Daphne - I don't see your point. The low growth and stagnation of Europe and Japan can be partially blamed on their aging population and not enough new workers. Economies need to be growing and wealthy to be able to deal with environmental costs. Also, without more young people, the pyramid scheme of our entitlement system (social security, medicare, etc.) will ultimately fail.
2
@Tamara T.
"Also, without more young people, the pyramid scheme of our entitlement system (social security, medicare, etc.) will ultimately fail. "
These two programs - and more - will actually be our salvation in the end.
What will change is the way they are funded.
2
@Tamara T.
You have just repeated the argument for unlimited immigration. Immigrants have more babies and will replace our old people. There is a point where even a country that is rich in resources will expand to the point where every forest and every bit of land capable of supporting life will have to become cropland. Think about what that loss will mean.
Think about climate change and the devastating effects of drought that were predicted and already visible. Ranchers in Texas had to sell their cattle because there is not enough water. Eventually, there will not be enough water to support our existing population.
If present trends continue, the U.S. Census Bureau estimates we will grow to 571 million by 2100,doubling our current number. We will lose the native forests and wilderness areas that many of us cherish. We will also see water wars as states fight over every drop. The world has more than 6 billion people, and some have begun to migrate because they can't live in their own environments. We need to pay attention and develop a real plan for the future, one where every resident has an opportunity for a healthy life. That will only happen if we limit our population.
3
Has anyone looked at inflation rate for low end vs. high end goods?
I'm guess a big disconnect where low end goods are reflecting an ongoing race to the bottom concomitant with low wage growth. On the flip side, I bet a cold beer that high end goods have seen normal (or above normal) inflation over the past 20 years.
5
@Paul
I guess I'm saying there are largely 2 economies that's why it's so hard to understand the macroeconomic situation
2
@Paul I agree with your observation. Here's an anecdotal datum. I am at the low end of the urban upper middle class in LA. One of my hobbies is old cars. This is obviously a purely discretionary, luxury activity. I purchased a collectible car in 1996 for $15,000. This was a purchase from a friend so it may have been a bit below market. Perhaps the market value was $20,000. Recent similar-condition examples have sold for a little over $100,000. This is not an outlier, but very typical of collectible cars. To compare, a 1996 dollar equals $1.60 in 2018.
3
@Paul -- There's not just two economies, there's two currencies, one is denominated in millions, billions and trillions, the other in tens, hundreds and thousands. These two currencies are walled off from each other by exponents, incontrovertible math that is the basis for the distancing cause by gated communities and condo towers, brilliant private education, the few who fly above us in the jet set and do not suffer the limits of national borders (Chrystia Freeland) and of course, the bailing out of banks and their best customers while the rest of us suffer the squalor of great recessions.
And when the weaker currency falters, it has no impact on the stronger currency, whereas the opposite is dramatically unequal and catastrophic: a slight hiccup in the stronger currency has and exponential negative impact on the weaker currency for, again, incontrovertible mathematical reasons.
Since the poorer folks suffer when their weaker currency takes a hit, they end up becoming less productive wealth builders, only trickling up the value of their lives into those of the plutocrats and their sibling oligarchs who slum it running the public sector.
They print money like the farmer bales hay, and it is of no use to them until they filter that money through us to make their fabulous world of mansions, yachts, jewelry, vacations and fancy dinners. My goats build my wealth only after they have eaten the hay: and when I take a side of goat to the market, they don't get the cash, only hay.
3
Perhaps an opportunity to contemplate is that learning to live within a slow-growth is in the public interest: the "new normal," as James Galbraith described it recently.
@John Davidsonthis idea means our children and the high rate of immigration (mostly illegal) will compete for the same amount of resources. Not my idea of a future that would be worth living.
@Mike. Mike, consider how grossly inefficient our uses of resources is now. That will improve dramatically as necessity compels changes. Not utilizing the energy from the sun as a main power source is bizarre. Moving people around in complicated machines which are on average 20 times the size of the occupant being moved is bizarre. Acquiring so many objects that we have to either choose larger residences or rent storage space just to keep them is bizarre. Eating food which makes you grotesquely obese and ill is bizarre. Your children and those immigrants will live far better than you do now.
2
@Mike ... when my daughter marries an immigrant who works harder because she doesn't share your fears and recognizes his value, her share of resources will be evenly distributed. I hope she works hard too. I think she will have a better chance of working harder because we celebrate the contributions of all immigrants and recognize that it's our job to compete with the best not the most privileged .... P.S. two facts: immigration has been declining for the past decade and so has growth .... hmmm.
3
Maybe, just maybe, low growth is all that is actually sustainable and to push for more is an illusion and a distortion. This does not negate the tremendous needs of the very poor worldwide, but it also clarifies that there is no rational reason for the top to get any higher.
7
Central banks were unable to prevent inflation in the 70's despite raising rates to record high levels (at least for the US) and they have been unable to do the reverse since 2007 despite reducing rates to record low levels - even negative rates in Europe and Japan. Economists refuse to face that fact that monetary policy does not control economies. Central banks can't even control the money supply and inflation, let alone employment. If governments can do anything about stagnation it won't be through central bank action. Monetary policy is supply-side action, which has more generally failed as tax cuts have not increased growth.
4
@skeptonomist: Interest rates represent the time value of money. The time value of money affects money velocity. Empirically, it seems that higher interest rates actually make money move faster, while lower interest rates tend to stagnate it.
Raising interest rates has always done an excellent job of killing inflation. It cuts down the demand until demand equals supply. Poof, inflation drops to nothing. Raising rates gets the job done, but has lots of side effects.
1
Low inflation is a blessing for the middle class, but less so if you are on a fixed income or a central bank needing more monetary wiggleroom. 1970s style inflation with the government campaign to Whip Inflation Now (WIN) and restrictions placed on employee annual salary increases via government pressure and corporate acquiescence to such, had serious negative implications for the middle class. Two percent inflation is just about right. But don't worry, the massive increase in annual federal deficits will ultimately be inflationary.
1
So why did the republicans and that stable genius leader force that tax cut on us? The net result was the worse single yr stock market performance in 10 yrs. They now claim deficits don't matter--until there is another democrat in the WH to blame it on. Why didn't they fund that wall that seems to be so vital to our countries future--that they tried sinking the economy for it? We have to get these incompetents out of power before they succeed in ruining us!
5
The new norm seems to be monetary policy that creates new electronic currency via central bank purchases of publicly traded securities, and suppresses money velocity with low interest rates to dampen inflation, as means to absorb bad debt from the panic of 2008.
@Steve Bolger How do you get a better understanding of this?
Central banks have been buying securities to increase money supply since 1905. They do not need an electronic currency, whatever that means. Lowering interest rates increases the money supply. Without an increase in demand, the higher amount of money buying goods at same rate means a given dollar gets used in fewer transactions. That is a lower velocity. Nothing new here. Textbooks in 1925 discussed it.
The goal is higher money supply used at same velocity, a situation that exists with higher demand, I.e., growth. Central banks can only set the table. In one direction, they can pull food off the table, lowering demand and inflation. That is easy. Putting more food on the table though does not seem to be the way to spawn more eating.
1
Might it be possible to go back to the old ways from the 90's in computing inflation and unemployment and what ever CPI calculations that are used now?
In the real world or in my world inflation has been huge probably more like 10% every year so I buy less as it takes more of my money to buy necessities suxh as food, energy, health care prodcuts and services. The cost of entertainment has increased and my SS calculation has not kept up.
Just think if we would not of put policies in place that just served the elite class of the world and certainly here in the US? Ordinary people living in the real world would of had more spendable $$$ and the greedy millionaires which became billionaires would still be living the high life.
3
Gee, if you don't pry most of the world's wealth from the tax haven holes it's hiding in, it won't circulate. I have long said we'll never see inflation again until we see wage-pressure based inflation. That will not happen without a bloody fight to claw back political power from the global top 1% moneyed class.
7
Isn't low growth as the new norma, l at least for the already developed and economically successful world, just what Thomas Piketty prophesied in his book Capital? It's interesting that his arguments were lauded by many (and challenged by many) a few years ago, but largely ignored in explaining economic growth ever since. Irwin's article affirms that this may be the pattern we need to get used to. Despite this, most people, including media pundits, continue to look for short-term immediate causes for wage stagnation, low inflation, and low GDP growth and for ways to fix them. Perhaps we need to go back to Piketty and read him again.
4
We have a fundamental problem if the global economy is dependent on perpetual growth. Just as the earth does not have the capacity to support continued exponential population growth; it has finite resources that cannot support perpetual economic growth based on the exploitation of those finite resources. Jus as it is imperative that we attain sustainable population levels; we must strive for a more service based economy with less reliance on extraction and processing of natural resources. As AI and automation reduce the amount of labor in the manufacturing sector, we need to get more creative in recycling and repurposing what we have already extracted from the planet. We must steer more of our human efforts into services, creativity and the mental potential of humanity. It can be done, we have the imagination to do it. We only need the will.
9
In the meantime, can't they fix the potholes?
5
@TomTom...They have a blue ribbon group of Pot Hole Experts convening a Pot Hole Committee to appoint a Pot Hole Commission to produce rough drafts of a proposed Pot Hole Convention to be held in Aspen. All pending budget approval.
1
A lot of comments about getting the money from the rich back into the hands of the people so they can spend it again? Won't that money just find it's way back to the rich? Spending probably helps the economy in the short run but what will helps it in the long run? What is sustainable? Spending and consumption can't be the only way to lift all boats, can it? Taxing the rich is a start but how it this achieved? The rich are accumulating and saving more money then the total GDP of some small countries and thus have every incentive to see that governments aren't coming after their money! So with governments unable to get more money from the rich and the average citizen can only be taxed so much, where does this leave us? Governments scrambling for a new sources of revenue, i.e. the whole explosion in legalizing marijuana? Does this mean that legalizing other "sins" is not too far behind? Finally, if governments can't provide for their citizens, where are people to turn? Enter the cooperate benevolence of Apple, Amazon, and Google! Yeah, right! We'er forever bent over, tattooed, and ......
5
@Bennett: The private sector has a short-run focus, because we're all dead in the long run. The public sector has a long-run focus, because it is supposed to endure indefinitely.
2
@Steve Bolger
"The private sector has a short-run focus, because we're all dead in the long run."
Corporations may be "people too" but they have a unique advantage.
They can live forever...
1
Why is growth the goal? It should be the sustainability and the fair distribution of wealth. As some urban planning guru said, “ growth for growth’s sake is the ideology of the cancer cell.”
11
Urumqi, I’m no economist and I tend to function on the basis of common sense so sometimes I’m wrong. But it seems to me, that when there are new markets to be discovered and not much production serving those markets, high growth is achievable. When most of the world’s markets are now discovered and served by an ever increasing number of producers, growth is going to be slower. In an ever shrinking world where my department store doesn’t have to be within 20 miles but is no further than my computer, it seems most of the world’s markets have been explored and exploited.
If one thinks growth is slow now, consider what will happen with improvements in AI and robotics. More people need more things but robots need nothing.
2
@Pops -- You are too modest, your "common sense" is unassailable. Capitalism requires unending growth and as you point out, AI and robotics will be the end of growth since they need far less maintenance than do humans who get hungry three times a day, need to rid themselves of their waste at about the same rate, and also put quite a drag on the political economy because they're so needy, what with all the circus that must be staged to keep them occupied when not working.
3
@Pops...Robots are very high maintenance. They can't feed themselves. They can't repair themselves. They can't think for themselves. They can't reproduce themselves. They can't evolve themselves...These poor dolts are totally dependent on the most sophisticated system in the known Universe - the human brain. They are merely tools. So go homo sapiens, so go roboticus.
This all talk about economy and the effects on the jobs and wages is based on 20th century.
We are completing 2nd decade of 21st century, isn't it time to wake up?
These arguments reminds me early 20th century, consider the effect of what electric and internal combustion engine brought to on the table from horse carriage to steam engines.
We are entering artificial intelligence- robotics era, which is very limited value in late 20th century economy.
Current economics couples with this new technology, projections clearly indicating that many jobs will be lost permanently, of course new job areas will created but that never create same amount of human.
What you call stagnation is the true face of 21st century job and wages. we are right in the beginning of this transformation wait and see!
1
@su -- I refer you to my reply to Pops right above this one.
When was the last time we had a high growth - low inflation economy. I am guessing - never. The goal of society should be on improving living standards for all, not on some arbitrary growth number.
We are a market economy driven almost entirely by mass market consumption where consumer spending by the middle class represents over 70% of our economy. If we want a better economy and better quality of life one of two things must happen. Either the middle class spends more (unlikely, given stagnant wages are here to stay), or the other 30% of the economy (government spending) expands (like on better infrastructure, healthcare, education, etc. that will improve all our lives).
The rich are rich because they sell products and services to the middle class, not because they sell to each other. Warren Buffet does not own a smart phone, and owns only one very old television. So, in time, even the rich will become fewer and less well off if the middle class continues to dry up. The rich cannot remain rich if the middle class dies off in a mass market based economy.
7
Demographics are all. Large numbers of people over 50 lead to stagnation. Japan was the first to demonstrate this phenomenon following the crash of 1989, and now many countries are facing it.
China is the worst, as their population of working-age people aged 22-59 is projected to fall from 800 million to 400 million over the next 80 years. They will be the epitome of no growth, no inflation, 0% interest rates.
5
Neil - This is one of the best analysis I have seen in some time - perhaps years. I have been posting for some time that folks don't seem to understand what happened in 2008. You can't recover from this stuff. There is no monetary foundation; everything floating on an unanchored sea of credit; "creditopia." All driven by cheap global labor which fuels supply beyond any possible demand for goods and services. All a product of post WWII boom-bust economics. You nailed it.
7
Our addiction to economic growth is unsustainable...just ask climate scientists. A totally sustainable capitalism is the ONLY long term solution.
10
I thought Trump and McConnell’s tax cut was going to deliver booming economic growth. Or is this just another GOP lie? Oh and then there’s Trump and McConnell’s shutdown, which is anti worker throughout. When will Americans learn? The GOP really only helps the rich?
15
Everyone should read "The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War", or at least watch the TED talk. It helps master the obvious.
4
There is nothing wrong with your headline.
It's called the Obama economy, low boring slow growth, low inflation, low unemployment, getting out of the greatest recession in history etc. etc.
What would you rather have Neil, massive upswings in the economy like the roaring 1990s followed by the greatest recession in our history?
While reasonable people can debate certain aspects of the Obama economy model, it was the greatest eight yrs. of slow steady growth with no major downside in modern history.
11
@Paul...The $10 Trillion in national debt added to the $10 Trillion debt wracked up in the Bush years was arguably a major downside. Two years ago the debt service [interest due] was $435 Billion, which constituted most of the deficit that fiscal year...The National Debt is an existential threat. If the Political Establishment - Democrats and Republicans - continue to do nothing but point fingers and scream at each other, the debt service will eventually exceed the GDP of the US. There is no mythical economic universe in which that scenario will end well.
1
@Albert Edmud- Thank you for your reply. Agree totally.
The national debt initially skyrocketed under Obama but it was needed to stimulate the economy after the Great Recession.
Then it started to go down and could have even more if the republicans agreed with Obama on cost reductions.
What Trump is doing is the opposite, starting with a massive deficient due to wasteful pentagon spending and a corporate welfare gift to the rich with no end in sight re massive, ballooning deficits.
1
I thought we were a consumer economy. If you keep taking money out of it via tax breaks for people who do not need the money and will just stow it away, somebody is not going to have money to buy stuff.
11
People are poor. They can't keep buying mass quantities while the oligarchs of the world do everything they can to squeeze even more.
As much as the Liberal media would like us to believe the whole world is like breakfast at Tiffany's, in reality it is some crusty toast and cold coffee for most the world. Media, I could argue, is the unwilling propaganda mouthpiece of our overlords.
It is tiring to read about fascist leaders everywhere and not one iota of new good ideas that could put humanity forward, except what we need to do is make the oligarchs pay for it all.
Where is the free education, healthcare, electricity? We have free military, wars and hate. I will argue that human societies are a failure. All they are for is making a few rich and everyone else scurrying for crumbs.
9
Er...some economists were pointing out lower growth was likely to a semi permanent phenomenon about 6 years ago while Irwin was bemoaning US growth averaging in the low to mid 2's.
2
If you want more spending, then people will have to be paid a wage meaningful enough to pay their bills, save some cash for vacations and educational needs, buy decent food, pay fair rents and mortgages...all without having to work 3 jobs. One good job will provide parents enough time to spend with their children. Wealth redistribution is blatantly required at this time. Wealth redistribution is the catalyst to bring back a middle class. However, what people will buy must be upgraded. Seeking more blind and wasteful consumer spending will not solve the outdated supply side policy that has produced horrific waste dump sites throughout the world. Wealth redistribution is the fund from which our schools can once again produce civic minded and well educated youth who may be able to solve the ecological disaster created by decades of unfettered capitalistic destruction.
15
"That helps explain why American workers’ wages have been rising relatively slowly despite a low unemployment rate. And it makes for a perilous time..."
No, it doesn't.
In these days of paunchy personal fortunes and share-holder gluttony, obscene tax policy and penurious social support, America's wages have been rising relatively slowly because grossly rich people do not wish to share.
They complain their returns fail to recognize the heroism and skill involved in their taking all the risk that drives our Capitalist dynamo ever forward.
Like that's happening.
When you create a culture in which no-one feels they have enough this is what you get: mindless rich Energizer Bunny guys who protest they don't have enough, will never have enough and, however much they have at the moment, it isn't enough.
The conditioning runs so deep, these heroes of commerce, this bedrock of American power and success, openly claims it owes nothing to the people or the country which spawned and supported them. Their self-perceived brilliance is reason enough to flout the rules, their personal excellence a perfect rational for breaking the money laws.
Now they're conditioning us for a massive lack of work due to automation, these rich old boys will be spending a ton of money on their personal walls.
Or they could wake up, grow a heart (or sense of self-preservation), and make provisions for the destruction they're preparing to rain down upon us all.
Its bad now; soon, it will get dangerous.
17
A significant chunk of the slow down is likely due to the end of Moore's law coupled with the absence of the appearance of any new 'must-have' devices. The only device that was 'hot' this season, the Amazon Echo Dot, simply empowers the one company that depresses both prices and wages across the economy.
1
The current "must-have" devices are tech that produces energy via processes that don't treat our atmosphere and oceans like Superfund sites in the making. Unfortunately, a relatively small number of mega-corporations (e.g., dinosaur utilities and fossil fuelers like Exxon) are allowed to wreck the livability of our only home for you, me, and our kids and those who follow.
There's a boom just waiting for sanity to break out in government and corporate circles.
1
There is nothing interesting or new to buy, nothing like the Internet of the 90s to invest in, no massive destruction like after WWII to rebuild. As a result it’s all shuffling papers and replacing the same old thing once it breaks, which is good business for a very few.
It seems like it would be a good time for some leadership that brings the nation and the world together with a common goal. Massive energy supply changes and saving the planet and its food supply come to mind. But, sadly, I don’t think humans are capable of such projects. Instead we’ll destroy the world, cause suffering and death for a huge percentage of the population, and then praise ourselves for raising the standard of living for those left behind.
13
Inequality isn't merely the result of a weak economy, it is the cause of a weak economy. We will be stuck in a deflationary rut until we have policies that massively redistribute income to those who will spend it. Only then will firms have the incentive to invest to take advantage of growing markets and the savings glut disappear. Rising wages will then spur an incentive for productivity improvements. Convincing the rich to accept any of this is, of course, the problem.
16
Government policies dictated by the donors created the ultra rich. Government policies can bring them down and create a more equal, prosperous and safer world. We just need the political will to do it. Unfortunately our politicians are owned by the ultra rich. We need a political revolution.
11
That observation bears repeating: rising wages bring productivity improvements.
We have no reason to think improved productivity leads to higher wages, automatically or no. The investment that leads to higher productivity is a capital investment; any return is a return on investment. Why should the investor share?
Higher wages, on the other hand — however caused — represent a higher input cost, something to be minimized by greater efficiency, i.e. higher productivity.
That the slump in wage growth and productivity growth coincide is no coincidence. For many industries, wage costs have gone down with globalization. If you want a higher return in capital, do you invest in a new, high-tech plant here, or move production overseas where wages are 10 cents on the dollar and environmental regulation nonexistent? The question answers itself.
We need not be passive passengers on the Laissez Faire Express. Corporations can be encouraged to pay more through the tax code. Taxes could be tied to wage inequality. Overseas production could be taxed at a higher rate to partially offset the wage differential.
It’s all a matter of policy. Policy since Reagan has put GDP growth first. Put wages first instead, and you’ll see a different economy.
6
Whether HUD-backed or investor/hedge fund financed, I hope there is complete reversal of the type of housing projects communities are being offered. Not all multi-family housing is equal and may not address other long standing issues that a community has faced. Most will be debt traps for communities and residents alike. While these big projects employ a lot of construction and trade workers, most communities have zero employment opportunities to enable a resident to afford the rent and utilities on new ammentity filled apartments. I see a scaling back on development plans in the foreseeable future.
Perhaps we need to adjust our thinking about what constitutes "low" growth? The world economy grew by 3.7% last year. Is that low? At that rate, global economic production and consumption would leap by around 40% in just one decade, at a time when our environment, our climate, our oceans, and thousands of threatened species are already reeling from the impact of existing human economic activity. Perhaps a wiser species would be seeking to reduce consumption, not accelerate it.
9
Deflation is where the value of money itself is falling- why would this be? Debasing perhaps or a thousand accounting tricks that skew the numbers or soft drivers of innovation could lend a brake.
There are many reasons why problems bedevil world economies- but remember economies are local. You might be doing well while your neighbor might be at the edge of bankruptcy. There is also the 'value added' imperative that seems to be grossly overlooked. An old Andy Capp cartoon shows Andy refusing a job when the potential employer says he'll only 'pay him what he's worth'. So the big metrics that show low growth can be attributed to a myriad of sources from corruption to mismanagement to ten thousand choices made by consumers and producers every day.
Diversify and keep some rainy day funds because there will be bumps in the road.
2
Imagine a tax system where NOBODY in the U.S. could accumulate $1 billion. Remember, a billion is one million times 1,000.
Could we all live, work, play, and be happy if the wealthiest among us could accumulate up to $10 million before a 90% tax rate applied to earnings and assets above that amount?
Could our 1% elite wealthy be happy if ALL Americans had decent healthcare, safe infrastructure, quality education, proper nutrition, and a healthy environment to live in?
Wouldn’t this be a much kinder, more noble country if we all had the promise of adequate retirement income after working full time for our adult lives?
All of these things were true when I was a boy growing up in the late 50s and 60s. They can be true again. But not if a single American family can acquire $170 billion. Not if our President has a Cabinet staffed with billionaires.
You can’t win at Monopoly if one of the players starts out with 99% of the money from the bank.
17
@Scott F
Your Comment like many others , highlights what it is this problem about.
But In this political environment in US and World doing some common sense things is practically impossible.
As the article mentioned that we are in Sisyphus situation. The repeats itself every time it gets more and more painful.
1
@Scott F My thoughts exactly. Income inequality and wealth concentration (that is, capitalism) are the problem.
2
None of what you want happens if the entrepreneur does not first get the billions for you to take. Without the opportunity to get the billions, he or she does not create the process to generate the billions. By definition, you are more equal, but do not have any more money to fund what you want than now.
These firms are not digging gold out of mines and hiding it. The government can always get some shovels and dig up the gold if that were the case. That is not the situation in 2019.
1
Growth in measured by changes in the GDP. The size of the GDP measures the power of an economy. So, we are looking at both GDP size and GDP growth.
GDP is related to population size and growth. The higher the population the higher the potential GDP of a nation -- since more people are available to consume the goods and services. It is also related to inequality as stated by Piketty, but leave that aside for a moment. We all know that if a population, no matter how large, does not have the wealth to purchase products, the GDP tanks or it becomes highly dependent upon exports which is a risky variable -- China as an example.
China's population is around 1.3 billion. The US population is around 325 million. So, China has a population 4 times larger than the US and therefore, over time, will have a much large economy than we will -- all things being equal. In addition, the population growth rate of the US and all the European countries is below the replacement rate. All our populations are ageing. As the baby boomers die off, our population will dramatically shrink (assuming no immigration which seems to be the object of this administration). As the population shrinks so does the GDP and the GDP growth rate will become negative. So, we may have a balanced economy but it will be smaller.
Limits on the number or characters per post means that a larger discussion is not possible. But, there are lot more variables which indicate slow growth in the future.
2
@Joseph
What I don´t understand is how on a global scale with an ever-growing population that results in the need for more housing, shelter, and basic goods, that the economic growth would slow. It´s not like we´re all becoming environmentally aware and dialing back consumption. Please shed some light on this.
1
@Rachel
Light WAS shed on “all this”. Piketty laid it all out cleanly and clearly. THAT is the reference bible that explains it all to us. Up to now, that is. It is not a book to read and forget about it’s plainly obvious facts. This article addresses the present, but the global processes in history hold important information. That requires frequent deep dives, or refreshment of Piketty. Then relax, if you can.
1
I'm no economist, but could it be that the wealth concentrated at the top end of society is being hoarded instead of spent? I mention this because my parents used to tell me that plenty of people had money during the Depression, but they wouldn't spend it, which contributed to, if not caused a deflationary spiral. Like many, I am baffled as to why wages are still stagnant. As my grandfather the grocer used to say, jobs are created when the average man has money in his pocket that he's willing to spend.
14
For 40 years in business I often advised the B-School crowd of self-entitled geniuses, who were really just financial analysts with pedigrees. This type, not genuine entrepreneurs or visionaries, have ruled the roost, and mostly to serve and impress the Wall Street powers. So here we are: They have helped extract the wealth while the rest of the world put their faith and hopes on the wrong horses. I know the richest must find it all amusing, from their ski lodge perspective. Me, not so much.
14
Another good article by Neil Irwin confirming that the world economy including the U.S. are headed for slow growth or stagnation in some areas. The big picture is that our capitalist economy goes between very occasional peak growth and then stagnation largely because of the imbalance between supply (capacity) and consumer demand. Accept that global capitalism at its bottom is totally irrational and even with central banks and governments trying to mitigate this the irrationality.
How is our world going to deal with climate change, the massive international refugee problem, and continual warfare in many parts of the world if we can't even get simple modest economic growth for all the countries of the world? We need to adopt the socialist aspects of central planning and begin to radically change our capitalist system starting with the 70% income taxes for the rich and the wealth taxes proposed by AOC and senator Warren.
9
I never understood why capitalists were so obsessed with growth - with it comes the inevitable burst afterward, leading to a constant roller coaster ride.
Low growth, low inflation? Sounds like a solid plan for long-term economic stability.
9
@Jim
Yes but Rich cannot harvest a good hay in that situation.
When it is cornered a Free market rampant capitalism person on TV after 2008 crisis, he literally said, to interviewer, This is capitalism, crisis happens , you have to get used to. You cannot complain about economic crisis. That is how rich capitalist operates.
When economic models see corporate wealth as a goal over rewards for increased productivity we get an increase in the concentration of capital.
May we be facing sluggish economic conditions due to too much held by too few?
Didn't the article mention demand was down? When Most employees live paycheck to paycheck, how about giving more to those that spend it all. Demand jumps and the banks end up with all the money a month later.
3
@Dennis Speer Every single left wing respondent to this article cites income inequality, and not one will acknowledge its source - a dramatically increased labor supply, resulting from both feminism and the globalization of immigration and outsourcing. Instead, you buy the Democrat Party scam that higher taxes will solve everything. Which makes you the biggest dupes on the planet.
So economically speaking, we aren't going anywhere fast. We are stuck. What will be interesting to see is how workers will respond to an economy that continues to reward the wealthy and corporations at the expense of the workers. People at the top say over and over "We hear you and we are going to help you". But everything points to all the economic gains going elsewhere. Oh there are more jobs. I think that was inevitable. But what seems to be happening here is the middle class earnings minus inflation curve is flat or might as well be. The real question is what these people will do and who will they turn to once they realize there really is nothing in this for them. When wealth and corporations come calling, asking for help, the answer is always a resounding "YES". When the masses meekly ask "Could I please have some more?" . The answer is always just a few table scraps. Along with a "We feel your pain". Eventually, not sure when, the masses will stop being meek. For when you sit painlessly at the top and only offer feigned empathy, eventually it falls on deaf ears. Then the masses won't meekly ask, they will demand. For widening disparity can't go on forever. What will wealth do when a crowd shows up at the gates of the estate? More importantly, what will leaders like Trump do to get them to disperse?
12
@walking man If you could step outside of ideology, and understand that the cause is immigration and outsourcing, you might begin to see reality. I'm sure you think that increasing income taxes will solve everything, while keeping the borders open. And you would be dead wrong.
The world is awash in supply side economics where the investor class has taken more and more and more of the wealth until their is insufficient demand to spur growth.
Instead of keeping workers poor, hungry and insecure so they will work for peanuts we need to keep the investor class poor, hungry and insecure so they will invest their money in productive endeavors, not in more empty vacation homes and therapy ponies.
13
@Ronny Do you understand that immigration and outsourcing are the primary cause of the devaluation of labor and exploding income inequality?
1
So called globalization has many tentacles. Like taking a prescription medication, most often side effects show up years later. One thrust of so called globalization, with a component of shifting labor destinations brought down average wages, but was framed as an interconnected world nicely co-ordinated. The US, China, and the EU. Our economy is known to rely on most of our GDP by consumption. Hundreds, of the large demographic of big consuming so called Boomers, are retiring. Most of their massive buying of stuff is history. With all western Democracies governments being called into question, by so called populist , it is clear, something isn't working. The debt hanging over major economies , tells one, taxes have to go up. So can our fed simply print more money ? Trumps forthcoming Impeachment pre-occupation will paralyze our swamp until that is resolved.If the Brits do get out of the EU that will lead to added confusion.
2
More stuff made then demand (money) for stuff = deflation. Look at how our whole mentality is to make more “stuff”......
4
Irwin points out the forces that held back the economy for 11 years have not gone away. This has been apparent to us working class types for the last 11 years. What has also been apparent is that nobody in the chattering classes gave a rip when Reagan exported working class jobs overseas or to Mexico. It was only when the white collar workers were affected that it became a concern.
The structural problem underlying the current malaise is that energy is more expensive. This is not reflected in price but in the lower EROI (energy return on investment) of global oil supplies. The good days after WWII were driven by cheap oil energy. Now that oil energy is not so cheap (in terms of EROI - not inflationary dollars) the money supply has to be spread thinner AND the super-rich are hoovering up more and more all the time. It is still a good racket to live in the USA, but it is getting worse all the time. Instead of having 6-8 times as much energy at our disposal as we needed in the "Go-Go Sixties" we only have 3-4 times as much. From the American perspective, one only has half the resources and lifestyle as when times were good.
So what to do? We sold our farm and moved to France. I will continue to grow most of our food and we will continue to live an abstemious life. Meanwhile, the US will descend into chaos - even though there is plenty for everyone.
3
We’re due for an old fashioned recession and it’s coming.....
@There
Agree. No Fed has ever figured out, with current theory of monetary policy, how to avoid periodic recessions.I have lived through and worked through, numerous recessions. A recession of course isn't pleasant, but recessions cleanse and weed out out the weaker players, and that of course cost jobs. We rely on our GDP from consumption , i:e. buying stuff.
2
@There
A recession will look like a picnic compared to what's coming.
@There You want it to happen because Trump has an (R) next to his name. And that kind of thinking, from any angle, is why real people suffer.
So maybe there's still hope: "The low-growth world was not just a phase. It’s the new reality beneath every macroeconomic question and debate for the foreseeable future."
The absolute necessity of never ending growth -- the ever increasing the rate at which we must take the ecology, turn it into the economy by using it up for its mass and energy value before scatting it back out onto the earth -- is our anthropogenic demise.
Capitalism is the worlds greatest invention ever, for better and worse. It is a form of economic engineering designed to build wealth using the masses of the world's people as worker-consumers, and it then concentrates that wealth into the fewest pockets. And in order for this racket to run, it must constantly grow or else shut down.
So without question or much consideration, the conventional wisdom never questions the wisdom of never ending growth, and it is the presumption that slow or no growth is so awful people world wide will suffer mightily.
Well guess what youse guys: the endgame is by orders of magnitude going to be worse than re-engineering a steady-state economy, the collapse of our societies with ecological degradation, pollution and scarcity of natural resources amongst a growing world population will be the end of us all, and surely like a perp who knows the end is nigh, the chances of sparking a nuclear exchange when all heck has broken loose will be of no surprise nor concern to those already suffering punishing poverty and sickness.
5
@Chris Ahh, yes, dystopia. A number of years ago, I said to some of my friends that the Four Horsemen were saddling up and my friends castigated me for my negativism. But, what you say is true. Inequality, climate change, and exponential technologies will exert a major strain upon the economies of the world. Climate change will induce major movements of people (and we are seeing early ramifications of it today at our southern border and in Europe). It will also create havoc in all the food growing regions of the world. We are beginning to see that also -- especially in California. So we will have climate change refugees and climate change wars as people fight for scarce resources. Inequality will stifle our GDP since people will, sooner or later, run out of credit cards to buy the needs that their salaries will not. So, they will stop buying because they will have run out of cash. The rich, in their private enclaves and their ability to escape on their million dollar boats, will survive this longer than most. Exponential technologies will eliminate a massive number of workers. And, although the folks at Davos are urging everyone to "upskill" as they call it, this will not happen since even those GM workers who lost their jobs were not successful at "upskilling". They all down-skilled to a lower weekly salary. More and more people will be tossed into the GIG economy which appears to be the end point in the Adam Smith economic theory.
1
@Chris Ideological possession like yours is the problem. The only people who have the luxury of pretending environmentalism is the primary concern are people who are already rich.
Why the obsession with growth?
Growth is not required for a healthy economy.
What is required is stable intelligent government.
What is required is living within means and sensible borrowing.
Where growth or future expectation is being used as a means to justify fantasy debt, thats when you are in trouble.
Sadly you have trump and his magic balloon of massively escalating debt and trade wars paid for by the American taxpayer.
Bleeding you dry.
At the same time as the stooge has done everything he can to do over world trade.
Mainly so he can bludgeon his way into other markets by force and try to control competitors legitimate business.
A one man army undermining the world economy.
When I hear his supporters saying 5.7 billion for a wall is a drop in the ocean of your rampant debt, I can only conclude his base must be more extremely wealthy than they look at his rallies. Thats small change to them for a fantasy random uncosted, unstudied wall? I guess it must be.
Happy trump days.
3
@Richard Bradley Obama exploded the debt far more than Trump has. And I'm sure you criticized that just as heavily, right?
Ah yes, once again we are subjected to the ridiculous theory that inflation is somehow good for the economy, instead of the tax it really is.
1
Low-growth is what we get when a minority of investors and executives are upholding the transition to a low-carbon economy while governments are dragging their feet. Cooperation between the public and private sectors is what we need, if we want to succeed, and it is not happening. No wonder we are getting low growth.
3
The die is already cast, and has been for over ten years. We sold our economic soul in ‘08 to prevent a massive collapse, and now the devil wants his due.
1
Neil Irwin knows of no model that explains the effects of obscene concentration of wealth into too few individual and institutional hands?
Or does he have a model that says wealth inequality and excessive concentration do not matter?
Does someone somewhere have a rationale of why the work of economists like John Maynard Keynes has been totally discredited? Do this rationale convince us to ignore the warnings of the1930s and 2008?
In the 1970s it was high school economics. When too many workers don’t have enough money to be consumers, the wheels of the economy gum up and slow down.
But I guess we know better now. Huh?
3
@Joseph F. Panzica
Supply side economics has been debunked many times. But, no one has been able to debunk Keynes. We got to supply side economics with Reagan and Alan Greenspan, who was an acolyte of Ayn Rand. Most of the Republicans love Rand because she personifies the elevation of Greed to the level of a sacrament. We have been on this Ayn Rand-ian trajectory for over 45 years and it has created massive wealth in the hands of a few and nothing for the many. This is our new-Gilded Age. The last Gilded Age led to two world wars.
4
@Joseph F. Panzica . I agree with Mr. Panzica. In addition , a person has to consider a relatively low inflation rate and low wages for the past thirty years. The low inflation plus the spikes in fuel prices and rents are making themselves known to the masses of workers daily. The high productivity or the American worker has not been rewarded. Where is the incentive to do more for less and less?
1
@Joseph F. Panzica Do you understand that the growth of inequality in recent years had been directly driven by "globalization", which provides access to cheap foreign labor through immigration and outsourcing, improving profit margins through cost cutting while depressing revenue due to reduce demand on the part of employees who are underpaid due to foreign competition?
The problem with this article is that it focuses almost exclusively on financial markets. It is good that the NYT (finally) acknowledges that the economy has been depressed for a decade, now that Obama is safely out of office. There was no recovery, and the last year has been the first sign of one.
The problem with the focus on the markets is that they have been distorted and inflated for ten years through monetary policy, and they grew while the economy didn't. As a result, they've become detached from the rest of the economy. A good sign would be reduced profit margins due to increased pay - which may not be good for stocks, but is good for the economy.
The most painful and cruel thing about the "resistance" to Trump is that he is actually pursuing policies that are improving the economic lives of the middle class, for the first time in years. Having all of that scuttled by the insane hate of his detractors, followed by the installation of some worse Obama clone, could truly be the final nail in the coffin for the country.
1
Neil, I hope you see this. Tremendous job. Thanks for keeping to the modern NYT reporting style of taking complicated topics and making them more easily understood!
3
I found this very predictable 10 years ago. While we blamed the banks for all sorts of wrongdoing(not incorrectly) the economic collapse was based upon the lack of confidence of who was going to buy our homes where we thought we invested our life savings when people couldn’t afford to buy new homes and we were competing with rising countries and with interest rates not reflecting the deflationary stresses, the housing market was unsustainable. The derivatives drained all the insurance which is ultimately the taxpayer and too much was dependent on a higher and higher percentage of our income going to housing. The interest rates were overinflated and they still are high given the deflationary pressures and pushed up by deductibility of interest payments and the inability to refinance underwater loans so banks could overinflated their worth and ridiculously sell their stock when they needed a bailout. Put the bankers to work figuring out how they can sustain the world economy with vanishing interest rates. It takes more attention to the investments. They’re smart. Don’t just let them do magic tricks where they are selling worthless pieces of paper to less suspecting institutions or those paying a lower price. The government could have forced interest rates down 10 yrs ago but now it would take creativity to do it legally.
So do we just take the all the wealth from the people that attended Davos at least once for the past twenty years? Won’t that work?
1
Since humanity is in population overshoot with respect to the Earth's carrying capacity, the question arises: When will political-economic systems be reconfigured to account for the inevitability of "outright contraction"?
2
@Toby
Actually we are not in population overshoot. All populations are diminishing. This may not show up in demographic projections because the demographers have not taken into account the reduction in the population replacement rates. They soon will as the data shows up. But all of the advanced economies are showing population growth rates below the replacement rate. In other words, we are not making enough babies to keep the population steady. Add to this an ageing population which will soon die off and that leads to lower populations in the developed nations. (And, lower GDP, by the way) The populations growth rates of the undeveloped nations are over the replacement rate but even they are having fewer babies than they once had. The major population centers will be in the African nations just as long as climate change does not kill them off through starvation and war. Climate change will reduce the earth's "carrying capacity" and that will lead to massive people migration, starvation, and war until balance is once again achieved.
@Joseph
"All populations are diminishing" is not accurate. I am not talking about different demographics (developed v not), just the global total. I cannot find a single source that claims the total is declining. The *rate* of growth is declining, but that's a different metric.
I do agree that "overshoot" is a broad term. My statement concerns whether the current (even assuming no more growth) population can be maintained over time. Perhaps it could be if we all stopped consuming so much energy and natural resources. I.e., the "do we need live in caves" metaphor that is often thrown at people like me. Seems unlikely.
I base my opinion that we're in overshoot on the global ecological system and how it functions with 7+ billion people. Systems ecology principles tell us that the various problems we have created due to our economic activity—global warming, biodiversity loss, and non-human (and ag) biomass diminishment being three main ones—will not be solved without a significant reduction in human population. In other words, we are beyond the carrying capacity of the earth to sustain our current population.
The inevitability of a population decline (regardless of how it happens) means we are *by definition*, in overshoot: "overshoot occurs when a population temporarily *exceeds* the long term carrying capacity of its environment."
Economists should take a cue from nature. Nothing grows forever. That is an unnatural, unsustainable, point of view. All systems grow, flower, then decline to some nadir, an acquiescent level from which growth starts again. Just use the metaphor of a garden.
We seem to think we can grow forever. And given the pyramid scheme nature of the economic structure we have built this isn't a surprising attitude. But it makes the inevitable decline all the more painful; especially the longer we strive to forestall it. Too bad more economists aren't gardeners. I'd be curious to see the (economic) logic of one who is. Wouldn't you?
John~
American Net'Zen
5
@John
Hey John , reminds me of the old saying , "what goes up , must come down", unless of course Nasa can figure out how to put our massive debt in orbit so we won't have to pay it off. With whats left of 70 million Boomers, now retiring and tapping into Medicare , the system, (along with our occasional war somewhere) wow, talk about debt. The final curtain of post WW 2 has come down. So maybe Oprah as President, is the answer.
@Dan Green: Indeed. But something will give. It has to. I was watching/listening to a comment made earlier today by a guest talking head on CNBC...
"Our national debt is setting up to EXCEED our national GDP."
Think about that one. Can your family run itself (for very long) like that? Can any country?
I've seen it written, and maybe we shouldn't be surprised, that some of the elite cognoscenti have been discovered to be holding joint citizenships in such places as New Zealand. I'd say they see an iceberg dead ahead for the good ship America....and they've got their exit strategy in place should the worse case occur, eh?
John~
American Net'Zen
The author seems unaware that the US started an illegal trade war with China in mid-2018, damaging growth prospects for China's economy, the US and indeed for global growth. No to mention the damage to global supply chains. And surprise, surprise recession comes nearer.
5
The paradox of this is that high growth equates with accelerating environmental degradation and climate change. The fundamental economic model of the world assures our doom.
9
@D Priest
The economic model is consumption.Some 70% of US GDP, and now our Chinese friends, with a state controlled economy, are pursing the same model . Rely on Chinese internally for consumption, to replace exporting slave labor. No world power ever talks about living within their means. The entire parade is built on debt.
The real story of the rising inequality is seldom told. All that billionaire money must be invested and bring a return. And so housing prices rise and they try to get all kinds of government services privatized for similar reasons. The end result is that the consumer is spending a lot on things that would be cheaper if there was less inequality.
14
@Wim Roffel. This is the simplest and strikingly accurate comment in the entire posting. All I would add is that we have "inflation", given it is a monetary phenomenon. Wim just tells us precisely how this shows up in "monopoly money" housing prices. Measuring inflation in a "basket of goods" is nothing but a farce. Those in the working classes ( income inequality) has had their resources siphoned off by the rich for decades. Artificially low rates only serve to postpone the inevitable. They have not changed a thing.
4
@Wim Roffel
Side effect of masterfully managed, so called globalization. So so few benefited, and boy did they benefit.Use slave labor , incorporate in a tax haven, and stash foreign earned revenue, in a tax haven.
2
“an aging work force in many of the biggest economies, weak growth in productivity, excessive global savings and industrial capacity, and a shortage of worldwide demand — haven’t disappeared.” These can be translated into the reluctance of owners of capital investing in production because there is no much profit to be made into making real things. The slowing down in China means the same. Thus speculation in money capital is what remains to induce illusions in profitability. That is a paradox that mainstream economists do not seriously address as they focus on the phenomena of gdp growth, savings, and industrial capacity independent of the main driver of economic growth and productivity: profits. So please address that question: why is that increasing investment in state of the art production (technology, machinery, etc) tends to reduce profitability in the long term? Which is exactly happening in China. The answer is not in behavioral economics, effective demand, monetary manipulation, and other neoclassical gems because they only deal with phenomena. Look deeply into what produce value: human labor
9
@Enri
Maybe when we value clean air, clean water and renewable energy as products, things will change.
1
Low, sustainable growth should be our goal.
The problem is that the current economic system that redistributes the wealth generated by all to a small group of the wealthiest people is by and large a pyramid scheme that cannot be supported by low growth.
16
Very good point, Celeste. And “growth” is not planned according to human needs but the needs of capital ( the bottom line)
6
What's scary about the world economy needing macro support? It is scary from the point of view of the Chicago school of economics - but otherwise, it is the reality of economic growth. Large public investments, that is the way to go. Cut taxes via demand side economics - lower taxes for the middle class, much much higher taxes for the wealthy. The trap we are in is basically - we can't support an outsized plutocracy and still continue to have New Deal and Great Society programs. You can't have a fiscal policy like Hoover in 1929 and a guarantor state like Roosevelt in 1936. You either have plutocrats, a decaying middle class and working class, or you ban the billionaires, regulate to make sure the compensation spread in large companies is dramatically tightened, and you direct work towards salvaging our beautiful and liveable global environment.
18
@rwgat agree with your views on this. We could use a spend stimulate rather than simply taxing the wealthy. The responsibility of wealth should be to pay your tax by spending a portion of your wealth and by that benefit society. This does not diminish the resposability to pay your share, just how you pay it.
Even as it is so often predicted that in the formative 21st century economy 'creativity' will become the important human asset, there is little evidence of that mental imperative in prevailing economics and (in this instance) the commentary of Neil Irvin. At the base line all that is foreseen is a global world population resembling that of western (modern) economies only more so. Summed-up it comes to growth. Everywhere cars, swaths of highways, lots of ownership of comfort appliances, retailers swamped with goods...and happily the measure of prosperity GDP/capita at 3+ percent. (Poor China with declining GDP at 7 percent.)
"Despite some promising signs of vitality during much of last year, issues that have dogged the world economy for the last decade — an aging work force in many of the biggest economies, weak growth in productivity, excessive global savings and industrial capacity, and a shortage of worldwide demand — haven’t disappeared."
Unfortunately the measure of "vitality" within the population is some mythic abstract conceived by the Oxford and Chicago schools of economics. A quick look at how that vitality plays out. It is not the aging population that must be lamented. These create jobs by the millions. Health care employs 17+million.
Dependencies arising from latent health risks: unanticipated consequences of technology; impulse consumption and indulgence from risk-prone pleasure goods; and, harmful/ detrimental social pastime activities, is the growth.
4
The world is awash in excess labor.
Most jobs require relatively little training and are at risk for automation.
Why should wages rise?
4
Wages have increased (relative to those in the west) in China while those in the west have remained stagnant because of the same reason the cheapening of products made there and consumed in the west.
1
@maguire good observation. The answer lies in the accounting mis-classification of humans as labor and machines and buildings as capital. It should be the other way around. Reclassification in this manner will see a surge of capital growth and productivity and wealth the world has never seen. Wall Street will need to start measuring and reacting to human capital markets and companies investing in human capitals as long term assets will see their share values grow.
1
@Enri
In the West wages have not just stagnated they have been eliminated.
There are certain industries (start with textiles) that essentially don't even exist in the US or other Western countries.
So what is left for workers at that end of the skill spectrum= not much.
The understandable reaction from this lower middle class sector of Western society is Brexit/Trump/Yellow Vest/Dump Merkel.
2
Distribution of income, not jobs, is the issue. Consider the world in 2100, or 2115: If the demographers are right, world population may level off at around 10B or 11B. Technology no doubt will have continued (hopefully mostly for the good) to drive "productivity." World GDP growth will significantly outpace population growth, and productivity defined broadly as value of products/services divided by the number of people will also rapidly rise (and in real terms, discounting for inflation). The number of actual "workers" as we now define work (paying jobs) will also decline sharply, meaning that strictly defined "labor productivity" will become a fairly meaningless construct. So, how will the value of the products/services get to the population, if not via wages (and/or "non-earned" dividend income for those holding stock shares, bonds, etc.)? Who knows how it will occur, but there will obviously emerge new forms of "social compact" (or social contract) policy that will reasonably and effectively distribute the income. "Redistribution" is a term that won't be used, replaced by new terms that explicitly recognize the realities of the new world economy.
The future situation (as summarized) is easy to lay out. How we get from here to there, in fits and starts, hopefully no terrible wars thrown in, will be the history of the rest of the 21st century.
5
Technology innovations are implemented to stay in competition. See article about G5 networks and fight over who controls them. As a rule it helps produce more in same amount of time thereby cheapening products. It’s only introduced when necessary and not an independent variable. Yes, when introduced less of human labor is needed, but since human labor is the only source of value each product is less valuable. Thus their cheapening.
2
I agree with the several commenters that it’s unnecessary, and in fact a waste of mental energy, to analyze the world economy in the manner Mr. Irwin (whom I respect as a professional, by the way) lays out. The basic problem, world-wide, is that all the money has gone to the wealthiest, and everyone else is left fighting for scraps.
France’s recent experiences with the Gilets Jaunes (Yellow Vest) protests, though, points out a fundamental problem with making real change at the global level. One of the main triggers (besides a meager gas-tax increase) for these protests was Macron’s slashing the “wealth tax” on the richest citizens of France. President Macron rightfully aimed to avoid the hazard of “capital flight” as many of the wealthiest in France simply shifted their assets to lower-tax regions (e.g., Belgium, Russia), but the resentment it’s sparked in the lower classes is totally understandable.
The very richest people, world-wide, have so many opportunities to shift (or hide) their money in low-tax havens, and they can afford the very best bankers, accountants, and lawyers to achieve those goals. Nothing less than a global tax treaty, at least among the first-world countries, can stem that economic bleeding of the masses. Sadly, everything President tRump is doing is exactly in the wrong direction, not just with the horrendous GOP Billionaire/Corporate Welfare tax cut a year ago, but also alienating allies that we need to implement such a tax treaty.
19
Low-Inflation is a direct result of more moving into the middle class, a good thing. Inflation means their hard-work means nothing by morning.
3
Barring events like meteorite strikes, serious climate change, or world wars, there are only two things that determine the structure of a society, demography and wealth distribution. As/If the planet avoids the cancer of unlimited population growth, the pyramid shape will be replaced with a more rectangular shape. This is good, but we do need to learn to live with a different mix of energy, ambitions, and pressures. We can do that, it's different but not difficult. The hockey stick distribution of wealth is a very different issue. That one has produced every major upheaval in recorded history. Monarchy was nothing more than oligarchs getting together and collectively insisting that their leader was appointed by god. That is the issue where the tax laws and other laws and public understanding will decide how it plays out this time. Our GINI coefficient is similar to what it was at the time of Louis XIV, and that did not turn out well. We must keep our perspective on what we allow as reasonable concentrations of wealth.
24
Gerald Hamburger is the CEO of a very large company, revenue in the billions. Gerald only makes $20 million/year and is very jealous of Jeff Bezos. So, Gerald looks down from his perch at the very top and says, "hmmm, I could make more money if I had more machines and fewer people." Then, in the name of "shareholder value," he lays off 10,000 employees.
Now, you talk about economic theory and inflation and deflation and all kinds of stuff. But, first the trickle down theory is an absolutely heartless fraud perpetuated by nasty people. Second, more people making less or no money, means what? Tell me. Hamburger gets richer and the economy gets poorer. Still next year, Hamburger gets to go to Davos.
Donald Trump just demonstrated, along with a few of his buddies like Wilbur Ross, just how much they care about people (800,000?) and how much they care about their wealth. Now the only problem with that is they are sucking the economy out of the economy.
36
@Ralph - I would only add, at the risk of pointing out the obvious, that the 800,000 figure representing American federal employees should be multiplied by the ripple effect that is completely lost on the Wilbur Ross set.
No doubt Mr.Ross is wistfully recalling the days of his youth, when you could send Johnny to the dry goods store to pick up a bag of flour and promise to pay when the crop gets sold or when we auction off old Bessie.
Rest assured that no owner of the means of production isn't wringing their hands in gleeful anticipation of the Robotics Revolution.
7
Clock the variables of growth from then and until now in the stock market and private sector to see the changes from past healthy growth to the stagnation now. What is different and what isn’t?
2
The policy that needs to be changed is not really in this realm. The nature of wealth (its concentration) and ownership are going to be the issues of the next 30-60 years. The capitalist promise of increased wealth is emerging. It is conceivable that every human on the planet could theoretically be materially secure in the next 30 years. Obviously that would require a very different understanding of who owns what. The rise of automation will have a profound impact on our understanding of wealth. Automation as the 'means of production' means a quantum leap away from the requirement of human labor to produce and to gain wealth. So who owns the machines? How ultimately did they get here? Who benefits from them and in what way?
These will be issues we have to address increasingly. We have to understand that this kind of transition is happening and work to make it beneficial to humanity. There are technology issues that could derail or accelerate that process. A sudden influx of sustainable energy for example, (Effective Fusion) would be transformative to accelerate automation. Climate change disasters, before mitigating technology can intervene, could mean even falling into some sort of semi-techno dark age and missing the promise of universal wealth that capitalism theorists have promised.
Al of this requires transition from an obsolete understanding to a new more relevant one. Interest rates in macro policy may not be relevant in 50 years.
6
@Trebor Exactly right. I have been calling the transition a "new social compact," this time for all nations. And things are indeed speeding up. I'd say that we'll know we're there within the 60 years that Trebor predicts, or certainly by the year 2100. Either we will be there, or we may very well self-destruct pursuing blind greed and "me first" insanity. Human nature as we know it may not be up to the challenge. But I am an optimist so I'll go for yes, we will get there.
1
The analysts, the pundits, the economists are locked in a black box without windows. The great rush to free Markets engineered first by The Chicago School followed soon by Harvard and others, leading to an unconstrained rise of failing firms and corporate concentration creating an unsustainable economic system rewarding the few and crushing the rest.
Down come growth rate up go barriers to entry and declining investment and somehow the notion slowly spreads all is not well. These events have been well analyzed in a growing list of publications but wisdom is blocked from legislators by their dependencies on ‘sponsors.’ Time to crunch things once again; somehow. Let a little light in.
11
By standard economic indicators, the US is experiencing the best economy in the lifetime of the vast majority of Americans. Leave it to the naysayers, as here, to always find a dark lining in silver clouds.
Yes, the rest of the world isn't doing very well, especially the Europeans, who have been shooting themselves in the feet for so long, and at so many levels, that they appear to be permanently crippled. But that's largely their problem and not ours. The US is extraordinarily insulated from the world economy; the World Bank lists our nation's economy as the 184th most dependent on world trade out of 188 countries. The world depends on a healthy US economy far more than we depend on healthy economies in other nations. And frankly, the health of other nations' economies really isn't our concern unless it affect us, and it largely does not.
@Chuck French
Oh, I'd say the economic health of the rest of the world very much concerns us. Not only does it provide us with a market for our goods, more important is the need to control migration patterns. No one tries to sneak into Nigeria, but millions want to come here. It's better for them and us that they are happy at home.
13
And while the rich get richer they get children
You are wrong, period. Our standard of living is in great decline because we can't keep up with costs of necessities. The pessimism of this time versus the 60s optimism is not an attitude problem. It's real.
Jiminy crickets, read Picketty already! The French economist’s seminal work illustrates with empirical evidence and brilliant social theory that a low growth society is the norm. We have grown accustomed to a boom-bust mentality following WWII, but growth rates throughout history have been much, much lower. A <2% global growth benchmark will be the norm.
14
@Philip
Your Frenchman’s analytics no longer sacred – the fate of many – see Jon Tepper, The Myth of Capitalism. There is a solution the restoration of Competition. Found again in Tim Wu The Curse of Bigness.
@Philip
The Financial Times found that the Piketty's work contains a “series of errors that skew his findings.” See article by Richard Sutch. Richard Sutch attempted to replicate his findings and could not do so. So it goes.
Too much flash trading, ides of February not promising.
2
I think the X factory here is mercurial moron, serial fabulist and bankruptcy junkie atop the world’s economic engine. Financial planning for the ordinary investor is way more roll of dice than due diligence. Buckle up.
3
Plenty of inflation in the high-end artwork market. Same with the ultra-luxury real estate ($238 million for one apartment?!). Maybe the problem with the stagnant world economy, and the slow growth rates for businesses, is that all the money is stalled out in the hands of a few tens of thousands of 'extremely high net worth' individuals, and they can only spend so much of it on ordinary things. The rest bids up marquee 'image' property of all sorts, and plays financial games of hide-and-seek with the tax agencies. Its hard to see how a real growth economy can exist when so much wealthy is concentrated in so few greedy grubby paws.
14
Undo the tax giveaway to the corporations and the wealthy.
All the the resources gathering at the top stimulates the stock market, not the economy.
Put 3 trillion into infrastructure so we really do make America great again, and create many, many goid paying jobs.
Then ou will have a better country and a better economy.
12
A huge amount of our national savings goes to that Mideast or other unstable places like Mexico or Nigeria indirectly and directly because of high energy prices. The US could insulate itself if we took over Venezuela and made it a state. We will end up supporting much of the population with the migrant wave...we deserve the resources to do it
Excessive savings?
What is this guy talking about?
We have never had so much debt in the world.
3
@dick west
Of course we have....the end of WWII.
1
Debt and Savings are two sides of the SAME coin. Because one man’s money saved ( and lent directly or via intermediaries/ banks ) is another man’s debt.
4
Well, doh! This is what you get when most of the profits produced by the workers go to the capitalist owners. It’s what capitalism does once it gets past those initial start up periods. When only a teeny tiny portion of the population hoover’s up the money, there just aren’t enough of them to circulate it back to the body politic. Result? Clogged arteries and eventual heart attack, i.e., depression or recessions.
15
@B. Rothman
It seems the ineffectual stimulus was forgotten as well. Putting all that money in the banks instead of wages does nothing for increasing consumption and economic growth.
7
You need to draw the links between austerity, low wage growth, income inequality, and economic stagnation. If people are living from paycheck to paycheck the economy can't go anywhere...
12
It appears that the parameters used to calculate inflation have little to do with normal prices for basic needs. Housing, food necessities have only risen relative to salaries. Eating the best healthy foods would cost a fortune. The reason many get by are sales and dollar stores. Even as a comfortably well-paid employee, I use coupons and eBay; colleagues frequent Costco; I have no debts because I rent, but my rent keeps rising. And I worry most that Social Security might not be around, or not worth much relative to inflation by the time I retire.
But much worse than my situation, are the federal employees, like a very large chunk of the American workforce, who live from paycheck to paycheck.
10
Just too many economies maturing at the same time.
1
Mr. Irwin,
I agree with your insightful and well-written analysis but it leaves a major question begging: what are the forces that have held back the global economy for the last 11 years. It seems to me that it would be useful to tease out the data to determine what these forces are? and what the activities and governance there are in the World that has created these mysterious forces.
As successful as the World Order has been since its creation at Bretton Woods, it appears that World economy has not addressed the needs of its participating population. There is still too much poverty, diseases that could be easily cured if our health care could be more accessible.
Amazingly, about 1 billion of the current 7.3 Billion population does not have access to electricity. I really don't see how we can expect to develop broad-based opportunity when the essentials of modern living are absent.
I have followed the "have and have not" argument for about 60 years and think that the growing concentration of wealth and income inequality issues for the World population seem to have gotten worse.
Then we have the huge problem of making the shift from fossil fuel energy to a non-fossil energy source for a growing population that is projected to grow to 11 Billion by the end of the Century when we know that continued use of fossil fuels threaten our very existence.
In my view, our holders of capital have not used it to effectively adapt our species and habitat systems to reality.
22
Maybe what is needed is a Copernicus revolution that transforms our understanding of how economics really works. We seem to be going through a whole bunch of contortions to allow current theories to work- sometimes- but remain confused by the counter-indications that have that inconvenient habit of poking up when things don't fit as we think they should. Think hello vs geocentric and the changes that shift wrought
3
I am always reminded of Robert Gordon’s ‘Rise and Fall of American Growth’ whenever I see articles like these. Barring the advance of flying cars, sizable meaningful economic growth is done.
2
Lack of wage growth is the issue that has dogged the economy since the early Bush presidency, or longer. The reason for this sorry state of affairs is corporations have stopped giving wage increases proportional to productivity increases. And they get away with it because workers everywhere lack bargaining power. All this is what happens when corporate leaders think their sole job is to earn profits for shareholders, who hoard most of their gains. A better idea is to start sharing more of the profit pool with employees, who will spend more, unleashing demand for goods and services and restoring growth to normal 3%-type levels.
15
@dt
This started when Reagan broke the Air Controllers strike; unions were under attack from that point forward. Unions had their own corruption problems; however, they did speak to wages, benefits and safety issues. No one is speaking to those issues now, certainly not office holders who are in debt to those who control wages and benefits. No one spoke up when manufacturers moved production and jobs overseas for lower tax benefits. Dollar Stores do not offer the same pay and benefits as did GM, GE et al. Workers are desperate to get what jobs are out there.
7
Deflation? Have you seen the price of real estate lately, at least in places where you can get a job? How can you say housing is recovering and inflation is low with a straight face?
Money and value are being transferred from working people to landlords and REITs. More for rent and mortgages and less for everything else.
Who says you need inflation anyway? Property speculators, who rely on it to improve their cash flow and cover their loans. Without inflation, to make money buying property, you'd have to improve it. Perish the thought!
14
This column is replete with bad news for the economy, but it isn't what the author says it is (that might be bad news too, but wait... there's more).
"That helps explain why American workers’ wages have been rising relatively slowly despite a low unemployment rate. " If American workers had the leverage that the column implies, they would demand higher wages and get them. Then, some of the profit would transfer from the bottom line to wages. That hasn't happened. Investors still have all the greater leverage.
"...an aging work force in many of the biggest economies..." Well duh! That's what happens when you slow down population growth. If we can't figure out to deal with it, we will keep expanding until we strip the Earth bare like a plague of locusts. Importing guest workers from more populous places fixes the economy but not the population, and ensures that the descendants of the shrinking group will be replaced by those of the expanding group. That's your grandchildren, folks.
Bottom line in both cases: We can't expand forever. We have to figure out how to shrink gracefully or Mother Nature will impose it on us, and I guarantee you that will NOT be graceful. We need to adapt of perish, and soon.
"Recession is the planet's way of showing us that what we are doing is not sustainable."
11
@mlbex
"If American workers had the leverage that the column implies, they would demand higher wages and get them."
While I agree with your pro-labor stance, I fear your suggestions about who has what "leverage" merely legitimize owners/managers paying as little as they can get away with, "what the market will bear."
I believe the discussion must shift toward notions of justice and fairness. The grotesque compensation ratios we see today, unprecedented in human history, with executives receiving hundreds of thousands of dollars per hour, only occurs because of the idolization of market forces largely enacted by the money-religion known as Chicago School of Economics. Suggesting market leverage can resolve the issue gives away far too much. Inequality must be attacked on moral grounds, including calling old-fashioned greed, callousness and exploitation by their proper names: greed, callousness and exploitation.
Those arrogating to themselves fortunes and power over humanity even a pharoah could not have imagined must both answer and surrender what simply doesn't belong to them, as a matter of moraloty, fairness and justice.
Those who would appeal to market forces to justify gross inequality should suffer the Darwinian consequences of their law-of-the-jungle outlook.
5
@Andrew: I didn't mean to legitimize anything. I just described the world as it is presently.
Owners and managers will pay as little as they can get away with. Only countervailing force can cause them to pay more. That force might be your moral objections, backed by the force of law in an enlightened democracy, it might be supply and demand, it might be the result of union activity, it might be all of the above. or something else.
I agree with your moral objections, but I don't see them providing countervailing force in today's economy.
My main point of my post is that we need to design something that is comfortable for all without requiring constant expansion. In such a system, it will likely be easier to get by but much harder to get rich by today's standards.
1
@mlbex
I think we aim at the same thing. But still, I stand by my conviction that the "logic of the market" must be 'countervailed' (to invoke your apt terminology) by moral principles basically denying any kind of "moral" authority to market process creating these concentrations of wealth (and power coming from that money) and levels of inequality. So, while you appear to look toward a hybrid set of forces including market process (and 'leverage') to correct the problem, I think market forces have little or no place in the solution because of te degree to which they create the problem. Appealing to them in a solution will likely only validate their effects in the opposite direction from what we want.
We certainly agree that the future must entail a market system more strictly constrained from concentrating wealth as has occurred in the neoliberal approach. But I think the solution must start with denying and Chicago-School-type "theologizing" of markets. Above all, the "moral" pretenses of that scheme must be attacked and obliterated as the crude "law of the jungle" outlook it really is.
1
All that verbiage and not a word about income distribution. Hasn't it dawned on Mr. Irwin, and those with whom he interviews that the lack of purchasing power on the part of a large percentage, perhaps the majority, of Americans is what is holding back demand and creating secular stagnation?
Of the sources of stimulating demand, investment depends mainly on expectations of future revenues, not merely interest rates, government stimulus means deficit spending, not Pelosi's PAYGO approach, and exports rely on foreign demand for US production, essentially on economic growth in our trading partners. None of these will arise.
A serious program of income distribution, of taxation of very high incomes through MARGINAL tax rate increases - not in average rates - and redistributing some of the revenues directly to people with high propensities to consume, i.e., the poor, and to a serious public works job creation program to get people out of the "gig" economy, will do much to offset the headwinds that are expected.
Who really benefits from the low growth trap?
14
Low inflation? Is Wilbur Ross the author? You must not have been to the grocery store later.
8
Lately, not later. Autocorrect is the bane of my existence.
3
Where do these economic statistics come from? For the first time in a decade we have less income than the prior year. We also owe the IRS instead of getting a healthy refund that we look forward to. Some employers are hiring,(although nowhere near what the statistics claim), but cutting everyone’s hours across the board so that a full-time job is now a part-time job which means that the threshold for employer supported health insurance isn’t met resulting in the loss of health insurance for many employees.
The tax cut was a stock buy back. And now the middle class is suffering under the weight of the burden of paying for it.
13
@SSkeer
The corporation I managed benefits for on the East Coast did exactly what you describe. We cut hours below 50/wk, which would have mandated health benefits. We maintained the Plans for acquired companies, but did not always renew them when they came up for renewal. Finally, our brokers came up with a company Plan which incorporated most of what employees wanted; then we put insurance out to bid. Our pension plan froze in 1989; the 401K savings plan match stopped as well. You could do just as well putting money in the best money mkt. plan.
1
"Low growth is better than no growth". There's nothing more wrong than this common sense. In order to achieve meaningful growth in an unstable state, the most realistic case is to have a large negative growth first. This is why I fully support the author's point.
Neil and Kamela Harris want to bring back the good old days of Jimmy Carter and double digit inflation/mortgage rates. No thanks.
4
How about slow, even growth with low inflation is sustainable? Why wring your metaphorical hands over a lack of a boom? After all, a boom is always followed by a bust.
We are dooming the other living species on this planet as our population grows and development expands. A model of economic sustainability coupled with environmental sustainability is the only moral course to follow. (Just sayin')
10
And dooming our species as well. Growth is dooming us all. Any economic model based on growth is dependent on population growth as its engine — and that’s absolutely unsustainable.
10
@B Absolutely and painfully, obviously right!
5
Develop the solar economy,,banks should not we wasting our resources on fossil fuel that are going to be killing us more and more all the time.The solar economy will provide lots of GOOD jobs..jobs that make ap erson feel pround to have..Just think no more oil wars to pay for..Poor Venezuela.To bad we destroyed Iraq for oil Iran next very costly without much return on the benefits side
8
@Jean Mcmahon: Poor Venezuela transformed its petroleum wealth into population growth.
1
Past successes, past failures, are not an indication of future performance. In other words, who knows what's going to happen next month much less next year?
We know only the present. The transfer of wealth into the fewest hands removes a great deal of flowing money from an economy. The more money that is stagnant the less money there is to keep an economy moving.
Mature economies are incapable of significant growth. At a "low" rate of 2% per year is exponentiated way beyond 2% per year in 10 years. Over time that is a fever. Since the large factors of economies, labor versus capital, ruling class versus government, rarely move in equivalent steps a slow economy has to create a fever that kills the body. How that death manifests is anyone's guess. But a body burning up dies.
The greater the expansion over time the greater a recession has to be. Recessions are the only antidote to economic expansions that turn into economic fevers.
What we know will happen:
There will be a recession sooner than later. The two mammoth economies of the world - in monetary and population size - will probably hit a recession together and plunge the globe.
A depression comparable or worse to 1929 will develop.
Dictators will arise, propaganda will enrage, war will rage, population will decrease, the rich will be forced to convert stagnant wealth into war funding liquid wealth.
The world might right itself after millions die.
5
Increases in income inequality shifts more and more of the economy's output to fewer and fewer people who have no need to consume more thereby decreasing overall demand. Rather than consume, the rich invest greater portions of their income into assets pushing up asset prices and lowering rates of return. Thus we have low interest rates and low demand levels.
Meanwhile back at the farm middle and lower income, not asset holding, folks get relatively poorer spawning populist political movements.
If the super and not so super rich don't get on board with real income distribution reforms soon we are headed to a significant economic and political catastrophe. Unfortunately the powerful seem to be pushing in the opposite direction. This is not just a USA problem. Most of the rich and powerful think they can protect themselves and their children. If they escape the catastrophe their children won't.
19
You know things are really bad when we keep trying to put words together to describe someone or something and every week we need something stronger and more vivid but still can't find adequate words to convey the evil.
Where's Marlon Brando hissing "The horror! The horror!" at the end of Apocalypse Now?
But for today, Mr. Irwin's "Low growth, low inflation rut" will do nicely to describe Trump.
9
We have to wean ourselves off "growth" altogether. We do not have the resources. We need a revolution in perspective.
First priority is eliminate population growth. Which means liberate women everywhere.
11
@Audaz
Permanent growth may--eventually--be unsustainable.
However, no one has yet invented a way for humans to live in a zero-growth world. The economy can only be doing one of two things: growing, or contracting. There's no in-between for such a complex system. No perfect balance point. And we can't "opt out" of the economy by bartering or living in vans.
4
People who are struggling to get by from month to month don't have the means to consume at the pace a growing economy requires. People who are afraid of losing their jobs to shutdowns, automation, or aging are not going to spend much at all. If a lopsided economy like ours, plagued with inequality, is constantly threatening people with joblessness and homelessness, that does not encourage anyone to be optimistic about the future. Many are scared to death to get older and find themselves without work or a roof over their heads, so we hoard as much as we can and spend as little as possible. It is way past time to recalibrate the American economic system, because it is destroying what was once the most robust middle class in the world.
26
@Allison
WWII produced that middle class; shipyards and military weapons production etc. Prior to that there were the rich, the poor, and a few in between shop keepers. We should not hope to see WWIII. Infrastructure spending is needed and would produce good jobs with decent pay. National health care would produce jobs with decent pay. More money put into R&D would be well spent. Decent political reps are needed to make the above happen. Corporations exist for shareholder profits, dividends notwithstanding. Most of Congress needs to be replaced with serious people; corporate legislative power needs to be reigned in by repealing the "corporations are individuals" Scalia Citizens United Decision. Corporations are financial entities; they are not your next door neighbors.
4
The author shows that growth in already-developed countries, such as the U.S., members of the EU, and Japan, is slow (though, since it is not adjusted to per-capita numbers, the U.S. with its growing headcount will look better than Japan!).
But China grew 6.6 percent last year, the article says.
It sounds as though the less developed countries are catching up.
If you're upset by inequality, shouldn't you be cheered by the numbers presented in this article? The rich countries are getting only very slightly richer (even more slight when you factor in population growth). The formerly poor countries are enjoying strong growth. At this rate, there will be a convergence and nobody will have to fret about inequality among nations. Why is that so bad?
2
Only China is getting richer. Poor countries are getting poorer. China is the exception that confirms the rule. In 2002 they were 23% within western levels of wealth. Today that figure is 70%
8
@Enri Thanks for the reply. Are you sure that's right, though? The CIA Factbook says that Indonesia has been growing at 5% (subtract 0.83% for population growth) and India at roughly 7% (subtract 1.14% for population growth). Those two countries combined have more than 1.5 billion residents and it would seem that, even after adjusting for population growth rate, the typical person there is experiencing greater prosperity.
2
@Philip Greenspun, you leave out an important factor in your last sentence: how is that growth distributed among the population? It's entirely possible for a nation to experience 4-5% growth, while average people are no more prosperous than they were before.
4
I’m glad that Neil has finally accepted this situation. The glut of “savings” or low growth prospects actually means that there is no much future for the high levels of profitability corporations used to obtain from China in the last 30 plus years. But that has been written before: when constant capital (machinery, technology, raw materials, buildings, roads, railroads, etc) relative to variable capital (wages) increase to the point it minimizes return margins -investment is no longer as lucrative as before. Then, productive consumption (of constant capital and wages) tends to slow down and/or become stagnant. If claims on future production (debt) become exaggerated by means of credit instruments like CDS or other financial means (speculation), then crises of production become crises of finance. No mystery except for those who still refuse to accept that value is only created by human labor (not machines, buildings, land, technology, money, etc, which are only products and/or expressions of that very value).
Money infusion by China may delay but not avoid the incoming crisis. That won’t necessarily increase profits or move corporations to invest in constant capital. While state owned enterprises are solvent, many corporations there are already highly indebted. Capital is only invested when profits are highly likely.
4
Neil Irwin says "China is trying to wean itself off debt-driven growth." Of course and so is the United States. So are many other countries. The unexamined truth, however is that growth is always driven either by private or government debt. The Roaring 20s and the debt-fueled housing debacle that led to the Great Recession are examples of growth financed by private debt. The growth and prosperity of the 40s, 50s and 60s, on the other hand was financed significantly by government debt taken on to fight World War II. Money to finance growth has to come from somewhere and as long as money is created entirely by private bank lending growth will require increases of either private or public debt or a combination of the two. Mr. Irwin should think about that for another column.
5
Roughly 2% annual growth is the new normal, with about 1% productivity growth and 1% work force growth.
Far more important than growth is distribution at this point, as we've never been richer in total. The top 1% have 40% of the wealth, vs. 25% pre-Reagan. If we split U.S. net worth evenly, every household would have about $850,000. Instead, the median household has about $100,000.
Once we tax capital gains and dividends as ordinary income, we can tax stock buybacks, the main upward transfer mechanism. Higher marginal rates on the rich and a wealth tax should get us back towards that 25% level.
We can then use the money to invest in getting everyone a tuition-free college degree or trade school, moving that productivity number upward.
36
Ignore the slowdown. How far reaching a nation wide infra structure rebuild could be, hopefully, it would impact U.S. workers in a positive way, providing a progressive platform to supersede the rear view mirror blame game of Trump. Putting lots of people to work, regardless of an international slowdown is another advantage the U.S. has over many other countries who couldn't do that.
For now, idealism, progressivism, and house cleaning Washington all seems to be wrapped up in female candidates hopes and prayers.
3
Trump tax cuts badly timed. No one, especially corporate America and rich people, needed a tax cut. We were just cutting the government deficit to below 500 billion. So its a typical Republican pig out for no reason other than they can slam it through. Corporations invest capital if they think they can make money, not because they have money. As Forrest Gump said, Stupid is as Stupid Does and Trump and the GOP are both dumb and greedy to no end
38
It is the Dollar,stupid. Too much debt and underlying everything is distrust of paper currency. I keep reprints on my wall of scenes from 1929. It will reoccur. Debt become the deflator of wealth.
2
Distrust of paper currency? Please provide evidence that that's even a microscopic factor in anything. I'd suggest avoiding any more of Ron Paul's kindergarten-level financial literature.
5
I don't believe low growth and low inflation are in the same catagory in 2019. Inflation will be back very soon. Trade war with China will bring everything more costly and expensive, and thus the inflation back. It will not be good for middle income families. On the other hand, the oil price went down so fast at the end of last year is amazing. With oil price in control now, the ugly inflation head is no where to be seen until OPEC & Russia have cut enough production and our shale oil producers can no longer produce under the $50/bbl market conditions. Oil price will rise up soon. So don't count the inflation out and they will be back very soon.
Re headline, it’s not that difficult. It’s called fiscal stimulus. The deficit scolds have so intimidated governments that basic economic tools are impoverished. Reliance on monetary policy as we have most of the past 20 years represents a political failure.
2
When unlimited labour is available in the third world for a fraction of the price of the developed world is there any wonder there is persistent deflationary pressure?
When your industrial workers are placed in direct competition with third world labour is there any wonder there is a loss of jobs and income?
You'll notice that professionals do not allow direct competition for their labour, do you wonder why that is?
Africa has barely even begun to be tapped yet.
The west sold China - a communist dictatorship - the rope to hang itself with, particularly the large multinational corporations. They wholesale moved the West's industrial base to China so they could enjoy gigantic short term profits. Now that the Chinese are moving up the value chain, they want the government to intervene! Did anyone hold a gun to their heads to transfer their factories and technology to the third world? And if China is just going to steal their technology and it's run by a communist dictator, why are we trading with them at all?
The hypocrisy and greed at the top is the main problem in the Western world.
24
Aging work force as a concern? Seniors want jobs.
7
The annual growth rate in labor force by age is presently heavily tilted to workers 65 and older. That does not bode well for a growing economy.....
https://www.bls.gov/careeroutlook/2017/article/older-workers.htm
2
Depends where you are in the world
Growth and Wages reconsidered, by Woof, with numbers
Country GPD growth 2016 GDP growth 2017
US 1.6% 1.9%
Ethiopia 10.9% 10.2%
What explains the fast growth of Ethopia (Faster than China or India) ? Growth of its garment industry.
Why would it grow in Ethiopia ?
Because textile workers wages are 1/20th of those of China (not a misprint)
Watch for yourself at France evening news, how a proud Chinese factory owner explains how little he pays: 30 Euros per month !
Éthiopie : la nouvelle usine de la Chine
(Ethiopia : The new factory of China)
https://www.francetvinfo.fr/economie/industrie/ethiopie-la-nouvelle-usine-de-la-chine_2764803.html
What the proud Chinese owner leaves out that he laid off his workers in China, which is what depresses growth in China - yes outsourcing has come to China
Moral
If you are willing to work for peanuts, you can grow your GDP like no tomorrow,
When will the free trade economists understand that it all about a race to the bottom ?
When their OWN jobs get outsourced
26
@Woof
That gives me an idea how Trump can goose GDP, bring all the jobs back, and make America great again.
Wage and Price controls.
Put a wage cap at $2/hour with no overtime. The manufacturing jobs will come back. We'll export everything because no one will be able to afford anything. But everyone will have a job, just more hours of work to cover living expenses. GDP will skyrocket and the stock market will go through the roof. China will outsource to the US. Isn't that what we all want?
3
Part of the problem seems to be caused by the change in power relations between workers and communities (whether local, state or national) and companies. More of the profits goes into stock buybacks, dividends and executive pay (more of it now in stock options) and less into worker pay, research and development, and long term investment. The result is a skewed set of incentives for those making the decisions. Focusing on shareholder value at the expense of everything else has hurt workers, communities and growth. For example, less investment and a short-range focus keep an economy running below its potential. And the lack of wage growth means that demand is less than it could be. All of this shows up in low economic and wage growth.
32
Hello Edwin ... My husband, a stock broker, just walked in from a weekend skiing in upstate New York ... and I thought he might have gone to New Hampshire with a pseudonym of Edwin ... I’ve been hearing him saying this comment for years ...
Now what do we citizens do about this?
8
The comments blaming slow growth on inequality are totally wrong. Highly unequal countries like the USA and China are growing significantly faster than the more equal countries in Europe and Japan.
Inequality is only bad if caused by corruption. If the rules are fair, then inequality is good for the economy because it encourages people to work harder to get to the top by creating more value for consumers. The fastest growing developed countries all have high inequality but low corruption (like Singapore, Hong Kong, the United States, Israel, etc.). Egalitarian European countries might be nicer places to live in the short-run, but the fact is that they have fewer innovative companies and slower economic growth because people don't see as many of the rewards of creating those things.
6
@Aoy
You might want to re-think your assertion that the U.S., Hong Kong, and Israel are low-corruption countries. I might have believed that before the financial bail out of 2008 or so, but certainly not anymore.
There was a lot of blatant criminality that went unpunished in the finance sector in particular, the reason being that those criminals send huge amounts of lobbying money to politicians. I would call that corruption.
Do you dispute this?
6
@Aoy
You might want to re-think your assertion that the U.S., Hong Kong, and Israel are low-corruption countries. I might have believed that before the financial bail out of 2008 or so, but certainly not anymore.
There was a lot of blatant criminality that went unpunished in the finance sector in particular, the reason being that those financiers (criminally corrupt in this case) send huge amounts of lobbying money to politicians. I would call that corruption.
In fact, I would go so far as to say that without the government bail-out(s) of the financial sector after the melt-down of 2008, the U.S. economy could / would have completely collapsed.
Where does that leave your argument of "only the fittest and least corrupt grow quickly"? I'd say that the U.S. in particular is neither economically fit nor is there low corruption (in the finance sector in particular).
I'd honestly like to know, and would appreciate your response.
I think we need to move beyond hard partisan positions on both the right and the left and assess politics and economics clearly and honestly, I hope you agree.
3
@Aoy You have made the perfect argument for slavery -- which is the extreme end of the labor inequality spectrum. A society is not formed in order to benefit a single group of people. We form societies to benefit all. Promote the general welfare -- as in the preamble to our Constitution. The fact is, inequality benefits the few and has been the cause of numerous was and revolutions. Adam Smith coined the term the "invisible hand" because he had no other way of explaining his theory of economics. The fact that it has worked for so many years does not make it correct just as the existence of Dictators does not make that form of inequality correct. Colonialism is another extreme form of your inequality and that does not work either -- except in the short term.
1
The idea of continued "growth" is not sustainable in economics or population. Slow growth and low inflation are good as it means a stable world economy that can be transformed into a sustainable world economy.
The "aging workforce" is amusing as people can be very productive engineers, teachers, doctors, nurses, retail workers, even warehouse workers well into their 70's. That will be the case in any sustainable future economy.
For US, redoing the tax code to match income shifts mostly due to unproductive financial schemes on Wall St, will pay for improvements in US economy. Removing the upper limits on SS and Medicare/Medicaid taxes so Trump pays at a real higher tax rate than his undocumented maintenance staff and service workers stabilizes SS and Medicare.
Going to Medicare for All gains the US economy $1.4T in unproductive dollars going to insurance industry which provides no health care.
Replacing the the $400B in oil imports with US solar and wind power with battery bank storage is another big economic boost.
Cutting US military spending by 50% to equal Russia and China combined saves another $500B a year.
28
No major western economy had any sort of sustained stimulus after the initial "rescue" from the 2008 financial collapse. Sequestration hamstrung the Obama administration, and after Gordon Brown was removed as the British PM, the UK and the Eurozone went into full austerity mode at the worse possible time.
The banking sector wasn't reformed substantially enough, and austerity has made it impossible for growth at the low end of the economy; most of the growth in the Western economies of the world has come from the top, which just isn't sustainable.
Basically, we've had yet another iteration of trickle down since 2008 and suprise surprise, it hasn't worked this time either.
18
Just want to correct a commonly repeated error that appears near the beginning of this article. None of the explanations for why American workers' wages haven't gone up hold water. The real explanation is that American workers have less political power than the corporations that set their wages. The legislative onslaught on labor unions, making elections into simply another free-market commodity, and the suppression of working class access to voting are the root causes. No matter how desperate businesses are for workers, they will never, never raise wages or stop distorting the economy in other ways that put workers at a disadvantage until forced to by aggressive mobilization.
42
@Purity of
Excellent point. The truth is that the wealthy can only spend so much, i.e. they can only eat so many steaks, drive so many cars etc. And they spend money in things like art, vintage car auctions etc., which do not typically or directly impact economic growth.
8
@Purity of-In the last 10+ years every company I've worked at except one in Silicon Valley has put the vast majority of its jobs in the hands of H1-Visa workers. It's rare to see more than a handful of contract employees, born in America, and over the age of 50
5
It’s a bad state of affairs to complain about high savings and consumers not spending money on junk as a negative —
The only way to have continued growth it seems with this sort of philosophy—is for more and more children to be born to use more and more resources.
We should start determining a good economy by different measures= how much pristine land that remains undeveloped, how many mountains stand tall without gashes where coal was extracted. How much bette the air is to breathe with less planes in the air and cars spewing exhaust...etc etc
20
Trump boasted that the tax cut would provide a "tremendous boost" to the economy "never before been seen" that would eliminate the deficit. Instead the national debt is going through the roof. Now trump's scapegoat is "The only problem our economy has is the Fed". Really? How about tariffs imposed willy nilly without fore thought? Or government shut downs over a wall that Mexico won’t pay for? Or a ballooning federal deficit because of tax cuts that aren’t paying for themselves? Or a complete disfunction and utter chaos in the WH now aggravated even more by the partial gov’t shutdown? And the nonsensical twitterlng about firing the chairman of the Federal Reserve doesn’t help either.
20
I am in favor of slower growth for the sake of the life of the planet! I'm sick and tired of Capitalist approaches to everything. Corporate junk everywhere like a deadly virus is out of control. It will come to an end someday, probably soon, but I wish I could experience it before I blink out.
24
Please stop spreading the falsehood that the difference between Tips yields and Treasury yields equals inflation expectations. There are so many risk premiums built into bond prices that make such a simplistic subtraction misleading. The Fed itself has written a number of papers on this. Here's but one of the papers:
https://www.frbsf.org/economic-research/publications/economic-letter/2011/june/tips-liquidity-breakeven-inflation-expectations/
4
The corrosive effects of the broadening income inequality on the US economy is, of course, a central issue. It seems silly for anyone to suggest that those benefiting most from this inequality are generally creative and productive and, thus, deserving of great rewards because they are the drivers of the economy. While some doubtless are, most are not and are just friction in the system. This group would include, for example, the lobbyists, banksters, and others who are really just part of the legalized wing of organized crime.
17
Perhaps we should be revisiting Thomas Picketty's "Capital in the 21st Century.'
16
This is what you get when you pick trickle-down Trump rather than middle-out Hillary...
People forgot that she was directly tied to the last administration to oversee zero deficit and a healthy middle class while being in no wars...
The true driver of a healthy economy is middle class spending. Income inequality is the biggest problem of our present society...
But don't worry, automation is going to make this all moot... and sooner than anyone expects.
20
Lower growth is natural for an already developed and wealthy countries. There are more developed countries now and of course global super wealthy keeping distribution down.
8
It takes a lot of $238 million apartment sales for a robust economy. Concentrated wealth and selfish tax poicies that contribute to inequality lead to instability. May it also will lead to change.
23
No, its not deflation
1. US wages are nailed down by global competition. When employees ask for higher salaries, the response is to move production to low wage countries .
Recommended read : " Becoming a steel worker liberated her than her job moved to Mexico " (NY Times). The freedom to move jobs to low wage countries destroyed industrial Unions in the US
2. Deflation and growth are NOT coupled. Yes, I know Krugman claimed it for a decade plus. But if you plot the GDP growth per capita , 2001- 2008, for Japan, than you find that the Japanese economy grew FASTER under deflation, than the US economy under inflation - in the throws of the housing bubble
(How could Krugman be wrong ? He did not adjust for denographics. The US population grew at 1%. At constant economic activity= that alone will grow the GDP by one percent = while Japanese population shrank)
3. What is pulling us back now, is the incoherent monetary policy of the Fed, that every time it tries a rate increase, and predictably sees assets deflate, pulls back. The Fed, the BOJ and the EBC have no thought out, let alone coordinated, policy how to unwind the historically unprecedented positions they build up under QE
Printing money is fine, but as Powell (Colin , the General) noted you have to have an exit plan before you embark on something
The Fed Chairman in 2008 did not have on. 11 years later,
another Powell (Jerome. Fed Chair) still does not have one.
That IS a problem
19
Neil Irwin comments on “slow-moving” economies—low inflation, low interest, low growth. Basically, in these economies, all “growth” dividends have gone to the top 10%--and at least half to the top 1%. I suggest that the political unrest may have less to do with stagnant incomes, and more to do with perceptions that gains are going to the top while many others are losing ground—with declining incomes. That is a real sore point.
I wonder to what extent redistributing incomes to the top 1% has the effect of reducing “demand”—for ordinary products and services—with the result that demand domestic products and domains are suppressed relative to what they would be if income were less skewed?
Andrew Biemiller
19
@RachelK - my vote will be for the Democratic candidate with the best likelihood of beating the Republican candidate. My hope is that will be Senator Klobuchar, by far the most productive senator in terms of getting legislation passed in 2016 - because we need exactly that kind of powerful, diplomatic leadership to help correct the mess that Trump has made. Third party voters and people who stayed at home in November 2016 have given Trump and McConnell more than 100 young alt-right and far right federal court judge appointments, and two Supreme Court justices so far - and they will destroy civil rights for generations to come.
My dogma will never come before my country. Vote Democratic in 2020.
17
Surely the one lesson we can learn about economic downturns is that people have short memories and it's only a matter of time before the next one exacerbates an already unstable situation. Add to this the dysfunctional politics mentioned in this article - Trump in the US; Brexit in the UK; an EU which is on the defensive before the threat of a backward-looking right-wing populism, and we look to be careering towards the abyss.
How middle class people can take on 30-year mortgages within this context, when it's frightening to think what might happen next month, let alone in ten years' time, is a mystery to me. We're condemned to live in interesting times.
11
@Monterey Sea Otter
Middle-income people (I don't know precisely how you're defining "middle class") take on a mortgage because a mortgage builds equity while rent is money that's just gone. You have to have a place to live, and while rent can be just another expense for someone with a very high salary, for the average person it's a cash drain with nothing to show.
If you put down 20 percent and have been paying a $1200/month mortgage for five or more years, and then you lose your job, you can sell your house if you can't make the payments. Unless the price of your home was staggeringly inflated and you can't sell it for enough to pay off your loan (which was no more than 80 percent of the home's value at the time you bought), you're in a better position financially than someone who's been paying $1200 a month for rent. All that rent money is simply gone.
If you have been building equity for more than ten years and you hit hard times, you can borrow from yourself in excess of the 20 percent.
An ordinary person should never take out a mortgage that isn't fixed rate. Take out a variable rate mortgage only if you are absolutely sure you're moving in two or three years because your job requires mobility and you have reasonable confidence that real estate is a safe investment.
And don't buy the most expensive house you can possibly afford. Buy a home you can improve, and you can increase its value if the market remains stable.
8
@C Wolfe
Points well made. I was simply suggesting that the world has changed since I took out my mortgage in 1992, finally paying it off at the end of last year. The kind of long-term jobs I had while doing this just don't exist in 2019 to the same extent. Consequently, I feel for young people starting out today, or at least those that don't have wealthy parents.
As for your last paragraph, I have a quibble: you advise not buying the most expensive house you can possibly afford and buying a home you can improve. I'd suggest combining the two, i.e. buying the worst house on the best street you can afford, a home that can be improved and which will retain its value.
2
Not being an economist, I suspect nonetheless Mr. Irwin to be a
dyed-in-the-wool Keynesian. Inflation is the enemy of the people that irreversibly devalues their savings and fixed incomes. But the State repays its debts in depreciated paper money.
6
@Tuvw Xyz You are right...you are no economist as evidenced by your knee-jerk comment about inflation being the enemy of the people. The enemy of the people is unemployment and/or flat wage growth. You can't have savings if you don't have stable employment with a descent salary. Then you can worry about inflation.
10
The solution is to raise taxes to take money out of the system.
7
@Jeremy P.
Who do you suggest should carry increased taxes? Small homeowners? Small business people? Small landowners? To date, it has been my experience, which includes working for a very large corporation on the East Coast for 22 yrs, that large corporations have departments to deal with corporate taxes. They pay auditors, tax experts, and lobbyists. Those are advantages not available to ordinary working people who live on paychecks with little left over to save. Unions now work closely with corporate interests. C.G. is correct.
1
I am not an economist and don't play one in Congress like many Republicans. But it seems to me that wealth concentration at the very top worldwide has something to do with low demand and unused capacity.
The govt shutdown showed us how many solidly middle class working people are in financial trouble.
We need to correct inequality and we need to do it fast. It's not just a matter of fairness.
42
@sapere aude
It is very difficult to get money away from the top 1%. They have corrupted the charity universe.
The wealthy avoid taxes on their income by donating stock [which has never been taxed] to foundations. The catch is, they control the foundations, and use them to lobby the government for policies they wish even when those policies are contrary to the interests of Americans.
So you have the Ford Foundation, founded to keep control of the Ford Motor company in the family, still in existence over 100 years after its creation, providing well paid jobs to Ford heirs and not spending its money on philanthropic objectives but pursing actions to favor the wealthy.
You have the more recent Clinton Foundation, which hired the Hillary in waiting crew, solicited donations from foreign governments, paid a political operative Sid Blumenthal [father of the birther conspiracy] $120,000 per year. While Hillary was Secretary of State, Huma Weiner was a full time federal employee being paid around $180,000 per year. She was also a consultant for Blumenthal at $120,000 per year and an employee of the Clinton Foundation at $150,000 per year. What philanthropic services was she providing to justify the charity's payment to her. Was she reminding Hillary that Russian and Canadians had contributed billions to the CF and should get approval for Uranium One?
Harvard has billions, and charges students $80,000 so they can pay seven figure salaries to executives.
5
@sapere aude
No, you're right; it isn't just a matter of fairness. It's a matter of life and death.
5
The 40-years old predictions of the Club of Rome ("Limits to Growth") are on target for a general collapse in the mid 21st century. To avoid this, growth needs to stop altogether. Living with this is perfectly OK as long as inequalities are kept in check.
13
@Hugues
I'm with you about "no growth" for sure. Gluttony is all our masters of business know. They will suck the world dry of all living things until they are forced to eat each other.
7
Wealth and power, two motivators that have driven nations and individuals throughout time. Economics are embedded in the resources available to exploit and the demand to consume the products. An economy based upon the continued expansion of consumption for consumption sake without regard to the collateral damage done to the environment is not sustainable in the long term. Sure, there will be plenty of people and nations that will in the short term will reap some riches and power. Who knows, maybe the increased sales of yachts and villas is just what the doctor ordered. I'm not convinced.
12
@richard wiesner
You are absolutely right. The people in sub-Saharan Africa and Asia are selfishly demanding clean drinking water, sanitation, electricity.
The Paris accord calls for the western democracies to contribute $100 billion per year to the autocratic leaders of the third world, since that's always been so successful in making the people better off. The leaders can spend the money fighting with their neighbors and preventing progress that would increase the carbon footprint of the third world population in poverty. American and European cronies will build some overpriced demonstration solar installations and get their excess share of the loot.
China will continue to increase air pollution by burning coal without emission controls and use the profits from low energy cost to build coal fired plants in Kenya and Viet Nam. That will make the Earth much cleaner.
3
What goes up must come down. Change is coming.
3
We see the results of thirty years of trickle down economics. A moron buys a $238 million apartment in N.Y. while wages are flat.
Until we shift taxation to the wealthy and the US uses it's muscle to end corporate tax evasion, and close down tax havens, the lack of demand will continue.
Trickle down is good for the art market, but cutting taxes on the middle class or voting for medicare for all will create demand and stimulate the economy.
The wealthy are neither spending nor investing. They are hoarding. Time to transfer the income they have captured to working people.
28
Another omitted reason for slow growth:
People do not have enough money to buy stuff. We have just have 2 studies that showed if the typical American family had a real emergency & had to come up with some money, they couldn't do it. One said about half the people couldn't come up with $400 & the other that 2/3rds couldn't find $1,000.
Now businesses are not going to produce stuff people can't buy. So they have to keep prices low, & they can't pay workers well & still keep the big profits they have become used to. If wages were higher, people would have the money to buy stuff, but that's a chicken & egg problem.
BUT we have a way to break out of this circle. Its called the federal government. It can create as much money as it needs out of thin air. It can then get the money to the people who need it & will spend it by simply doing stuff that needs to be done, e.g. fixing roads and bridges, helping with education, research of all kinds, a new power grid, efficient transportation, etc., etc., etc. Thus we can break the circle & improve our lives at the same time.
What about inflation? Prices are proportional to the amount of money in the economy (times its velocity), but INVERSELY proportional to the dollar value of the stuff we can produce. So if the money is spent doing good things, it will produce enough stuff to soak up the money. Excessive inflation is caused by something that prevents us from producing stuff, like shortages.
14
@Len Charlap In the neo-liberal view all that's needed to start the economy (aka investment in production) is business confidence.
What inspires that confidence? Say the neo-liberals: that the government is not going to take away corporate, business, financial institution profits.
Hmm, anything lacking in the neo-liberal argument? (Psst, businesses need to know that people are going to buy items and services produced.)
Len Charlap and most middle class families and "stolen pension" retirees know that right now "People do not have enough money to buy stuff." Sounds Keynesian to me. Do you suppose Keynes was right in saying that it is consumers with good paying jobs that restart a flagging economy? Could the neo-liberals be wrong?
Say it louder and clearer every day!
1
@Len Charlap The Federal government doesn’t even have to create the money out of thin air. It can tax the rich more. The guy with the fancy most expensive ever penthouse apartment in Manhattan as just one of his stable of homes can surely afford to pay a higher tax to build a bridge or two.
6
@Dfkinjer- I think if you do the math, the Rich do not have enough money to replace what was lost in 1996 to 2008, and then get the economy really moving again.
Anyway, politically, it is easier to create money than tax the Rich. Unfortunately.
2
"And you wise men don't know how it feels, to be thick as a brick" But what happens when the wise men are just as thick. Noble Prize winners reaching conflicting conclusions while looking at the same information. Loud mouth charlatans like Larry Kudlow making claims that make no sense but become policy. Sly dog sycophants like little Stevie Mnuchin making proclamations with no basis in fact but accepted as truth.I just keep looking at all the conflicting signals, shake my head and recall "really don't mind if you sit this one out?". So I am going to sit this one out, if you really don't mind.
4
Whaddya know !!
Seems things are nearly ripe enough for that good old tried and true stimulus, we all know the one, World War 111, but, and this is key, the big boys will quietly agree to no nuclear weaponry being deployed.
After all, they do need to be able to access the devastated areas of the planet, once the bullets, mortars, and bombs stop, so the no bid government chosen contractors can begin the rebuilding, what was it called after WW11, The Marshal Plan, so perhaps this time it might be The Trump plan.
Back in 1948 it cost a pithy $12 Billion, which in todays dollars is more likely to be several hundred billion, if not several trillion.
Ain't war just grand !!
So many pieces on the chess board; I wonder whether Iran or the House of Saud will make the requisite move ...
10
For most of the past 2200 years China has been a socioeconomic political educational demographic diplomatic military scientific and technological superpower ruling with the " Mandate of Heaven" from the " Central/ Middle Kingdom." China's retreat from the barbarians half of a millennium ago slowly reduced that ethnic sectarian supremacy.
Over the past 30+ years China has managed to move 300 million of it's people into the middle class by using a term limited collective leadership model using Deng Xiaoping's socialism with Chinese characteristics aka capitalism. Xi Jinping has rejected this model by becoming the first Chinese leader since Mao Zedong whose thoughts are deemed worthy of study by members of the Chinese Communist Party and the first "core leader" since Deng Xiaoping and the first Chinese ruler since Puyi claiming the " Mandate of Heaven".
China is an aging and shrinking nation with a below replacement level birthrate and a massive male gender imbalance. China has 4x as many people on land the size of America. While China has the nominal #2 GDP on a per capita basis it ranks near Bulgaria and the Dominican Republic aka # 80.
America spends 3x on its military. America has 10 nuclear aircraft carrier power battle groups. China has none. America has 48% of world nukes. Russia has 48% of world nukes. China not so many nukes.
3
@Blackmamba
The Chinese middle class are poorer than the poor in America. They do not have democracy. In elections, they get a choice between two Communists.
They are not socialists, they are communists: a totalitarian country. They do not have capitalism, they have communism, where the elite capture the bulk of the wealth.
They do have term limited government. When one of the oligarchs gets ideas of his own, he is arrested, tried, convicted and executed.
If individuals get feisty, the tanks roll over them as per Tiananmen Square. Uigars want to practice their religion? It's off to re-education camps for them.
They are poor, and yet spending money on the military to expand their power.
1
@ebmem
All animals are equal, but some are more equal, as was said in Animal Farm by Mr. Orwell back in 1949. Things have not changed.
1
@Blackmamba , Thank you for the tutorial. I'm 3x more impressed with you.
Stop talking about growth..It is impossible to have continuous growth on a finite planet//We need stability IS all your shopping making you happy???..Endless war is a bad idea.Too few banks just backing the fossil fuel industry is killing us
7
CASH becomes "King-ier."
1
@AWENSHOK
My old boss used to say that. That was almost thirty years ago, but I think it truer today than it was back then.
1
Everything economic said about China continues to be nonsense...
Think of China as a land of four USA's (i.e. 4X the people), nestled in a continent of a dozen USA's...
Of that dozen, perhaps 2-3 have attained the standard of living of the US or Europe...
That's another 9-10 USA's, full of people hungry to improve their standard of living...
That loud screaming heard in legislative Houses – on either side of the pond – isn't debate...
It's denial...
It was all over once the Chinese figured out it wasn’t how many tons of steel you produced – it’s how many fossil-fueled barbecue grills and snowblowers you consume...
PS
What do we plan to withhold, to forestall this...
> Soybeans?
> Treasury Bonds??
> iPhones???
PPS
Running against this neonihilist outlook is precisely how Trump got himself elected...
Didn’t make him right – or even smart...
Did make him president...
8
It's capitalism, stupid.
We're reaching the point where all these standard measures are becoming obsolete. If we don't have a change in consciousness to shift from valuing what is profitable to what is sustainable, we'll be cooked.
10
@Barbara
Capitalism is sustainable. Socialism and Communism are not.
America is closer to capitalism than China, and China is the land of air, water and soil pollution. They are increasing their CO2 production every year until 2030, at which point they will figure out if they can stop increasing. Between 2016 and 2030, they will add more CO2 to the atmosphere than mankind has added since the beginning of the industrial revolution.
1
We all know why. It is painful to say but the rich will not hand over a portion of their wealth easily.
There will be war. The military will have to make up their mind which side they are willing to die for. Their friends and family or the oghlicarcs.
7
What gets me really steamed up is that the economic policies of the gang of "experts" that has determined these policies for the last 30-some years might just manage to prove Karl Marx's theory right! How dumb can one get? Apparently, very!
11
It is obvious to me that the slow world growth is caused by the concentration of wealth in a small percentage of individuals and corporations. Quantitative easing helped save us from Armageddon but it also created dramatic inequality.
If the world wants more growth we need higher taxation on the super wealthy and much, much more investment in education and research, infrastructure and healthcare.
20
@Lalala
Tax charitable Foundations at 3% of their endowments and remove the power of the wealthy oligarchs.
Quantitative easing profited big money at the expense of retirees, pension funds that are taxpayer liabilities, and hedge funds. It caused a stock market bubble.
Actions of the Fed, along with investment by the oil and gas industry that reduced energy prices are the only thing that prevented a double dip recession under Obama. Obama raised taxes on the middle class, but his friends the oligarchs didn't have to pony up.
Obama's regulatory overreach stifled investment in the US and drove investment offshore.
In the Trump economy, GDP has grown despite the fact that the fed has ended quantitative easing and increased the interest rates.
Raising wages for administrators of schools is not an investment. If we returned to the teacher to administrator ratios of 40 years ago, teachers would be paid more, but what would we do with those who cannot teach?
1
Low growth rut? That is actually great news for humanity and the planet. Growth can’t last forever. Runaway growth, like cancer, eventually destroys its host. There is a name for economic cancer, capitalism, and I have no doubt it will eventually destroy, if not all life on earth, at least humanity. We may be in stage four already. There is no cure for cancer but it might be easier to find a cure for capitalism. Maybe start by abolishing the stock market. Cap maximum income at one million. Tax wealth severely. Public financing of elections.
8
@J. Palmieri
Great idea, public financing of elections. Let's have some unelected unaccountable bureaucrat determine who is fit to be a candidate for office and then provide campaign financing.
Sounds like China.
1
I follow economics pretty closely, in this publication and others. One big problem I see - perhaps the biggest- is with economists themselves. How can you continue to be so wrong about so much for so long?
In paragraph 18, Mr. Irwin references the "old economic rules." The problem here is that neither "rule" is true, nor has ever been true. Employment is NOT related to inflation. Putting people to work or giving them raises increases consumption and GDP directly. Goods producers respond by increasing output; not raising prices. Working people cause prosperity, not inflation. Inflation is caused by the devaluation of currency; NOT by any increase in normal supply. (Note to professional economists: there is a Nobel prize waiting for the first of you to grasp this distinction and publish the proof).
And public expenditures do NOT drive out private investment. The proof of that is in the details of the West's recovery from the 2008 recession.
Everyone should read Piketty's "Capital in the 21st Century." Low growth across the world as far as the eye can see is normal. It's what will happen, despite anyone's macro policy. The aberrant growth of the 20th century is over and is never coming back.
Economists: please stop reading the same old books, going to the same conferences and talking only to each other. The collective views expressed in this Comments section ARE the path forward.
11
There are two errors that underlie this thinking, well two that bear directly on this area, obviously there are lots more.
The first is an old saw: it is impossible to continuously grow within a finite system.
For many centuries we have been able to ignore this obvious truth. Mowing down forests, tearing off mountain tops, spewing poison into the water and air etc.
The world is a smaller hotter place now and any fool can see that it is a problem and can’t continue much longer
The second is that capitalism is a benign force for good.
For years here, this has been a back and forth between boom and bust, regulation and deregulation, working man vs corporations, governments role in maintaining an even playing field and opportunity across the socio economic spectrum.
These debates are now mostly moot, the mega capitalists have won the argument by the simple means of purchasing our government
We are just along for the ride now and it makes me sorry in my heart to leave this behind for our children
9
"The low-growth trap of the last decade — and the resulting stagnant incomes — might have contributed to dysfunctional politics in nations including Britain, Italy and the United States."
Hogwash. The unrest is coming because the top 1% have been capturing virtually all the growth for the last four or five decades. Until the mid-seventies productivity and hourly wages grew in lockstep. Everyone was sharing in the growing economy.
But, as shown by the chart at https://www.epi.org/productivity-pay-gap/ productivity has soared by 246% since 1973. Hourly wages? Almost stagnant, up 15%.
The problem the past several decades is not growth, there's been plenty. It's just that everyone except the favored few at the top are not sharing in it.
12
It is hard to take any economic analysis seriously when it so egregiously fails to understand why American workers' wages have been stagnant. Failing to take into account the impact of neo-liberal policies on wages is a non-starter. You can't have a robust economy when policies are designed to eliminate a strong working- and middle-class.
9
@Jed
I can't speak to "neo-liberal" policies; however, is a fact that the middle class, produced by WWII, built the country we have today. They are the citizens who bought new homes and cars; they are the citizens who sent their children to college; they are the citizens who went shopping and became the foundation of our current consumer economy which depends on disposable income for support. It is not possible to trust the rich to look after the common good; that is not what they do. A few who do that are highly publicized and commended; however, they are not the majority among the very rich.
2
In this country and abroad, one of the key indicators of a 'good' economy is a stable, solid middle class In the US, we have neither. Until policy makers quit hyper-rewarding the ultra rich and start investing in the infrastructure and education AND social programs to keep people from becoming more impoverished this will not happen.
Without stabilizing policies and investment, our middle class will continue to devolve and the chasm between haves and have nots will grow. Queue the torches and pitchforks.
Being middle class must begin to feel like 'being middle class'. It isn't an outdated set of numbers that mask the feeling and reality of living on the edge of disaster. The middle class these days are one pay check or less from disaster. Witness the results from the insane government shutdown. The ripples will persist - and not in a good way.
7
Everything is changing at once. Growth is no longer economic. It is people attaining a different and evolved mentality. We will have immense growth in this realm. It will trump (sic) the current wisdom. It will enable the emergence of a rational basis for distribution of people and resources. It will shut the mouths of dictatorial naysayers. It will open things up for more and more growth beyond all expectations. And none of those now watching things necessarily have any idea because it heralds a new synthesis that contradicts both sides of our binary world.
I have long stood for an economy that is sustainable and I live in a country where the prime rate is close to zero and economy growth is quickly becoming more sustainability than growth. I live in Quebec where we have one of the lowest birthrates in the world and one of if not the most successful economies. We are a democracy and we choose whether to become more socialistic or more neoliberal every election. We had a quiet revolution and a flight of the large corporations 40 years ago.
Security and education and a language that is not the language of the world's reserve currency has allowed us the luxury of evolving a bottom up rather than a top down society. We are the society America was supposed to become 240 years ago. We believe God has no place in our our politics and increasingly a greatly diminished role in our public spaces. We had our period of looking at giant corporations to create wealth and opportunity and discovered that facilitating start-ups is what has created a Quebec that was a low taxed, poorly educated and high poverty shrine to ultra-conservative governance to a confident optimistic shrine to democracy and the wisdom of an informed electorate.
We are not free to exploit capitalism or socialist we are an electorate that understands sometimes you need big government and high taxes and sometimes thumbs must be removed from the scales and more power must be given to the private sector.
Neil Irwin is an ideologue not an economist. I am sad but I understand.
10
I have a pair of trousers that are a bit worn but they fit well and just need a new cuff. I could go and buy a new pair. And I don't. I just won't. I repair them. The idea of a world that is ecologically insane stops me from buying anything not essential. So I would like to know a lot more about the "weak demand". I think people are becoming wary of buying and buying. Let's get to the bottom of this. And as to stagnant wages and persistent unemployment, wherever that is the case, we just have to shift resources from the top 5% to the 95% in as fair and orderly a manner as possible, both putting money into people's pockets, especially the lower 20%, and investing in the services and enhancements that improve life for the society at large. Tying wages to productivity, that is slave economics. Insisting on changes in distribution, insisting on social spending, that is a big part of developing democracy. I think economic thinking is stuck in a rut. Respectfully, this article is a case in point. We will not emerge except on the basis of new and better thinking.You do not really have to be "progressive". "Rational, reasonable, kind, careful" are good enough for me.
6
A note from one of the majority in the US - independent voters. Please, Democrats, don't veer too far to the left in order to energize whatever passes for your base.
States can do what they want, but at the national level, both parties needs a healthy dose of centrism or Willingness to Compromise or whatever you want to call it. The current GOP is run and paid for by wealthy extremists who have run such people out of much of their party, through primary challenges from the whack-a-doo far right.
It's been disastrous for the Republicans (and I'm glad, given the policies they embraced) but it's been bad for the country as they've ignored working with the Democrats on real solutions to immigration law, climate change and other things that need the urgent attention of our elected officials, whichever party they belong to.
"Significantly more U.S. adults continued to identify as political independents (42%) in 2018 than as either Democrats (30%) or Republicans (26%). At least four in 10 Americans have been political independents in seven of the past eight years, including a record-high 43% in 2014.
[...]
The proportion identifying with each party is near its low in the telephone-polling era. The 26% identifying as Republicans is one point above the low from 2013, and the 30% identifying as Democrats is one point above its 2015 and 2017 lows.
https://news.gallup.com/poll/245801/americans-continue-embrace-political-independence.aspx
4
With the countries politicians favoring the wealthy giving big welfare to the rich you will always end up with the 99 percent struggling. The 1 percent will always get ahead especially when they don't pay decades worth of taxes like Trump and family.
5
Now that we know how stubborn Donald is about proving he is right about the Wall, makes me realize that even if world plunges into the next Great Depression, he won't change his mind about imposing tariffs.
3
You insinuate global well being of humanity is best measured in terms of economic growth. Economic prosperity is essential, but only in the context of truer metrics of achievement for all, such as greater equity in income, open access to health services and education, and the protection of our natural environment, so that the long term quality of life of all peoples are assured.
Into that mix, also add a society where our leadership doesn't sit quiet in a sewer of lies and deceit, and truth, honor, and integrity are held as the highest of ideals.
4
Supply side economics is the fantasy of producer businesses. If they build it they will come. To keep them coming business has to spend on market stimulation marketing. It is a Thanksgiving Turkey dinner effect. Before dinner (US after WWII) you have pent up demand for basics, you gorge until you hate turkey and the prices come down, become sticky and profits fall off. Other businesses make Betamax, TV's, computers, Mink coats for goodness sakes, fine wine, we gorge until we don't want any more. Now it is health care and exotic drugs. Most people don't need them, oh, wait pain relief and opioides, like cigarettes, a constant demand. The problem is that we need to have contentment and happiness, not toys to drive demand and maybe we don't need to grow GDP, just make it work better.
A virtuous feedback loop to create growth first requires virtue. Henry Ford figured it out, why can the magnates of the modern era not?
2
Low growth? U. S. economy is growing at 3% per year, faster than it has in decades. India and China about 6%. Most other major countries are growing more slowly, but not badly by historical standards, especially considering the shrinking of their workforces as their populations age.
Calm down. The world is not coming to an end (but it makes better copy if you pretend it is).
LOW INFLATION?!?! BEEN SHOPPING FOR FOOD LATELY?
We are seeing LOW inflation in goods and services that people do NOT need.
Inflation is HIGH for things that people DO need.
You may get a multi-million dollar condo in Manhattan for less but try and find an affordable small apartment.
Flat screen TV's, computers and other consumer gods may be getting cheaper but you can live life without any of these items.
Meanwhile, health care costs, education costs and other 'needed' things in life have increased at absurd rates and continue to do so.
And in a clear example of increasing costs, governmental fees and taxes have increased at absurd rates while incomes have gone down in effective buying power for many people. Bus fares, subway fares, bridge and road tolls have gone up far faster than incomes while effective services have decreased.
Even as bridges and tunnels have eliminated scores of toll collector jobs, and subways have reduced token sellers, the fees for using services have gone up at ever accelerating rates.
The GW Bridge was .50 in 1931 - going up to $1.50 in 1975. It is now $15 if you do not use E-Z Pass.
In 1904, subway fares were .05 - it took until 1953 for fares to rise to .15 and not until 1975 - 71 years - for the fare to hit $.50.
In 1995 it was $1.50 while a fare today is $3.00 (or $2.75 on a multi-ride ticket)
15
@cynicalskeptic
Thank you for bringing up food and gadgets as two areas where the government pulls some very nasty sleight of hand to mask the true level of inflation.
Food:
Let's say filet mignon goes from $16 a pound to $20 a pound. It's less affordable now, so many consumers who previously bought the filet switch to NY Strip at $16 a pound. To the Bureau of Labor Statistics, no inflation has occurred. The 25% increase in the price of filet mignon is simply disappeared.
Gadgets:
Every time Apple releases an iPhone, it triggers a .1% or .2% decrease in the inflation rate, because even though the new phone has the same price as the previous model, it's somehow "better" (note how this compares to BLS's treatment of better cuts of beef).
5
Hey, the labor supply has exploded with worldwide development and the “savings glut” hasn’t gone away, so what must happen to prices?
Mature economies, aging populations, low growth.
My peers and I are holding down multiple jobs, but none of us will admit to doing without or receiving any kind of assistance; we were brought up on racist folklore about 'able bodied welfare recipients'. Now we see and hear the corporate media treating 'inequality' as some kind of natural disaster, rather than the result of decades of income redistribution from the workers to the rich. No wonder, then, that workers are falling for MAGA instead of demanding public-sector goods like health care, educational opportunity, clean water etc.
7
The determining factor until November 2020 is and will continue to be America's baldly negative, uninformed, purposeless, posturing in domestic and foreign policies of every stripe.
4
This analysis is woefully inadequate to describe our actual world. Endless continuing growth is literally impossible within a closed system such as our planet, and we are ever more quickly running up against environmental devastation that is going to bring our economic growth to a very ugly end. If we can’t figure out a way to more intentionally and peacefully live in accordance with our limited resources, reality is going to do it for us much more violently and painfully.
Furthermore, economists should not act as if wealth inequality were some sort of law of nature that can’t be addressed. This is a societal choice. It is not, for example, a law of nature that we should permit very low taxes on the richest individuals and companies. Wealth can and has in the past been redistributed through means other than the magic of the marketplace.
2
Globalization caused populism to rise worldwide, what will automation bring, rampant migration, massive economic insecurity, rise of religion and back to dark ages? Human behavir does not change, history goes in cycles, we just might get back there.
To avoid dark ages, Universal Basic Income will become necessary, enough for a place to live, food, education & healthcare. Until then, expect turmoil.
2
According to Bloomberg, the fortunes of a dozen (yes, 12) 2009 Davos attendees, has soared today, to a combined amount of 175 BILLION dollars.
Meanwhile US median wealth has stagnated since then.
Do the math.
5
World population growth is slowing and near zero in developed countries. Compared to the productivity growth brought about by PC’s and software hasn’t been replicated. Smart phones and social media didn’t improve productivity much. Worldwide public financed infrastructure is low and with it the gains in efficiency we need. Private money won’t do it. It chases quick hits. We’ve got climate warming and a world switch to renewables costing tens of trillions in our future. The economic salad days population growth, mass consumer junk and using the atmosphere as a public sewer are mostly over. How is it 13,000 PhD economists can’t give us a prescription?
2
The built-in contradictions of capitalism drive us to a dead end, particularly on a finite planet where endless growth is delusional.
Start with high taxes on the wealthy and corporations, along with a Green New Deal, to pull us back from the brink. Then move on to an economic system that works for all people and the planet.
1
Of all the opinions so for expressed, I find those of Tadeusz Kościuszko in Texas, Jeff of Port Townsend, WA, and Casual Observer in Los Angeles the most persuasive. I am not in any way versed in economics (one class in macro-econ many moons ago, the lessons of which are lost to the mists of time) but along with the fallacy of the “rational actor” of Adam Smith, there is one thing about economics and business-speak in general that has always bothered me: the calculated refusal to acknowledge the life cycle itself. All living things are born, grow, reach maturity, reproduce, decline, and die. So why is it that in speaking about business and the economy is “growth” the only measure that is continually trumpeted as the most important? Why would organizations—businesses—composed of creatures that KNOW they will die not correspondingly follow the same cycle? Why is ending—death—not a part of economic analysis? All things end, and it appears to me that people who focus on “making money” by whatever means seem to ignore this basic fact of all existence.
"...a mere 2.4 percent interest rate — is enough to risk breaking the economy? "
What that means to me is that more of the information we have is "fake news" than we realize. There is the obvious fake news and the obscure fake news because there is greater uncertainty about future world develops now by far, than before Trump took office.
1
Raising the minimum wage will help us get out of this rut.
2
Please explain why slow growth and contraction are bad things? I miss birds and butterflies and other creatures that had habitats before humankind increased in numbers and inhis ability to poison or pave over the natural environment or convert the forests to farmland and the farmland to housing projects.
SO tired of lazy thinking. (Another one -- elders are a drain on the economy: Excuse me elders support numerous industries from medical to cruise ship! -- and if allowed to do so there are many jobs we can do, e.g. teach.)
So i9t's more impt. to make the stock market and the related corruption (cap. gains tax, interest carried forward) the only game in town than to raise interest rates.
And yes, it's obvious that the federal gov. is not interested in fair taxation; consumer taxes (often hidden, such as utilities and gas tax, and aviation taxes) are more fun than a fair income tax and a luxury tax of 10% on the super expensive toys of the rich.
I guess if only the little people pay taxes it will be a problem as the little people's incomes seem to shrink and shrink and we do have inflation.
Perhaps, we (the Saudis) should lend Syria and Yemen the funds to rebuild? (The fact that they have little in terms of natural resources besides youngish population would not disuade us if indeed we werre humane.)
1
Worse days are coming. See yesterday's article "The Hidden Automation Agenda". It is projected that with the advancement of AI and robotics unemployment in 15 years could be in the 40% range.
1
"government shutdowns and trade wars". The solution is get rid of Trump.
1
Whatever happened to “limits to growth”? Tax bonus incentives and we do just fine.
1
Criticism of low global growth is ridiculous. The cause of the world's problems is not low global growth but misallocation of resources, inefficiency and corruption.
The pursuit of 'high growth at any cost' has caused the unprecedented indebtedness that we see today, causing massive internal economic dislocations as nations seek to prevent recessions simply by issuing more debt.
The solution is LESS growth, LESS consumption. Instead, the world should focus on targeted, self-sustaining growth in renewable energy and recyclables and, most importantly, socio-economic justice that would enable more citizens to contribute to their nations' future.
I have complained, frequently and bitterly, on these blogs about the derisory references to 'socialism'. Why is is that northern European countries boast far superior standards of living to the U.S. despite traditionally lower GDP growth? Because 'government' in those countries is 'by the people, for the people', whereas in the U.S. this phrase is an empty, political mantra designed to maintain the Law of the Jungle.
Forget Venezuela. Forget Iran. Compare yourselves to successful, socialist countries that leave the U.S. in the dust in terms of health, welfare, longevity, infrastructure, environment and socio-economic justice. The extreme-capitalist brainwashing has become tiresome.
6
@Hamid Varzi
That capitalist brainwashing keeps the People from rising up. The People think they're in a representative democracy because someone told them so (and it makes them feel special). They never question the capitalism-con or democracy-con - it's unAmerican.
But the two parties are exactly the same global corporate party of the ultra-rich, Bad and Worse, just with different advertising.
The People are allowed to choose once every four years between two corporate shills; Really Bad and Much Worse.
Feed them the delusion of freedom and they line up to pay taxes and go to war. It's a duty!
5
@Hamid Varzi
Check Denmark, Switzerland, Norway and Finland on immigration. None of them are now allowing unlimited migration into their countries. They are successful due to a homogenous population base and controlled immigration policies voted for by their populations. The U.S. no longer has the need for thousands of migrants to work in the fields, in factories or as servants in large homes. We cannot support the world's poor; climate change has contributed to migration patterns, e.g. drought in former farming areas. Birth control should stop being used as a political weapon; it is needed in India, Africa, South and Central America. It is nonsense for leaders to claim that birth control is a form of political oppression.
@Linda Miilu
Birth control is needed on the Upper East Side of Manhattan. Those kids will use up resources and pollute at about 200 times the level of a kid from Africa, South and Central America.
You are using birth control as a form of political oppression.
2
Good old Henry Ford, while not a paragon of progressive thought, at least understood that people without disposable income didn’t buy cars. This simple thought has seemed to escape our titans of industry as well as the attendees of Davos. It would seem that the egotism that needs to accumulate billions of dollars blocks simple brain function. I fear the cycle of ignorance that culminates in the guillotine will be repeated, ad nauseam.
2
Maybe this rut stems from too much concentration of wealth in too few hands who won’t raise salaries or pay value or taxes?
1
Has the author of this article ever considered that the economic well-being of a country depends on factors other than interest rates, I.e., the cost of borrowing? With such a limited understanding of behaviourable economics not much of what he writers can be taken seriously.
1
@J K Griffin behavioural, sorry
The fallacy in all this thinking hinges on the general population continuing to buy cheap goods. However, as income for average people has stagnated or fallen, most people will not buy more goods, regardless of price. They can't afford them. Plutocrats like Wilbur Ross and his ilk fail to understand this. Until the global elites decide to share some of the goodies, this situation will not change.
2
If we need to fear bad policy we should be terrified at this time. We have the master of bankruptcy in the White House and Irresponsible Senators in charge on Capitol Hill. It is time for the adults to take over.
1
It may take a revolution of some sort, to get back the money that has gone to the few very wealthy individuals in many societies. Personally, I think they are being long term foolish, with their greed. It took a long time, and a lot of persecution for the riots of the sixties. Will it take a long time for the underclasses to wise up? Maybe.
1
We put Bernie Madoff in jail because he peddled a Ponzi scheme to gullible investors.
But what if the notion of "economic growth" is itself a Ponzi scheme? That would be because economic growth is seen as requiring population growth. And population growth is unsustainable in the long run.
If the world were subjected to an average of 2% per annum population growth for 700 years, there would be one person for each square foot on the earth's surface. In a few thousand years, the earth would be replaced by a ball of humanity expanding outward at the speed of light. A continuation beyond that would conflict with laws of physics.
At some point, when population densities get high enough, continued population growth leads to lower living standards.
This has already happened in much of the third world.
Example: Life for the poor in India is bleak. You can read about it in the excellent book by Katherine Boo, Behind the Beautiful Forevers.
Outright starvation is occurring in Yemen. Yes, there is also a war in Yemen, but war would not lead to starvation if population density were low.
What is the impact of population growth in the US? Well ,a part of the population feels so threatened by illegal immigration that they have shut down the government.
Why didn't democracy provide a forum for discussion instead of government shutdown?
Perhaps because liberals declare that concern over immigration is due to bigotry and racism. This censors the needed rational discussion.
@Jake Wagner
I am a liberal; I am neither a bigot or a racist. My concerns are about the unlimited migration of people with low education and skill sets. We don't need more people to clean hotel rooms or mow lawns. We don't need more men to displace construction workers et al, even if the builders want to import them for low wages. I want to protect the middle class which already exists here; manufacturing jobs with good wages and benefits were allowed to move to countries with low wages, no benefits, and no environmental or safety regs. How did that work out for the middle class now working behind the counters at Wal-Mart and Dollar Stores, many of whom are working two jobs to survive. How is that working out for their children? Corporate interests now control much of our foreign and domestic policy; they finance expensive campaigns and are then owed preferred legislation in their interests. How is that working out for everyone?
I am not surprised. When the GOP keep giving all the money to the corporations and the wealthy the 99 percent will always stay poor. How about sharing the wealth like Jesus recomends. many sections of the Bible.
2
The neo-colonization continues of the US and other formally first world nations. Saturate with massive amounts of third world immigrants and watch the profits accumulate, as our standards of living and wages rapidly decrease.
4
"And that...makes the world uncommonly vulnerable to a bout of bad luck or bad policy."
Why does the name "Trump" keep coming to mind.
1
The unwillingness of the global elite to transition to a renewable energy economy is the reason for war, poverty, income/resource inequity, and of course rapidly accelerating climate change. Military activity is a full 40% of US greenhouse gas production, and the US is constantly increasing that by increasing military activity. I'm sure Russian and Chinese military are also huge culprits in the production of greenhouse gases.
We are not going to get out of this by conducting business as usual. The psychopathic presidents, CEOs, bankers, etc. must all be removed from positions of power or we are well and truly doomed. These people are so focused on their greed, they don't see that they are killing the world, or if they do see they don't care.
Change or die, that is our situation.
2
It could be the rise of the socialist worldwide. Promises of higher taxes and/or seizure of assets will kill any economy.
But the low interest rate and large deficit can't go together forever. At some point, rates will have to rise in order to continue to fund the balooning deficit after sucking up the savings glut. Then what? stagflation?
Chinese are now proposing to wipe out the trade deficit by buying American agricultural goods and enegy instead of treasuries. That could be one event that sparks inflation while the economy enters recession.
1
I'm an upper middle class film artist in Hollywood and my wages are lower now than they were in 1992. Like most American households, I work multiple jobs to make the same income I did in the late 1980's. How dare you or anyone else say that worker wages are inflationary? The structural inequities in the economy are all skewed to support corporate welfare and to force working families into poverty and servitude. How dare you fail to mention the corporate giveaway that has rewarded stock buybacks instead of wage increases, and how dare you feign ignorance of this fact in print. These are not questions, these are certainties: Without higher wages THERE WILL BE NO RISE IN DEMAND FOR GOODS AND SERVICES. There is no way out but the redistribution of wealth back to the levels of the prosperous past, and you know it, Neil Irwin. How dare you.
5
@Larry Leker
Larry is so right !
"Without higher wages THERE WILL BE NO RISE IN DEMAND FOR GOODS AND SERVICES. "
The need for higher wages is simple. Congress pass a "Natl" infrastructure bill ( $ 5 bil.) This will employ 1 mil. high wage construction workers plus support industries. The increased Fed. taxes for infrastructure will be paid by the higher wage earners in all industrial supply industries along with all other increased employment.
We're talking about : highway, rail , sewer , water , electric, airport , internet etc.
Our systems are old, face lifts won't work anymore.
1
Yes. High growth by all means! Let's destroy the natural systems on which we all depend more and more rapidly.
The stupidity of a philosophy of continual long term economic growth is breathtaking. We will have an Earth that is tragically depleted and lives that are hardly worth living.
3
So, what's wrong with everything going slowly?
Only the slathering greedy sociopaths on Wall Street demand 5% growth for them to find any inner joy.
Homeostatic economic conditions are just hunky dory for me.
3
"China is trying to wean itself off debt-driven growth." They've got to tell their kids that: "China's Generation Z teens spend more and worry less than you do"
https://www.chicagotribune.com/news/nationworld/ct-china-generation-z-spending-20190127-story.html
Another example of the disconnect between: reality, the economy, the environment, the press and the future. In case you've been off the planet for the last 100 years, we can't go on like this. Ever more economic growth, ever more population growth, more consumers, more industrial out put, more resource use, more throw away products and everything else that have gotten us to this point, are not only incompatible with a sustainable future, but are the causes of global warming and the majority of the problems we face as a civilization and planet. We need less, not more, of almost everything that most economists, the press and shortsighted politicians think are "good".
6
@Al
No pun intended, but you are not alone in your observations.
2
this was a symptomatic inventory without the diagnosis. i didn't even see mention of hansen's "secular stagnation" which is to exactly this economic condition of "boom times" in an economy hobbled by savings -- when savings are greater than investments.
savings is not always, dear children, the meager pension of grandma and grandpa (although those do add up in an aging population) and their six figger savings, it can also be the stupendously fat ownership accounts of all those billionaires sitting with trash accountants counting their kreugerrands and forest timber. those poor forests.
no, no, says nobel laureate paul krugman, it's those slaggard consumers, we need them to spend more!
wait ... what happened to the billionaires who would trickle down their wealth to the many who vote not to tax them? secular stagnation also means investments are not greater than savings.
so then, billionaires, why sit on your wealth? -- i looked it up, those 2200 worthies are worth $9.1 trillion -- why sit and not spend or invest, either way, we don't care.
my theory of secular stagnation says that it's a gambling scenario; as environmental risks proliferate, the best strategy for all economic actors is to hang on to what you have, and don't invest unless it is necessary. wouldn't that also be secular stagnation?
where are we headed, and how do we propose to get there? once we all decide to hang onto our wealth, what next? why, the world of have and have not.
2
Maybe I missed it, but I found nothing in the article nor in the comments reflecting the higher growth and lower unemployment in the U.S. over the past two years. The article seems to be complaining that the runaway inflation formerly feared is not materializing. Can the answer be the higher capital investment we are seeing and the re-entry into the labor force of those who dropped out over the preceding decade? The real risk is that we now reverse those policies based on a shift in the political environment, and revert to the low growth scenario.
1
"the era of persistently low growth, low inflation and low interest rates isn’t over after all."
This is all bad why?
4
The article is, for me, very informative but makes no mention of Brazil, or, for that matter, Russia. We benefit best when we include all economies on the global stage, of course, but I wonder how that thinking is received in DC. From another perspective, one could look at the world economy and see a war zone.
Just what did they think would happen when they rig the system so that almost all of the rewards for greater productivity and hard work go to the very top few, most of whom had nothing to do with the increases in work and productivity?
We have a primarily consumer economy, not a capitalistic one. If you're going to expect the economy to grow, you have to fuel it with income flowing to those who will spend it!
Give a million dollar tax cut to someone who already has trouble finding things to spend his money on that he doesn't already have, and you will get no economic stimulus. Give a ten thousand dollar tax cut to someone in the middle class and you'll see a much larger return on that tax cut. It will all get spent, and spent on things that create new jobs and income for others of the middle class.
A million dollars to a big pharma executive who already lives in a fifteen thousand square foot house and has six cars will do very little outside of increasing his already large bank account. Ten thousand dollars to someone who lives in a fifteen hundred square foot house and has two older cars will create more stimulus than that million dollars ever would!
27
@Bruce: The Trump tax cut was a gift to corporation managements to buy back stock to concentrate wealth even more.
9
@Bruce wow, I was getting ready to write but you said almost exactly what I was going to. no industrial output as noone has money to buy anything and the people with the $ already have too much.
amazing no dem can find the spine to say this. the r's are a lost cause and nothing but enablers to stealing from the poor to give to the rich.
yet here comes AOC and in a month changes the debate to one we should have been having a decade or two ago.
so change the tax code back to what it was when RR was elected and use 100% of it to spend locally on infrastructure. the multiplier for spending/taxing/ buying raw materials/ paying wages locally is huge.
but if you really want to scare the diseased greedy class here's how; militarily seize the banks on all these off shore corruption havens, complete a 100% open forensic accounting of all the untaxed crooked wealth stashed there, send a few chosen egregious ones to jail (Putin and his oligarchs will not be happy) and distribute the money worldwide to fund infrastructure esp last-mile green energy projects, like PV solar, and fund crash development of carbon capture. you create local jobs, provide infrastructure for the masses and a shot in arm to local govts to fund additional projects or subsidize things like child health care.
that way all the greed mongers untaxed illegitimate $$$ would actually go for something good rather than the continuance of their disease.
there's you green new deal. nah, never happen.
2
@sam. The democrats have only one issue. Ever more immigration, amnesty, protecting and encouraging illegals. They may yet find a path to a second term for DJT.
Talk about cherry picking data. US worker productivity has grown enormously, and the workforce is younger since 2000 and 2010, yet growth and wages still stagnate. Your observation that these two factors are responsible for poor market conditions is wrong.
The modern global economies are consumer based, yet the investor class continues to treat the middle class poorly, with policies that make the already rich richer, and everyone else poorer. It's no surprise that the world economy is stagnating when the world's consumers - the historic middle class - has been under assault by plutocrats for a quarter century.
25
@Dan D
The low interest rates also discourage savers. Why scrimp to save when you get nothing.
1
The trouble is that most wealth created in the last 20 years is in business that require few workers (Google, Facebook). Those workers and owners have captured this wealth, but, given their few numbers, this wealth has not filtered through to additional demand in the economy. Even software designers have a limit on the number of cars they need and lattes they can consume.
Until the next innovation is around a product that creates significant employment as well as wealth, the low growth, high wealth cycle will continue.
Government policy of high taxation and wealth transfer can help generate additional demand from this wealth, but is inefficient and feels unfair within the capitalist framework.
1
@OneView
The need for increased productivity at the cost of jobs needs to be re-evaluated. What kind of world do we want to live in? Most people want meaningful work and purpose. Innovation shouldn’t make lives worse. Just as we need to look at products from cradle to grave (plastics didn’t meet the grave test), we need to look at the value of work.
5
@OneView
Eisenhower didn't think it was unfair; he managed to build an Inter-State highway system which we no longer maintain. I drove from NYC to SF and can vouch for the potholes, crumbling side areas, and many toll charges. The Feds have now thrown maintenance back to States with uneven funding available. The latest gimmick is to sell our toll roads to the Saudis who can collect tolls and do whatever maintenance they choose.
Wow, I never thought I would hear Neil Irwin mention "lack of consumer demand". And all this talk of a deflation trap and how hard it is to get out of one is making him sound like Paul Krugman.
I wonder what would have happened if, when the GOP forced through its big tax cut, it had given the extra funds to people who had real consumer needs, like housing and medical care. Oh right, worker pay might start to rise and we don't want that (/s).
10
The cyclical/structural debate is over. It's structural.
7
I would like to see a robust debate around the ideas of "doughnut economics" proposed by Kate Raworth. Degrowth or steady-state economics with new metrics for measuring well-being. If we are aiming for an ecological civilization in the 21st century we need alternatives to the compounding growth assumption.
21
German insistance on tight fiscal policies within the Euro Zone, and it's preoccupation with a tight budget and a current account surplus for itself are continuing to strangle aggregate demand in the North. Blame where due.
4
@bernard Germany is bankrolling Latin Europe, and soon to be France. They have every right to demand those economies live within their means.
1
@bernard. A lit of the growth is fake; the metrics are wrong. A person’s illness/ death ‘contributes’ to GDP by ‘increased’ consumption [of medical care] and the ‘income’ from say burial etc. But a stay-at-home parent’s value is not counted, Butt daycare is. There should be a simpler positive/ negative measure -
There's a simple Marxist explanation for the low-growth low-inflation rut. It is that the rich have most of the money, the poor folks don't have the money to buy the stuff they make and the services they provide, and the investments of the rich don't pan out because the poor shoppers can't shop enough to make investments pay off. We're evidently due for a global panic, the old-fashioned word for a recession or depression. And it's happening because taxes on the rich are too low, the pay for workers is too low and there aren't enough govt programs to recycle the tax money of the rich back into the living economy.
115
@Garlic Toast nothing Marxist about it - Henry ford KNEW it. Capitalists’ extreme greed is the real problem.
10
@Garlic Toast simply stated, and correct...
7
@Garlic Toast That's not Marxist. That's Classical. Marxism would say, following the labor theory of value, that expropriation by the bourgeoisie of the value created by the workers' labor impoverishes the workers.
5
There’s a saturation of goods in the developed economies and China is moving in that direction as well. The consumption level of world’s poor needs to rise substantially to grow the world economy.
Policies in all countries that encourage higher incomes and lower taxes for the poor and reciprocallly higher taxes for the world’s rich can make for a win-win outcome for the world.
15
Economic growth is based on human population growth, and exploiting and destroying the biosphere and other species.
It's the ideology of cancer cells: growth for the sake of growth.
It's based on relentlessly increasing consumption of a finite biosphere, and the killing of 57 BILLION animals per year.
The best thing would be for economic growth to slow down to nothing, and a total revision of the human economic/cultural grid into something that respects the biosphere, quality of life, and the other organisms who evolved here with us.
26
The problem is that capital knows that low growth readily turns into negative growth so they minimize their investment risk, ensuring negative growth.
6
This would be comical if it were not so wrong.
Deflation is being fueled by ever rising savings in fewer and fewer individuals and
companies which keeps pushing down demand.
Only taxation will solve this problem and it better come sooner than later. The alternative is social upheaval .
64
@Joe income tax AND wealth tax. All over the ‘developed’ world.
4
Two things some to mind:
1. Put in place policies that reverse this 40 year trend of income inequality. It can come from tax policy but also safety net expansions.
2. Make savings less attractive. It’s not that Mom and Pop are saving to much. It’s the wealthy and corporations.
Ultimately this problem can only addressed through government policy, not monetary policy. And governments it seems aren’t wrapping their head around this. Instead they’re scapegoating the scapegoatable to serve their own political survival.
13
Savings are not more profitable for anyone at this time. Investing in economic expansion which does not happen means losing the money invested. With most new wealth going to the wealthy, the economy does not expand rapidly enough to support investing in greater productive capacity. Businesses focused upon becoming leaner and less costly to sustain good profits are not supporting growing demand for new sales, they are relying upon others to do that. When there aren’t others able to buy more and more, the result is a static economy.
1
Hmmm.. the corporations are giving money to shareholders through buybacks and you say they’re saving too much? More likely, the world is overdeveloped and there are too few opportunities available.
@John Sweeney the ‘buybacks’ transfer money to the already wealthy. So no difference. Iran has it right: give away 2.5% of you ‘idle’ wealth every year - think of that as a ‘wealth donation’ [tithe] it is not a tax by the state. You need to ‘let’ individual earnings be able to ‘buy’ things that are necessary and produced .
2
The usual economic money multipliers fueling demand and encouraging investment are not in play because the 1% aren't spending. When the poor receive a raise or a wage, they spend most of it. The effect of that spending multiplies into the local economic base, the tax base and beyond. The super rich (and Multinational Corporations) sit on most of theirs. We need Eisenhower tax laws (which are panned today as socialist) back in play to put more multipliers back into the economy by forcing the rich to pay more taxes or spend more money in lieu of paying taxes.
19
Corporations are buying back their own shares, not hoarding cash ... there are too few opportunities in this over-developed world.
1
Hmmm. Could low growth and low inflation be due to the fact that the United States now resembles most of Latin America - with little to no middle class?
How did this happen?
The 1% can only buy so many appliances and other staples which make the core of a healthy economy.
69
True that so they’re investing in emerging markets not over-developed Western economies.
3
@Jake, We've turned into Brazil, especially in California, and nobody has bothered to notice or point it out.
7
As Jerome Powell knows, but Trump does not, it's very dangerous to let the mood of the stock market drive Fed policy. The stock market represents the wealthiest 20%, not the paycheck-to-paycheck 80%. The Fed has to worry about the overall economy - jobs, wages, revenues, profits - in other words the real economy that the 80% lives in. Swings in the stock market are driven by a small percentage of professional investors and their computers, who try to jump on the trend early and create volatility. Forget them.
Let's not forget that the Fed controls monetary policy. Come the next recession, we will need a strong fiscal policy - i.e. deficit spending on infrastructure and safety-net benefits - that our government has eschewed since about 2010. The 2017 tax cut was a fiscal giveaway to the 20%, and it has done almost nothing to goose the paychecks of the 80%, who would gladly keep this expansion humming for a few more years.
22
So many of these comments point to ‘wealth inequality’ as the greatest sin of our current society, and the failure of policy makers to stand in the way of this evil. I know this view will not be popular here - but I disagree.
I know that this comment section not a fair venue to debate this completely, but I would like to credit free-market capitalism for what it has done for humankind: help lift more people out of poverty, hunger and disease than any of the centrally-planned, top-down policies suggested by many. Let’s not blame & attack success, let’s focus on what we can do within a free-market economy, with an emphasis on education and safety-nets, to keep providing opportunities for all.
Sure, Jeff Bezos, Surgey Brin, Bill Gates, Steve Jobs, and many others have aggregated hundreds of billions with their entrepreneurship in our global economy. But many of these, Bezos & Brin in particular, had very humble beginnings.
Instead, I think we should focus on the many root problems in America that lead to unfair opportunities, such as failing schools, degrading public housing, inadequate job training and disincentives to work.
12
@Concerned Mom
You have a point. But everything in moderation, and the free market economy can function very well, thank you, when it is not allowed to run rampant at the expense of the public sector.
11
@Concerned Mom
My concern for "humankind" outside the US exists but it is limited.
Our "corporate citizens" and "job creators" love to wave the Red,White,and Blue in their ads and go one about how patriotic they are but when you listen to their quarterly analyst calls and IR presentations it's clear that the US (whose courts protect their IP, enforce their contracts,and ensure their receivables) is just another market to them.
Also, your contention that "disincentives to work" are even a minor factor in our economic situation just isn't borne out in the numbers.
7
They had humble beginnings and did just fine -- that is a good argument for why they and their kids, and those of their top investors, don't need the billions of dollars that they hoard -- they did fine with 1/1000 of what they have now. And it's not even those few newbies that cause the most problems. It's equally on those whose extreme wealth comes from other sources, perhaps in addition to shares in high tech. People who aren't common household names (and some who are, like the Koch bros).
(and p.s. I don't think growing up upper-middle class counts as "humble beginnings" -- unless you, too, are super-rich.)
5
2% inflation per year for 20 years erodes 67% of the dollars purchasing power.
Think of that before we start saying inflation isn't a problem or is to "low."
9
@Veritas Odit Moras
Yes, but it only erodes the purchasing power of cash stuck in a mattress.
@Veritas Odit Moras, 2% inflation is only a problem because wages have been stuck in real terms for four decades.
2
Why not tax the rich more, and lower taxes on the middle class?
Just make capital gains and income tax rates the same.
That would stimulate the economy, and narrow the inequality gap.
32
@Toms Quill I fully agree that income from work shouldn't be taxed higher than income from having wealth (capital gains). It's sad that our current government believes that working for a living should be punished (higher tax rates), while simply being rich (income from investments) is rewarded. If this isn't upside down, what is?
4
@Toms QuillIndeed this would money in the pockets of people that actually will spend it and not hord it.
1
@Toms Quill
An excellent point, made in many different ways throughout these comments. The problem is that the rich are buying politicians to keep their taxes low on income and capitol gains, and prevent the stimulation of the world's economies by moving wealth down the economic ladder!
They have become convinced it's a zero sum game. If they lose even one dime of their wealth to taxes, they will cry to the heavens that they are the ones being exploited!
They are convinced that only the wealthy know how to spend money correctly. Everyone else wastes their income on foolish things, (you know, like food and housing)!
4
Maybe the conventional wisdom, and this essay, are wrong. Maybe slow growth and low inflation results in fewer, milder recessions. Less boom and bust, per se. Which means we need to look differently at slow wage and income growth. Rather than depending on a rapidly growing and inflationary economy to grow wages (rapid wage growth plus inflation is self-defeating, in any case), we should be looking at different distribution models. How about we accept slow growth, but insist that more of company profits go to employees, instead of shareholders? During this period of slow growth corporate profits have been booming. Why do all of those gains go to shareholders? Change the tax laws and laws on pay and benefits, so that more of those profits go to employees. Radical, I know, but simple and elegant.
14
@John Ranta
The US corporate sector just received the largest onetime tax cut in history and after some PR stunt "bonus" announcements proceeded to NOT share their windfall with their workers.
Corporate managers and Wall Street analyst have been indoctrinated with a hard-wired hatred of wage hikes.
Trickle down theory must be destroyed in favor of "bubble up!" Until that happens consumers will struggle.
1
With health care now almost 20% of GDP, one needs to think about its role in GDP growth over the last 30 years. When I got into the health care business, it was about 6-7% of GDP and typically exceeding GDP growth. My rough calculations put health care spending increases have contributed to about a 20-30% of GDP growth over that entire time except for the immediate aftermath of the 2008 recession.
As we speak, health care spending is likely to seriously outstrip overall GDP growth for the foreseeable future. However, we know that our health care system's costs are out of control. The question is, if health care spending was reduced to at or below overall GDP growth it would be a serious dent in how much potential GDP could grow. It would put us on a sub 2% GDP growth maximum all else being equal.
One could also argue that since health care has not seen, nor is it likely to see, significant improvements in productivity since 80% of total health care costs are in labor. This is probably one of the reasons that overall productivity has decreased.
Something to think about.
5
Low growth, low productivity, increasing
pollution is the bad scenario for Mr. Trump's trade wars. Eventually the
protectionist policies will make the
economies worse off and can easily be pushed into recession. The next recession will be worse than 2008 because central banks don't have many tools to deal with it and there is heavy debt burden on government, corporations and households. In USA it is 317% of GDP ( all debt). It will be difficult to load up on more debt to stimulate demand.Fasten the sealt belt. It could be very bumpy.
3
Economists have become adept at describing the low-growth, low-inflation word economy but have no idea of the root cause. They are able to describe the patients' symptoms but not the underlying disease.
In fact, there may not be a malevolent cause. The slow-growth may be a benevolent response to a world limited by Malthusian environmental and climate changes. We don't know.
Perhaps economists should be focused on elimination of poverty, hunger, illiteracy , income inequality and disease rather than GDP growth. Perhaps in solving these more important problems we may make meaningful progress on the more mundane statistics.
It is at least worth a try.
19
No, it’s simpler than that. The labor supply has exploded with globalization. And the western economies are overdeveloped so there’s no place to invest there; hence the savings glut. Too much labor, too much capital, prices must fall.
2
Inflation, growth and productivity changes are all in synch. While people focus on IT’s impact on automation, they completely miss the impact of MIS. Managers do a much better job managing all resources and assets of which staff are just one component. More than a few recessions arose after the left hand figured out what the right hand was buying and it was all waste. Now everyone in an organization knows what everyone buys, sells and uses every day worldwide. You will get less peaks and valleys in that system. Benefits there translate into higher financial markets.
When your father told you to work hard and work smart to make your money off smarter people working harder, we are living what he meant.
4
Yeah, I Told You So.
As I've stated repeatedly, it's no big surprise that central banks are have such a hard time (re)kindling any sustained inflation in goods prices. There is overcapacity in everything! From the rawest of raw materials to high value-added consumer products and capital goods.
Easy,cheap money,flexible production hardware and software,tremendously easy transfer of labor capital,etc.
This is mainly,though not solely,due to China's admittance into the global trade system (remember, bringing China into the fold was going to change it!).
8
And it is a good thing that low-growth is a reality, not just a phase, and the smart approach is to think about how to adjust society to a low-growth future.
Economic growth is what caused climate change (and climate change will force economic growth to slow even if we don't slow growth to try to slow climate change) and is driving countless species to extinction (that many of us don't want the world we live in to be without).
Also, population growth will invariably slow as more countries reach "developed" status and women are allowed to get educations and families with 5, 7, 10 children don't make sense in a non-agrarian societies. Plus, we're simply crowding each other. 10 billion people with internet connections all wanting to be heard and having the means to do so. The cacophony is deafening. We can't just all get along apparently and the more crowded we are and the more the earth's resources are taxed the worse it will get. So it is not just a Malthusian debate about whether technology will allow the earth to keep sustaining more and more people, so that the elite can profit off of more and more consumers; there are societal reasons for why we should not just keep growing and growing. And people simply won't.
We need to stop being economic growth junkies and workaholics; the machines should be giving us leisure time and fostering a time of intellectual and artistic growth rather than just concentrating wealth and leaving so many in misery.
37
@John Fritschie Nonsense. We could have a clean energy economic boom that would make energy less expensive and more plentiful. Imagine if we all had energy efficient “smart” homes with advanced solar panels on our roofs, batteries to store and deliver electricity when the sun isn’t shining, electric heating/cooling, and electric transportation. Supplement solar with advanced wind, hydro, and next-generation nuclear (as a last resort).
All of that has to researched, developed, built, installed, and maintained. Investment to make it happen would spur the biggest economic growth in history. All we have to do is decide that we want that future for our kids.
12
Time to admit that free market economics do not reflect real world economic behavior. The free market hypothesis is founded upon the dominance of rational agents controlling how humans conduct economic activities. This leads to the conclusion that by letting that behavior to be as it will, optimal results can be produced. It leads to the belief that when people have surpluses of money they will invest and lend it to gain more of it, and so will perpetuate economic expansion. But that’s not true.
People are dominated by feelings not rational understanding. They don’t minimize losses and maximize gains reasonably. Instead, when they see losses are inevitable they will tend to bet on the longest odds. When they see winning is less than absolute, they will hedge their bets greater than their likelihood of losses. The result is not achieving the optimal outcomes.
For ten years after the Great Recession, investors and corporations sequestered massive amounts of money to retain it until they saw clear opportunities to make money. They reduced operations to optimize profits, focused upon mergers and acquisitions, bought back stocks, focused upon automation, played trading of paper securities to gain a greater share of existing wealth, and rejected risky investments. The result has been huge concentrations of money that produces little new growth because it does not contribute to much growth in markets. They did not follow a strategy that enabled all to contribute to new growth.
17
So, how is buying back stocks hoarding massive amounts of money?
Buying back stocks raises the values of shares without any actual increase of owner equity. There is no new wealth created.
2
As long as economist’s models fail to include important factors such as the health of our environment, concentration of wealth, dropping food stocks in the ocean, population growth, pollution, and climate change those same models will fail to predict how the world economy works. As long as economic theories treat these things as “externalities” and only count the number of money transactions (gross domestic product) as a measure of well being of the economy those same economic models will continue to fail to predict what it takes to achieve a truly “healthy” economy and one that is sustainable. We are measuring the wrong things folks.
80
@Jeff
You're making the common assumption that the economy is supposed to benefit everyone. Not sure if it's designed that way.
4
@Fourteen
To the degree that we are free, there is no design and no “supposed to” involved.
2
@KBronson
Yes, but we are not free.
Free to work 50 weeks and get 2 off. At least the slaves got free housing, free food, and free healthcare, and they didn't have to commute or pay taxes.
Free to vote once every four years - for Corporate Shill 1 or Corporate Shill 2. We're hardly free to think with all the media programming.
This society is definitely not designed for freedom, that's just a control icon we blindly worship. Democracy and Capitalism are a couple of others.
3
May I summarize what David Attenborough, one of the most trusted people in the U.K., said at the convention of outer space aliens in Davos?
"...In the space of my lifetime, all that has changed. The Holocene has ended. The Garden of Eden is no more. We have changed the world so much that scientists say we are in a new geological age: the Anthropocene, the age of humans."
He added:
"[The economic] growth is going to come to an end, either suddenly or in a controlled way. Anyone who thinks you can have infinite growth in finite circumstances is either a madman or an economist." (The Guardian, 01/21/2019)
How can anyone despair that exponential growth (or ever continuing growth) is impossible on the spherical, finite Earth with her finite natural resources?
141
@Tadeusz Kościuszko - The earth may be a finite planet, but we now have the technology to expand to the solar system if we were willing to spend the money and do the work. The solar system is effectively infinite.
ad astra per aspera!!
2
@Tadeusz Kościuszko
He's a fool. Don't trust him.
Don't trust anybody who doesn't present evidence.
1
@Len Charlap
I hope there are plenty more like you wh are willing to live in bubbles out and beyond. I for one prefer the planet we have here.
7
When all of the money is concentrated at the top, the other 99% can't afford to spend as much on goods. Selling goods to consumers is what makes the economy go around, not more money for the rich. The recent shutdown has shown that what is considered "the Middle class" is living one step away from the edge of the bankruptcy cliff. I know that is making me rethink whether or not I really need Amazon Prime, or that special something I just saw in a pop up. Maybe I don't really need a new patio cover! I am sure many others are doing the same.
82
@1 bite at a time
Of course, you don't need it. Aside from basic needs like food, cheap clothing and shelter, you don't need much. Save your money for a rainy day.
4
@1 bite at a time
If you don't buy that patio cover then you will be partially responsible for the economic consequences of a downturn.
1
@1 bite at a time
And when so many of see our tiny-to-none tax returns this year (thanks to last year's giveaway to corporations and the already super wealthy), we won't be buying that appliance we'd plan to get.
3
Why does low growth and low inflation get labeled a "rut"? Why is it assumed that growth is always, inherently, and solely a good thing?
There is value in stability, and it's not only monetary. For those who are already making ends meet and living a reasonably comfortable life, and especially for upper middle class and the already rich, with low inflation, there's no need to constantly get more and more and more money. Unless, that is, one considers failing to appropriately treat and even enabling compulsive spending and/or compulsive gambling (stock market), compulsive collecting (of money, things, costly vacations), and/or compulsive saving (hoarding money) a "need" which it is not.
16
@Person
One reason low growth is a problem is that the global population is growing at a faster rate than the world economy. That means that more people get a smaller sliver of the economic "pie." That's a recipe for increasing poverty, political instability, and even lower economic growth. The world economy may be in a deflationary spiral.
3
@Person
Growth assumptions are built in to the system. Government debt, private borrowing for education, pension systems, are all built on assumptions of growth. We have already spent our next raise and the entire society is in a pickle if it doesn’t materialize.
4
@Eleanor Per Wikipedia: Global human population growth amounts to around 83 million annually,[2] or 1.1% per year.
The average population in the developed
world is lower where birth rates are less than death rates.
1
It boggles my mind that fiscal policy isn't mentioned once as a serious prescription for lifting the global economy out of the doldrums. Call them what you want -- neoliberals, budget hawks, austerians; their wrong-headed and destructive view of government's role in the economy -- limited or none -- has triumphed at the expense of the quality of life for generations of Americans and millions of people around the world. With interest rates near zero and no signs of inflation in the economy, it'd be foolishness not to spend (borrow) trillions of dollars on infrastructure, education, energy and public health to increase growth and improve the lives of millions. The cost to taxpayers would be virtually nil while decreasing the number of underemployed and unemployed, and it would increase the productive capacity of the economies that enacted such measures. During the 1950s, 1960s and 1970s, when the economy turned down, Congress passed bipartisan infrastructure spending bills that limited the extent and duration of recessions. It was called pump-priming, and I suspect that the reason we don't hear about it anymore has something to do with widening income inequality. The mega-wealthy who control the conversation are anti-government. But Neil Irwin should know better.
32
@AlNewman The very rich are vested in keeping the status quo as it is. They will ride this low growth, low income train until the system and the consumers falter and break under decades of attack. We, the People are aware that we are already there. The rich are the last to admit their system will not magically continue to work when they have broken everyone else except the top .01%.
27
@AlNewman
Extremely wealthy people are heavily invested in sequestering and securing their wealth from the rest of society, and nothing erodes at fallow wealth like inflation does. This is a bespoke article: ignoring the elephant in the room in favor of the paintings on the wall.
13
@AlNewman
Your thinking is based on the good old days.
The modern era has massive income inequality - the smart money - calling the shots. Low interest rates are not when you borrow and invest, as one might think. That would give soft landings and mitigate cycles.
Engineered boom and bust is the fast risk-free way wealth is transferred into the ultra-richs' offshore accounts. Old-fashioned investment in productive assets and accruing returns is slow and boring.
They care not for the old pedestrian return, instead they're positioned to withstand risk so when assets crash they clean up.
1) They sell short, and 2) they're buyers on the other side of the trade when everyone sells, and 3) they buy risk at the bottom for next to nothing.
Then up it goes again, like a miracle. They sell off their risk assets (which are no risk because they got them for next to nothing) and reposition in risk-free to await the next cycle.
There's very little risk for those who own the markets and making money is not something they leave to chance.
5
And what is even more amazing, the US can increase its national debt to $20 trillion+, and yet inflation remain muted and interest rates low. Who would have thought this would be the case when the national debt was at $1 trillion as opposed to now? I can only theorize that since the US is considered the largest and most efficient economy in the world that the US dollar has become the de facto reserve currency in the world. This result including the effect that technological innovation has had on subduing inflation, economists must revise their old world models for predicting inflation in todays environment.
4
@RDK573, US debt is not $20T.
it is of federal government only. In addition,corporations, city governments(municipal bonds)
and households have debt in trillions.It totals to about $64Trillions, a hefty number.
This is the reason stock market went
into a nose dive at the prospects
of increasing interest rates. The
debt servicing will take away a big
chunk of government budget,
household income( worse if there
are layoffs) and corporate cash flows
causing many to default.
3
There is much discussion of how wage earners have not benefited nearly as much as those at the top. Robert Reich writes about this extensively. In every case the viewpoint is without the context of the massive events of the 20th century.
After WW2, the US had the only real functioning major economy. Europe and Japan were smoldering and needed massive aid to rebuild. American factories were in great shape. Advances in technology and manufacturing brought us a world of new products. We had no competition.
Western Europe recovered first and was relatively socialized. Much of their investment was in infrastructure, such as their rail system that lives today. Japan recovered during the 1960's with ever-increasing quality of goods. During the 1970's we started to feel the pressure.
In the 1980's the communist eastern Europe began to fall. Western European companies could tap inexpensive manufacturing to their east. Competition is getting tighter and factory automation starts improving with more computers.
In the 1990's it was the "Asian Tigers" that caused the greatest fear. South Korea (having started as the agrarian part of the peninsula and leveled in their war) began to export.
Finally in the late 1990's China, with >1B people, started to export. They exported absolute junk at first, but quality has improved. Factory automation is also growing.
Just how does anyone expect to get workers back to the market power that they had in 1955?
21
@John
Good synopsis. The biggest "disrupter" in your list is China, by far.
A completely self-inflicted wound on our part.
@John
Have a *good* war? Or a major, country-decimating catastrophe like a plague? Or environmental collapse? (If all those populations desert the seashore, we'll need to build a lot of housing somewhere inland.)
Not liking this answer, just saying.
1
I find this frame helpful for thinking about why the U.S. sustainable growth rate is around 2%:
Output or GDP = (Output per person) X (Number of working persons).
Output per person is productivity, which has grown just 0.9% per year since 2010. The number of employed has grown 1.2% per year since 2010. So the U.S. sustainable growth rate is somewhere around 2.1%.
We can increase this rate by adding to our employed workforce, via higher fertility (long-term) or more immigration; we have 7 million job openings so this is a golden opportunity.
We can increase productivity by better processes or investments in technology and education (free tuition, anyone?)
Some industries have gotten far more productive (e.g., manufacturing, where we produce more output with one-third fewer workers), while the mix of more service industries probably weighs down the overall statistics, as we haven't figured out (yet) how to automate services.
The BEA publishes statistics that show how much the federal government stimulus (just the spending side) has added to GDP growth; that answer is about 0.25% during Q2-Q3 2018.
Trump's tax cuts added another 0.3% or so on top of that temporarily.
https://fred.stlouisfed.org/series/A823RY2Q224SBEA
5
@David Doney
Adding more people without adding more jobs does not increase economic output. It just increases poverty.
Unless corporations put their stockpiles of cash to work, economic output won't increase, regardless of how many people are born in the U.S. or migrate here.
3
With 78% of Americans living paycheck to paycheck, we don’t have the disposable income to spend on goods and services that would stimulate the economy. Low unemployment does not increase worker bargaining power to demand raises, because we’re disposable workers in a gig economy. Redistribution of wealth will not only allow Americans to live at respectable levels, it will generate the market demand that might save capitalism from self-destructing.
103
@Bruce Shigeura
You know, Bruce. The IRS is understaffed now. I'm wondering, in a gig economy, where most workers need to report and pay in, and income taxes are not automatically withheld, and so will be variable for each person—how is that tax revenue ever going to be collected?
12
@Bruce Shigeura
Right, I have heard this paycheck-to-paycheck problem many times. Just imagine if all the workers in the US saved not as much as the Chinese but just 15% of their paycheck every month. I would like you to think seriously about the economic implications of such a scenario: it is not likely to lead to better bargaining power and it likely will lead to deflation rather than generate market demand.
As another observer has pointed out, growth is possible only when productivity increases or the population increases. Leaving out the latter, we seem to be in a funk when it comes to truly innovative ideas that change productivity like the invention/application of electricity, motor cars or aviation. While the advanced electronics of modern age contributes to better processing, these processes were already there.
We need a better political/economic system that works with a non-negative, slow growth rate, that still provides meaningful work for its participants that recognizes human dignity.
6
@Naples: Starving the taxman shows up in myriad ways today, an example being Airbnb, have there been any studies done on the impact of these “ disruptive models” on tax receipts. It has to be huge, all of these folks renting out rooms etc. that formerly required a hotel that paid a staff as well as taxes have been replaced by folks forced to rent out their sofa as America’s middle class races to the bottom, do they pay significant taxes or hire staff, I doubt it. There has been an entire generation of people who built nothing other than business models to steal( funny how so many hedge funds closed up with the crackdown on insider trading)or cheat someone else out of a living, whether off shoring, financialization, or the most agregious being vulture capitalists who destroy companies through mergers and acquisitions:
Find a company to greenmail, load them up with debt, fire as many people as possible, strip mine their assets peddle the company to the public and watch it implode. Prison is really to good for the latest generation of bankers and “ entrepreneurs” who have destroyed our country, they should be disposed of themselves, the Chinese model works well in this aspect as it is in so many others, people are too corrupt and they are executed, I say good riddance.
4
How could it be otherwise? We are in the midst of an "industrial revolution" in which industry can operate WITHOUT workers. There may be low unemployment, but that is more than matched with low wages. Employers can compete by offering nickle and dime increases.
What can drive wages higher? Unions used to serve that function. It's difficult to see unions reaching the apex of power they once occupied. Maybe low birth rates and high death rates can force the issue? The only certainty is the uncertainty of the Brave New World.
16
Part of the issue of an aging population is signified among wealthy retiring boomers, of which I am, whereby there is a natural decline in spending. I have plenty but once retired from large income much more careful in how it's spent. I saw this occur with my parents once my father retired from svp to retiree. The cars were replaced every 6 years or longer as opposed to every 3 years and so on......Many of my peers from industry have noticed the same pattern. Much of the disposable wealth is in that generation & in this economy the effect is profound & will continue. Will be very hard to sustain growth in younger less affluent less populous generations.
25
@Northcountry, Most of the younger people I know don't even drive or own cars anymore.
The problem with this analysis is its fundamental assumptions - that continued growth is necessary to improve the economic outlook and that it is desirable. Both are false.
Both literally (environmentally) and metaphorically (economic growth), a rising tide never has lifted all boats. It tends to raise the yachts and swamp the rowboats.
Most of the benefits of economic growth go to the few with more, with minimal gain or great cost to the many with less.
After over 40 years of wage stagnation for the vast majority, combined with mammoth increases in income and wealth for the few at the top, we are at a point where sustaining even the minimal growth lamented here requires increasing tax giveaways to the already rich, further stripping of basic social benefits to the many, and increasing and unsustainable environmental degradation of the entire planet (e.g. rising temperature and CO2 concentrations in both the atmosphere and the oceans, rising sea levels, melting polar ice, unsustainable production methods of everything from food to electronics).
There really -are- limits to growth, and we have exceeded them. With 7.5 billion humans, headed toward 9 billion, we need to produce what we need more sustainably and distribute it more equitably. Solar energy and new ideas are not limited; everything material is.
Insanity is doing the same thing repeatedly, hoping it will change the situation. Sanity means we start doing things differently, starting with changing our goals.
86
@Aram Hollman
It would be great to change our goal of "world dominance" by pulling in our horns vis a vis all the places we have troops and bases (and wars) in other countries. The massive amount of money that goes to this endeavor, let alone the questionable nature of the endeavor itself, really needs examination. The jobs involved making weaponry and serving in the military could be transplanted to serve desperate domestic needs - infrastructure jobs, a Civilian Conservation Corps, and patches to our tattered social safety net immediately come to mind.
8
I'm surprised that Neil did not talk about the effects of wealth/income inequality on national/global growth. The .1% can only spend so much money. When the economy funnels more money to them, we all lose out on the multiplier effect.
For many years the problem has been demand--and it still is. What is needed are carrots and sticks to get corporations to plow more of their productivity gains into worker paychecks.
Seriously, we have to move the needle on the conversation. Inequality is not just a moral issue, it is an economic health issue. We have to wake up the plutocrats. Sure, they couldn't be happier with the state of their wealth right now. But, in the longer term, this level of inequality is going to bite back hard even at them.
The plutocrats need to start realizing that they need to start eating platefuls of broccoli now or they, and everyone else, will soon end up in the ER with a heart attack.
60
Why would US citizens be worried about world wide growth, they don't buy that much from us. I want our economy to grow about 4% per year with low inflation, that is sustainable. The rest of the world can not grow at all. And aging population is not that much of an issue, folks can work much longer today if valuable.
1
“Folks” over 70 are generally “folks” tired from a lifetime of working—or at the very least least lacking the energy and sense of urgency about work that drives their younger counterparts.
2
Isn't it time to consider the effects of changes in income distribution since the Reagan days in the US and more recently in some other highly developed countries? If the rich get relatively richer and the poor get relatively poorer consumption will grow more slowly. Keynes reminded us of this a long time ago and, in spite of advances in our understanding and the greater sophistication of economic models, there is ample evidence to show that consumption as a percentage of an individual's income declines as income rises.
15
Wage growth or rather the lack thereof suggest buyers (ie employers) have market power through substitution (global labor arbitrage) and discrimination (race and age).
Rising inequality creates a lack of demand, which increasingly is only offset by government deficit spending.
In the past there were national solutions (unions, minimum wages) that acted to limit employer market power in the labor market. Globalization has made these much less effective.
13
Raise taxes on the wealthiest, lower taxes on the poor and middle class, and watch demand and economic growth rise worldwide.
119
@Rafael The poor in the US pay no federal income taxes, in fact they might actually get money from the government. I don't want demand growing that much, it will cause more CO2 and that dreaded climate change.
5
@Rafael Many in the middle class and almost all the poor pay no federal income tax, in fact most of the poor receive subsidies from the government such as food stamps. Lowering taxes does these people no good.
4
@dave Where have you been living? I've never met anyone who didn't pay taxes. I and all my friends had no health care in our 20's despite being college educated and all working full time. I lived in a house with "squirrels" running thru the walls. Wake up and smell the coffee, buddy, before you get trampled by an angry middle class, tax paying, regressive-tax-sytem exploited mob. Can you hear the rumbling of their feet....
5
Not surprised! The supply-side, trickle-down economics nonsense continues since Reagan, while average wages stagnated or, in real purchasing power, declined. A key problem is while many, many people would love to buy more goods and services, they simply don't have the money to pay for them. The enormous consumer debt in this and many other countries resulted largely from an attempt by so many to sustain a level of consumption that was not possible with their stagnant or shrinking incomes. But, that only works for a while, and then further reduces spending on goods and services, as interest and debt payments eat into the disposable income. If we really want higher growth rates, stop the tax cutting nonsense, and start to raise real wages. A good first step would be a living Federal minimum wage: how about a nationwide "12 in 19" change to the minimum wage law? $12/hour would give millions of hard working Americans a break. And, they would spend that money, helping our economy grow faster.
27
@Pete in Downtown - Minimum wage is NOT supposed to be a wage to raise a family. Minimum wage is for youth and individuals who have no skills at all.
Raise minimum wage and you just fuel inflation with no real gain for workers. You're putting people on a treadmill. I started working at minimum wage when it was $1.65/hr. It's gone up a lot since then, but nothing has changed for those in the lower economic strata. Why do you think raising it more will suddenly make a difference?
If you want to make more real money, you have to provide more value to society and have some economic market power.
4
The Federal minimum wage is $7.25 and was raised in 2007- it is now worth $6.19 in 2019 dollars. Raising the lowest rate would eventually raise wages for every one else.
9
@Patrice Stark My thoughts exactly! A rising tide (increased minimum wage) is one of the best chances we have to lift most boats (wages and salaries). Our current minimum wage is abysmally low. Americans working full-time shouldn't have to depend on food stamps and rent vouchers to get by! And, pretty much every extra cent they earn will be spent, fueling economic growth.
3
Why would wages rise significantly when ALL employers know that the way things are going, the economy will go into recession eventually ( as it always does eventually)....
Why pay people one cent more?
Especially now that the last economic recession is in people's minds.....everyone knows that you better keep employed now for not IF the nest recession hits, but WHEN it does.
Personally, I don't buy 'Stuff" any more. I have enough stuff to last the rest of my life.( currently 63). I know a LOT of older people like me who are clearing out the accumulated junk that one realizes is no longer needed to live.
No buying equals deflation. And, even if prices do deflate, I plan not to buy ANYTHING until I absolutely must.
I'm retired, don't abuse the things I DO own so I can get maximum value, don't upgrade "just because", and realize how little one really needs to be happy.
45
@Ignatz Great points, but today business is not hiring employees unless it provides value. That means it creates more profit. Paying a lot more for no value will just put you out of business.
1
@vulcanalex
The economy shouldn’t be about buying things.
We need to develop more of a service economy.
In my neighborhood there are many retired people. They don’t need stuff, but they could use a lot of services, like help with cooking and cleaning, physical therapy, social activities, culture, music, friendship, etc.
They have worked all their lifes and they don’t have any of this things.
3
@vulcanalex, so why bother to become more efficient if we ALREADY make more than enough?
It is odd that Americans are stuck on this. Other societies decided that they would "spend" it on more vacation time and allow people to live their lives instead of this treadmill to nowhere.
The world does NOT suffer from scarcity (that is so 20th century). What it suffers from is an inability to use and distribute what it does produce wisely or to produce what we need and not what is not needed. The excess is simply waste at this point.
If you were really a Vulcan, this plain logic would appeal to you.
Unlimited growth is not possible with finite resources and we are witnessing the result of propping up a failing system (ie poverty for most). Time to toss the capitalist economic model and ensure everyone has the basics.
35
@RachelK Everyone where, and what is the "basics"?? In the US almost everyone has the basics by my POV.
1
@vulcanalex
Like those living on the street like many do in Tennessee as well as most other states? How basic is your basic. Not skin and bone like Yemeni children?
3
@vulcanalex
When children--and their parents--go hungry at the end of the month, they don't have "the basics."
When high deductible health insurance--for those who have insurance at all--leads to people cutting their pills in half, or skipping doses of insulin, they don't have "the basics."
Try expanding your POV. Go work in a food pantry.
4
I’m not sure that low growth and low inflation is such a bad thing. The deflationary pressure is primarily a result of the unconscionable concentration of wealth in fewer and fewer hands.
25
It's pretty simple. It costs more to extract oil from the ground which is eating away at the world's economy ability to grow at the rates it was previously accustomed. All of the world's economic growth for more than 100 years can be tied each country adopting oil as a significant energy source.
1
Reagan created huge deficits with his promise of trickle down prosperity for the masses if only the plutocrats and oligarchs could get some relief. W. adopted the language of John Boehner when he said that "job creators" would shower workers with opportunity and gold if only the plutocrats and oligarchs could get some more relief. Donald Trump bought the Paul Ryan pledge for more jobs and higher wages if only the plutocrats and oligarchs could have even more relief.
I see that this column is talking about deflation and its cause is attributed to lack of productivity growth (people who work). Over the last month I've seen many articles about an overheating economy resulting from too many people working and too many workers getting a raise after 10 years of wage stagnation. (Once again, blame people who work).
Do any of the well paid pundits who pedal their positions for corporate media giants really think that we believe them anymore?
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@Bill, You mean the Ministry of Propaganda? Nightly TV news is the worst offender.
6
Can it be that "demand" is drying up because people have enough "stuff."
Demand is defined as desire to purchase, backed up by necessary funds. Certainly there are many ppl, worldwide, who need stuff, but alas, they don't have money. They can't generate demand. Subsistence agriculture is the limit of their economic participation.
Has the prospect of new-source economic growth hit the wall?
11
It's become quite clear that the concentration of wealth in the hands of a few and the concentration of market (monopoly and monopsony) power have constrained demand both globally and in the U.S.
Until policy makes serious inroads into these issues, low growth and potential deflation are here to stay. Heavier taxation of the wealthy and anti-trust laws are two such methods that can get more money recirculating in the economy.
Who do you think can get this accomplished?
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We need higher inflation to get rid of the burden of debt, there is no reason to risk savings.... Its just not profitable. Money from the huge bank accounts will start flowing again when inflation gets high and savings will have an inflation cost.
All the money is moving to the top 1%ers. The 1#ers need to send money back down to the middle class. the middle class spends money, which crates a stronger economy. The top must invest in the workers. They need to raise their wages. This will jumpstart the economy. No other answer.
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@Billy P
The way to do this is to rebuild our US 3rd world infrastructure with a Natl. 'public works' bill to rebuild road, rail, electric grid, water treatment, airport etc. for the entire country. The new Congress seems prepared to do this and it will employ a million with high wage union jobs.
A tax increase is necessary. Previous Fed. funding bills in the 70/80 decade worked well before being discarded. Modern public transportation in E & A, benefit the entire population of each country , and will do the same in US as it did previously in the 50's with the Eisenhower sponsered interstate program.
6
@Billy P We don’t have a command and control economy. There must be incentives given to get those results.
In my observation, in the USA we're at saturation-affluence levels of a lot of STUFF. Isn't there a point where it's a bad idea to keep piling more on top of it?
5
Some are but as recently as this month we discovered that 18% of federal employees live paycheck to paycheck. They probably don't feel like they have enough stuff. Like a rainy day fund. Even though the US is wealthy, we still have many citizens who do not have money to live comfortably on the fruits of their labor. If we don't escape this 1% driven crisis soon we will have a much larger problem as AI causes our next labor crisis by allowing capital to gain additional leverage over labor.
13
As Paul Volcker pointed out, there is no economic basis for "2% inflation is necessary" (NYT Oct 23, 2018). It is just a fad among economists. Inflation is merely a tax on savings. Failed governments use inflation when they can't collect other taxes - a case in point would be Turkey for many years. We have an irrational fear of deflation. Irrational because we now live in a time where people gladly pay a premium to receive goods overnight or even delivered within hours.
Silicon Valley thrives on deflation and Moore's law. The push to make new products faster, cheaper, better has brought the world an amazing technology and put it in the palm of our hands.
To say that any recent political instability is due to low growth is a damaging use of correlation rather than causation. All of the countries listed are becoming nationalistic due to increased immigration pressure. Putin weaponized Syrian immigrants by destroying the country and forcing millions to flee. Note how few Syrians ended up in Russia.
Japan is a case in point where low growth is blamed on low inflation, but first ask yourself "what new product has come out of Japan in the past 20 years?" After VHS and tube TVs, Japan managed to miss the entire internet and smartphone boom. Japan still supplies many of the components that go into computers and phones, but not the final products themselves. That's not an economic problem, that's a creativity problem.
9
The problem is that everyone focuses on the unemployment rate. I wish economists would stop using that meaningless number. The important number is percentage of working age population that is gainfully employed. As long as that number remains low, wages can not rise and societal productivity remains low. Policy makers should ignore unemployment rate and work on increases the employment percentage.
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...and by “gainfully” I assume you mean a living wage for that particular area...should be a low number indeed!
1
Tunnel vision. On a finite planet with finite resources encouraging high growth is not nearly as good as trying to find a way to have a stable economy with less growth. Of course that assumes a stable global population which is another major problem. World population is fast increasing, and even though US population is more steady, we are still influenced by global pollution, climate change, and immigration from devastated areas on the globe.
Economics has never taken the environment into the equation. If they did you would get a very different picture of growth. Nothing is a stand alone scenario, everything is complicated because many urgent issues affect the overall picture.
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Yes! We need to tear down the religion of growth, greed and hyper consumption. We cannot support the population numbers on this planet with current technology. Something's gotta give.
7
@joyce - World population growth is decreasing. In the US, the fertility rate has dropped below 2 (1.76) so if it were not for immigration, our population would be decreasing.
The earth may be a finite planet, but we now have the technology to expand to the solar system if we were willing to spend the money and do the work. The solar system is effectively infinite.
ad astra per aspera!!
While it is true that population growth has made pollution and global warming worse, dealing with that problem can only be part of the solution.
Especially in the limited time that we have available, we must urgently decrease pollution without significantly decreasing production. This requires a tax on carbon (fully returned to the population) and strong assistance by government.
We know how to do this. It would cost around 2% of our GDP. The reason that we don't do this is that certain business interests would be hurt, and they have great power in our government and media.
We must fight hard. The lives of most people alive today depend on it.
8
As I see it, much of this problem is the direct result of 40 years of supply side economic fiscal policy thats failed to trickle down, leaving middle America stretched. Most live paycheck to paycheck in our consumer driven economy. The “demand side” has been neglected to the detriment of not only middle America, but to the larger economy that relies upon their spending.
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Western Capitalism is driven by growth. Unbounded growth is delusional in our world. So now we are testing the limits of the old system to the breaking point.
22
I wonder whether the excessive global savings and the resulting low growth/low inflation economies is a result of the gross and growing income inequality in both the world and the USA? If you have a very small number of people taking 90% of the income generated by economic activity that small number of people cannot generate enough activity to keep the rest of population well fed, much less well paid. We didn't seem to have these problems in the 50's and 60's when tax rates in general and marginal tax rates in particular were much higher. These issues came to a head after 30 yrs of Republican orthodoxy of lower taxes for the rich and smaller govt for everyone else
34
@Miguel Cernichiari
"If you have a very small number of people taking 90% of the income generated by economic activity that small number of people cannot generate enough activity to keep the rest of population well fed, much less well paid."
To put it another way, that "small number of people" are the ones sucking all the oxygen out of the room.
2
Tax refunds to the wealthy. Fiscal stimulus and QE flowing back, ultimately, to the wealthy. Government debt rising and rising. And.... The wealthy can only consume so much. Ply it back into real estate and the stock market. Rising tides have only raised the gilded ships, the masses in the leaky old scows are just above treading water. There is such an imbalance at this point that something is going to break.
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@A Centrist
One Leonardo da Vinciu painting sold for 400 million as you indirectly point out does nothing for the economy... and it'sa quite possible that not one penny is trax was paid since no one anymore ever says anything about the 10% Federal Luxury tax that was in effect at the time of "Breakfast at tiffany's" and under GHW Bush (Clinton got ird of it.)
2
@A Centrist As an untrained economist, my opinions are based on what I read and observe. A long time ago I had read an article that stated that a true measure of an economy was how many times a dollar circulated in the population. In other words, a one % may buy a yacht and that dollar didn't change hands very often, but give a worker a raise and that dollar would reverberate many times.
I never bought into the "trickle down hoax." How many more examples do we need so that people realize what it really is-- a lobbyist stunt perpetrated via the reps. I'm hoping and praying that the insanity called Donald Trump will finally be the end of the rep party as it will become evident they are like a spineless blob, no creative ideas just sucking the lifeblood out of the people. Maybe we can have an economic revolution. We really need it.
6
Is there actually anything going on in the world that would actually encourage investment that would be wide spread enough to overcome all the head winds, like tariffs, global discord, government shutdowns, Brexit, the prospect of lower profits and the economic downturn in China?
Frankly, it is a threatening picture, and I'm surprised that things are going as well as they are, which is not great. Probably, the wheels will fall off shortly, and we will be in for a great deal of stagnation. The world seems out of kilter. Some have enormous profits but others, many others, have very small salaries, so where would there be the kind of demand to make things grow? There is something radically wrong with capitalism.
10
In the U.S., at least, there's a marked aversion to change among both the plutocrats and the proles. The former fear the loss of their mountain of privilege and riches, while the latter fear cultural obsolescence amidst ever-increasing diversity. The result is willful stagnation, as the future seems too ominous to face head-on. In order to work, capitalism requires a commitment to addressing and solving modern challenges, yet we are far from that mindset.
The most central challenge, arguably, is deterioration of our biosphere, which threatens not just our economy but civilization itself. Imagine a private sector, fueled by enlightened government policies, that fully commits itself to the development of post-carbon technologies, restoration of both ocean and terrestrial ecosystems, and improved water quality; jump-started by progressive tax policy that has the secondary effect of greatly reducing inequality and its corresponding distortion of democracy.
As long as the West continues its nostalgic attempts at preserving the 1980s in amber, growth will be slow where it occurs and the recessions deeply painful, with the edge of the abyss approaching ever closer.
14
@corvid,
Those at the top are busy squeezing every last dime left out of us, for they too know it will soon all be dried up.
2
"low growth, low inflation and low interest rates" sounds like a better situation than the "roller coaster" over extended growth followed by market crashes every few years.
28
Indeed; I wasn't sure if this article was intended to be satire. We need to end our fixation on growth as the solution. Better distribution; wiser use; environmental protection is the answer.
1
This article takes the point of view that we’re talking about some large-scale macroeconomic phenomenon beyond straightforward human control. That’s a cop-out.
The world had a hell of a hole to climb out of in 2008. The climb was made all the more difficult by the deliberate obstruction of the Republican Party in the US and the various self-inflicted wounds in the EU. Austerity in the UK was one particular bit of lunacy.
We were finally out of the woods by 2016, but by 2017 we were already into mutually destructive trade wars. The trade war with China in particular is a major impediment to growth in the two economies that should be leading the way.
We’re in a mess, because we’ve made one one.
20
Excellent !
One of the biggest problems is too many workers. Overpopulation has not only baked smaller pieces of pie slices but less tiny crumbs to scatter to the peonage as well.
Those at the top are not into sharing much either.
This severe economic imbalance will result in a worldwide 1789 redux. They, those who attend Davos, know this day is coming. Eat the rich will become real.
A dystopian future is not that far off if things continue as is.
It's already happening in certain parts of the world.
14
@JM population in most of the world is declining or stabilizing. The future will have fewer workers.
Well rich people are in charge of everything. We have just survived a 35 day shut down and no one outside the Democrats seemed to care,
Rich policy people live in a world where normal people don’t exist. If LaGuardia hadn’t closed down trump would not have opened the government we would still be without paychecks.
Americans have faith in our institutions just not in the corrupt individuals who are seating in the seats of power .
Everyone voted during the midterms and the GOP hide during the shutdown so a new day is Comings to the trump swamp land.
15
If I'm not mistaken most counties, including China and the United States rely heavily on consumer spending (over 70%) to goose their GDP. That means that the best way to hedge against the next downturn (and the one before that and the one before that) would be to get more money into the hands of those that will turn around and put that money back into the system. Low to middle class workers who spend what they have just to keep afloat. One of the takeaways from the recent shutdown was that many workers in the U.S. can't go a month without a paycheck and more then 50% of Americans don't have an extra $500 to hold them over in case of emergencies. Instead of rich people and countries manipulating markets, taxes, trade and growth figures, it makes more sense to get your heads out of the economic clouds of uncertainty and do the one thing that everyone agrees will stimulate the world economies in unison. Give the workers a raise. There, fixed it for you.
222
It has to be said-
Pay the people!
Raise wages to raise demand. Remember Henry Ford?
38
@Rick Gage
"Give the workers a raise."
Nice idea! but it would create an inflationary wave that that the rich would easily ride to their advantage.
4
@Marlene Barbera Yes remember the actuality of Mr. Ford, he paid more because working on a line was boring and led to a lot of turnover which cost him money. Not to get folks to afford his cars.
7
How about ending the fantastic stockpiling of wealth by eight people and two trillion-dollar companies?
Just a thought.
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@Naples
At least MacKenzie will be trimming Jeff's pocketbook a bit.
3
@Naples
"You say you want a Rev-o-lu-tion."
4
@Naples
This is precisely why I won't shop at Amazon, Walmart, and their ilk. I figure their owners have more than enough, and I like to spread my pittance of wealth around.
7
Thirty years ago, a CEO earned thirty times what a line worker made. Today, a CEO makes 300 to a thousand times that earnings multiple. Oxfam international research spotlighted in Time magazine reports that "'the world now has 2,043 billionaires, after a new one emerged every two days in the past year,' the nonprofit organization said in a report published Monday. The group of mostly men saw its wealth surge by $762 billion, which is enough money to end extreme poverty seven times over, according to Oxfam...'The billionaire boom is not a sign of a thriving economy but a symptom of a failing economic system,” said Winnie Byanyima, executive director of Oxfam International. “The people who make our clothes, assemble our phones and grow our food are being exploited.'” And from an economic perspective, the people in the lower and middle income stratas, the ones who spend money and buy goods and services, grow our economy the safe way when their earnings go up - instead of the Trumpian deficit exploding, tax cut for the wealthy, offshore account-stashing, stock buyback bubble economy that has married with Trump's ugly tariff war to poke an insistent air leak in that bubble.
There's no substitute for a healthy, functioning middle class that buys, sells, educates and invests. Let's get to work building real growth.
Nine out of the last ten recessions happened during Republican presidencies. Stop the madness. Vote Democratic in 2020.
206
Vote for Bernie regardless of his party affiliation. We need fundamental change that includes a Green New Deal.
3
@common sense advocate
Well, the average income of all CEOs is $187,000, less than the average income of doctors.
Oh, you mean the CEOs of the Fortune 500 companies? Well, they represent about .0003% of the workforce, and if they all were replaced by a computer program tomorrow there would be nearly no impact on everybody else.
1
@Jonathan, there's no law that says CEOs are not the CEO of more than one company. I think that figure is deceptively low.
1
Maybe passing the control of most investment to financial markets and allowing a small percentage of individuals to hold most of the wealth and income wasn't such a good idea after all.
Maybe further steps to shrink government as foreseen by the EU and our own Fix the Debt folks would be a disaster.
3
Maybe burdening my two-year old daughter with $70,000 of debt at birth isn’t such a good idea either.
Seems like increased trade, between people and between nations might help stimulate growth. But to make that work, more income will have to flow to millions of people, not just a few, and more the US will need more global partners and allies, not less.
5
A lot of the problem here in the U.S is maldistribution of wealth. If the poor lack money and wages are stagnant
high levels of debt may mean that they are unable to spend. The rich having met their needs for disposable items. Their "investment" may only be bidding up the price of stocks. The Irony is in the U.S. we could be investing in our crumbling infrastructure and education. The trade war with China may be deflating the economy. There should be better measures than GDP Growth to capture the state of the U.S. economy
9
Isn't growth dependent on 99% of the first world economic classes having enough spending power to pursue their wants (homes, cars, starting small businesses, etc)? Looks like in a gilded age, money is stagnant. Can we stop pretending that this is normal?
19
This is what happens when 42 people control as much wealth as over 50% of the world's population. They can manipulate the global markets any way they want. It's all a big paper-game scam because, except for China, there are no real assets to back up the inflated stock prices.
According to an article from ThinkProgress.org, "Last year, the wealth of that elite group increased by $762 billion, enough to end global poverty seven times over, and between 2006 and 2015, according to Oxfam, ordinary workers saw their incomes rise by an average of just 2 percent per year. During that same time period, billionaire wealth rose six times as fast, about 13 percent per year.
These are the people The Con Don is working for.
It is time to end the "It's the economy, stupid" mantra. The new mantras are "It's about harsh anti-trust laws", "It's about taxing back 99.9% of the stolen/inherited wealth of the 0.01%" and "It's about OUR social safety nets, stupid".
WE THE PEOPLE will not let this gobbling up and misuse of OUR resources and OUR hard-earned taxpayer, retirement and consumer dollars continue.
NOW is the time to stop them - before they can destroy OUR world and OUR lives with their demented greed.
Readers can see the full article at the link below:
https://thinkprogress.org/oxfam-inequality-report-ab3f596312b1/
370
The wealth disparity is so unbelievably out-of-whack that most people, including me, can't get their head around it.
Think about this: 2% of $36,000 is $720. 13% of $1 million is $130,000. My calculator won't even figure 13% of a Billion $$$ or a Trillion $$$, which Amazon and Apple are supposedly worth on paper.
It is ludicrous beyond words.
41
@njglea ... Thank you. Well said.
Income inequality is such that people realize they cannot afford a family and expect to be able to support it in a future that is changing at alarming rates before their eyes.
Birth rates worldwide are way down; going down with it are the growth expectations of the business world. Oops.
The oligarchs are currently winning; they're pricing the common man out of existence.
27
@njglea
Surprise, surprise, wealthy people simply don’t spend their money like the masses of middle-class people. And, we have forty years of tax incentives for the wealthy while expenses for everyone else has skyrocketed. Business consolidation is no help either. Companies like Apple and Google should be split up, not just in to two or three companies, but fifty, like Standard Oil, a hundred years ago. People, decry socialism, but we have lost most of capitalism. Drug companies work the patent office so drugs never go off patent. There is little to no competition on every bill I pay.
42
I appreciate the economics discipline for the lens it offers, but my take-away from this article is how constraining that lens can be. Hopefully, even economists can imagine the importance of putting money in the hands of people who will spend it on things the other people produce. With the prospect monetary policy becoming obsolete, as the author implies, a return to meaningful fiscal policy aimed at much-needed redistribution makes more sense.
7
@Kickham In other words, reverse the upward flow of money and power to the 1% by reforming the harmful tax policies begun by Reagan and worsened by Bush and Trump.
13
@marklee, yes, those words.
1
We have low growth for the simple reason that we have low demand.
Real wages for the 99% have not risen for a decade. The increased wealth in the 1% can only go so far … there are few quarter billion dollar apartments.
So, to get growth we need to get money back to those who would spend it, not accumulate it. The 70% marginal tax rate of AOC and the 1% wealth tax of Elizabeth Warren are both ways to achieve this.
309
@John Graybeard
Another option is a transaction tax on stock trades. The annual value of stocks traded is close to 3 times the GDP, which itself is near $20,000 billion annually.
A tax of, say, 0.2% per trade, could raise $100-$120B annually, and for people in the business of making money from money, it would be more difficult to evade than income or wealth taxes. Considering that the sales taxes paid by most Americans range from about 2% to 10%, 0.2% would be peanuts.
44
@John Graybeard - Why not simply sell bonds to the FED which can create money out of thin air and returns the interest. If we use the money to create demand, businesses will produce more stuff which will prevent much inflation.
2
@mancuroc Excellent suggestion!
5
Income and wealth inequality has continued to increase since the great recession. Greater inequality is thought to lead to slower growth. I wonder how much this is a root cause of slow growth in the U.S. and worldwide.
9
@hsc
One major reason we've had slow growth is that we have not had a war in a country that has the $$$ to rebuild after having its cities, highways, bridges, etc. destroyed. Why do you think the American economy grew amazingly post WWII? Europe had to be rebuilt..and the US had a baby boom, housing boom and the interstate highway, which got rid of trains and mass transit in many places made the automobile a necessity. (Now everyone has one and they last a few years, so yeah, you will sell fewer than in an emerging market-- ditto computers and cell phones.)
In Yemen, e.g., a common building material is mud brick/adobe.
Also, life styles have changed and things that used to cost a fair amount if made in America like clothing are very inexpensive. People also prefer experiences-- a trip to Bali to a new piano or pool table. They want $$ for X-ams and B-days forget the expensive doll or beautiful piece of silver.
4
At some point dependence of endless growth will become unsustainable because of its significant side effects like pollution, global warming and perhaps even demographic chaos like wars over good territory. Japan may be showing the world what a no growth future looks like. What is the global economy going to look like when our traditional mode of wasteful, consumptive growth has maxed out? Will someone write about the limits of "growth" as we know it. Thanks.
51
@Mr. Jones - Japan's "no growth" economy is actually very nice for those that live there. Growth mainly affect the profit of corporations, not necessarily the quality of life for citizens. Japan's main problem is that it has lost the will to innovate. In the long run that will fall behind other countries.
6
In developed economies, we may be seeing what happens when technology makes it ever easier to replace people. This threat keeps wages low, and in turn, keeps demand from growing. Demand equals customers with enough money to buy the product or service. Accumulation of wealth in a very few hands where it does not get used for transactions worsens the problem. Got to get that money moving.
21
@Ro Mason - the huge wealth concentrated in the hands of a few doesn't mean that the wealth is idle. Jeff Bezos own a huge percentage of Amazon (OK, so that may be cut in half soon), but all of that wealth is tied up in Amazon stock and is used to operate the huge operation that he and many others created. Would you dismember Amazon?
@John
Partly true. Amazon uses its capital more wisely than many. Question for capitalism in general still remains--how to allocate the profits and also handle the losses.
We need to move beyond obsession with growth. Growth too often means environmental destruction, population increases, and more social and environmental problems. Economic health means full employment, health care, housing, healthy food to eat, clean water, human rights, justice, and sustainability. If growth means none of the above but big wealth accumulation for billionaires, it’s a useless measure.
350
@Todd
You're right. And the only way to do this is through tax reform.
31
@Todd
Yes, the next Deadly Sin that we have to manage is Greed. The obsession for More when you have plenty, and enough for a very comfortable life, is ruining our ecosystem; the prospectus of our species survival is dim. The Desire for More means less for all the rest of us. I have enough and am happy with what I have.
We used to tax the highest portion of large incomes at 70 - 90%. This encouraged investment in the company, and more importantly, the workers whose labor was what made profits possible. The CEOs had plenty to live on and create an estate to pass on to the descendants. The middle-class grew because of well-paying jobs.
Our business education should no longer teach that the goal is to maximize profits. This policy is self-destructive to the world as a whole. Patagonia is a company whose focus first of all is creating the best product, and second is growth at a sustainable amount. Greed encourages fast growth, which leads to busts. Growing slowly, under control, will make everything better for everyone.
20
@Todd - If you want what you call economic health, you need growth. No growth leads to death.
3