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We’re in a Low-Growth World. How Did We Get Here?

• jganetsk 10y ago
  It seems that a potential solution to this, as various economists have proposed, is "helicopter money". In other words, have the central bank print money and distribute it to the people. The main criticism for this is that it is irreversible -- there would be no asset to balance the liability on the Fed's balance sheet. But this is an extremely simple problem to solve: monetize government debt. In that case, we would no longer call it "helicopter money", and recognize it for what it is: basic income. Despite all its flaws, basic income inspires a wide variety of Internet discussions about social justice and robots (as if automation is something that just started happening now, and not at the beginning of the 18th century) but ultimately it can be understood as a tool of monetary policy. And if you manage to hand people free money and yet the economy STILL doesn't grow, and inflation STILL doesn't rear it's head -- guess what? That's a GOOD thing. That's called... utopia. So maybe we should stop caring about GDP, and measure progress with a different metric: how much basic income can our country stably generate?
  • formula1 10y ago
    If companies and service providers know that an individual canpay $50 more. What insentive do they have to keep costs low? As it stands the price of living is absurd. Free money would only provide excuses for higher charges. GDP can be increased by making people buy more but is that really the solution? As it stands we have a ton of communities that are not sustainable and end up a net loss. Where Mcdollars have value. The issue with these communities is that they cannot produce their own food, materials for housing or clothes and once factories leave they export nothing. If you want higher gdp, making sustainable communitiesis far better than printing free money. One makes more areas attractive to live tge other makes the average citizen have umbilical cord connected to the central bank
    • susan_hall 10y ago
      jganetsk had already answered your question, you simply have to read what they wrote. Anticipating a question like "What insentive do they have to keep costs low?" they answered before you wrote, when they wrote: "And if you manage to hand people free money and yet the economy STILL doesn't grow, and inflation STILL doesn't rear it's head -- guess what? That's a GOOD thing." Put differently, the government should print money until inflation appears. This is what Keynesian economists have been recommending since 2008, yet most Western governments went in the opposite direction and engaged in long bouts of austerity.
      • jlj 10y ago
        The US has been buying bad debt with borrowed money (QE). There is so much cash in circulation that the banks don't know what to do with it. "So no, the Fed is not printing money. In fact, the Fed is doing much worse than that. In allocating $4 trillion borrowed from banks, it’s supporting the very government spending and housing consumption that got us into trouble to begin with. More to the point, the Fed is financing ongoing economic hardship through its expanded borrowing of bank reserves." http://www.forbes.com/sites/johntamny/2014/03/09/the-fed-is-not-printing-money-its-doing-something-much-worse/#76f682db43a1 http://www.forbes.com/sites/johntamny/2014/03/09/the-fed-is-...
        • susan_hall 10y ago
          This idea has been disproven hundreds of times. It is a zombie idea -- no matter how many times it is killed, it just keeps shambling along. Also, the context here was helicopter money -- sending money to people, not banks.
      • formula1 10y ago
        So the solution is "take a chance maybe it works". We already are inflating our money every year. Every year the dollar is worth a little less. This is usually done on purpose, if i remember correctly it desentivises holding cash. By inflating the dollar, people who simply just hoard it make less money than reinvesting. Jganetsk didnt address it. They simply pretended that there is a chance it will work
• blazespin 10y ago
  Growth as a result of consumption is destructive. We need to find ways to 'grow' our economy without increasing consumption. For example, measure growth by how people are becoming more educated. If people could live healthily and intelligent and only work 10 hours a week until they were 100, wouldn't that be better than being able to buy a new car every year? Or a 5000sq house with the latest big screen tv? I believe (or rather, I pray) that we have hit peak consumption which will lead to this problem forevermore. We need to find new ways to improve ourselves than shopping more.
  • weisser 10y ago
    Exciting to see that this is the top comment (at least for now) because I think this is the sort of attitude and vision for the future that will solve many of the health problems in this world. I'm also very excited by YC's UBI experiment. People should be able to not worry about basic needs and be able to focus on enriching their lives and, by doing so, the world around them. I encourage people to check out the entry for the Civilian Conservation Corps (https://en.wikipedia.org/wiki/Civilian_Conservation_Corps https://en.wikipedia.org/wiki/Civilian_Conservation_Corps) - few people realize how important programs like this can be.
    • jackcosgrove 10y ago
      It would seem to me that UBI would increase consumption, and reinforce our perceptions of success.
      • HammadB 10y ago
        Agreed, something has to be done at a cultural level as well and I think this starts with parenting and schools.
      • mason55 10y ago
        The idea is that with UBI people don't need to work 40 hours per week at a miserable job if they don't want to. This in theory causes prices for stuff like McDonalds to go up which should reduce consumption. In addition, people are free to pursue things like further education and the arts that are much harder when you're working two jobs to put food on the table.
• ting_bu_dung 10y ago
  it's interesting that the report mentioned the start of 2001 as the low GDP growth for US and EU......but it's also around the same time that China joins WTO. For 15 years, jobs, communities and quality of goods were sacrificed in US and europe for cheap, shoddy goods that were produced by laborers in China in abysmal conditions, the rewards reaped by Chinese communist party insiders. For 15 years, US and european companies outsourced their money and time to China, only come to find out that by being short sighted to profit, they've lost their trade secrets, technologies, know-hows, skills, market shares to Chinese manufacturers and technology companies. They paid a big price to learn that with the Chinese government, Only China wins. There's no win-win for both. When dealing with Chinese government, you lose. So we're at an interesting intersection in 2016. China's membership in WTO is at its end this year. China is exposed as having an authoritarian regime that is hiding trillions of debt and likely having a 0-2% gdp growth. It is exposed as having an anti-foreign environment where companies like Uber, Wynn, Yum, Apple are all suffering. What will happen?
  • ting_bu_dung 10y ago
    "“Made in China 2025” initiative, which aims to ensure Chinese-made components and materials account for 70 percent of China’s manufacturing inputs by 2025." http://atimes.com/2016/07/us-warns-at-wto-of-china-backsliding-on-economic-openness/ http://atimes.com/2016/07/us-warns-at-wto-of-china-backslidi... US warns at WTO of China backsliding on economic openness
  • Roboprog 10y ago
    I'm not voting for Trump, but he has definitely hit a nerve with his anti-China rhetoric - "cuz it's true!". I'm pretty sure that sentiment also alienated him from most of his party's establishment. I don't know that I will vote for Hillary, either, since the Clintons are like "Full speed ahead!!!" with the free traitor, er, trader, crap. I voted for Bernie :-(
• rm_-rf_slash 10y ago
  I often see articles like these result in a broad call for a universal basic income. The reasons are simple: it doesn't dictate what you should or should not spend your money on; it provides a standard-of-living floor; it balances out the inequalities of a globalized and increasingly automated world. I have a different proposal: instead of guaranteeing basic income, guarantee broad access to basic services. Off the top of my head, I see five basic services anybody in an industrialized society ought to have provided for them: food/water, shelter, transportation, health care, electricity/information. If these needs can be met cheaply enough, then we won't need a guaranteed income. The basics are cheap enough and if you want a higher standard of living, you can work towards it, but in a market society there are winners and there are losers, and at least under the guaranteed service mechanism, the losers aren't mired in poverty. In the short term, food/water and electricity/information are nearly cheap enough to be universal. We just don't choose to provide it in a low-tax society. Medium term, health care costs can be reduced through automated diagnosis and operations. Some automated surgeons exist today and there was a recent report that IBM's Watson was able to correctly diagnose patients. Long term issue will be shelter and transportation. Even with self-driving automobiles, providing shelter for everybody will require a delicate balance between dense urban housing (which is currently in high demand and very expensive) and suburban sprawl (which is harmful to the environment and requires vast and expensive infrastructure like roads and water). By investing heavily in an ultra-low-cost society, governments can ensure all people have access to the services they need, while refraining from redistribution-via-taxation, which, while good in intentions, dents the very growth and ROI necessary to make these big investments.
  • al_biglan 10y ago
    This. One other thing I might suggest is some sort of variable cost model where every person gets 1 unit of water per day for free and then consumption above that scales up. Most people will consume more than the bare minimum to survive (lets say the unit is 2 liters). Doing this raises the base for everyone to be able to contribute to society yet still collects money needed for infrastructure costs, etc. ) One we have some of the utilities under this system, things like health care would be nice follow-ons.
  • ap22213 10y ago
• tim333 10y ago
  A lot of it seems insufficient demand after asset bubbles. Houses or whatever keep going up for a while, people mortgage themselves to the hilt to buy and when the bubble pops cut back spending to pay off the debts over the following decade or three. That leads to less spending jobs tax revenue and so on. The solution I think should be something like governments borrowing money at the near zero rates we have at the moment and doing stuff like investing in infrastructure and things that will boost spending. When you get back to too much money chasing too few goods and inflation they can back off but we're way off that point in most economies at the moment.
  • dilemma 10y ago
    >The solution I think should be something like governments borrowing money at the near zero rates we have at the moment and doing stuff like investing in infrastructure and things that will boost spending. When you get back to too much money chasing too few goods and inflation they can back off but we're way off that point in most economies at the moment. This is a popular idea but the problem is that in practice the cutting back never happens, so you end up with government policy together with central bank interest rates causing deeper recessions, or even creating the depressions they were intended to prevent.
• smallnamespace 10y ago
  Note that very long run GDP per capita growth is driven more or less by technological change, and there's no reason to expect that technological change is constant. Major technological innovations are often discrete, their impact can take decades to be fully realized in the economy, and the timing of the next major innovation is unpredictable.
  • ArkyBeagle 10y ago
    There is a great deal of grumbling, dour dissent with any sort of technological change outside of the tech sector - aka the "true believers". I'd stop short of calling it Luddism but it's like that. I've presented far too many solutions to non-specialists who stared in unblinking misunderstanding at these solutions to think otherwise.
• tomjen3 10y ago
  There are a lot of calls in these comments for basic income, or schemes like it. But that is just redistributing existing wealth, not creating new growth, which is exactly the problem we have. You have to produce things before they can be consumed, and this is also the case with economics.
  • mindslight 10y ago
    UBI is even worse than redistributing existing wealth. It is a simplistic plan to throw more fuel on the monthly-rent fire, ignoring that price feedback will eagerly consume it. I had been wondering why it had quickly gained mainstream popularity, but then I realized it is simply the latest way central banksters can conjure money to have it collected by their cronies. What we need is an end to this many-decades regressive policy of forcing inflation, so that a middle class is once again able to save and thereby gain economic security and bargaining power.
    • imtringued 10y ago
      A lot of people move to the city because that's where the jobs are. If the job is no longer the primary motivation to choose their location then they would go into a low cost city and decrease the pressure on the housing market of the high cost city. Oh and inflation is already very low.
      • deleted 10y ago
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      • mindslight 10y ago
        Yes, many people will move to rural areas where a lack of competition for land will keep housing prices down. So BI will be good general welfare program for those rural lower-paced areas. But if one wants much income beyond the BI, they'll still be lured cities for their economic opportunities. Housing competition will still exist there, and thus we'd expect housing prices to stay in line with what people can afford by rising. So the economic divide between the rural poor and urban rat racers will actually increase. I think much the interest in BI comes from urban rat racers frustrated with making rent, wishing for a relief from that pressure so they could take time off. But simplistically adding money to the situation will have the opposite effect of what they want, just as how college loans fucked up college tuition.
• jackcosgrove 10y ago
  Using the Solow growth model, economic growth has three factors: population growth, technological improvement, and financial savings. All three factors are reducing growth in the developed world. Populations are stagnant or declining, technology may be displacing more jobs than it creates, and we are in more debt than ever. So what is the root cause? Birth rates fell because of declining economic prospects, and savings declined for the same reason as well. Alone among these three factors, technology has continued its advancement, except now instead of improving labor it is a substitute for labor. There were other supply shocks, such as the oil crises and more importantly the baby boom in developing countries that made outsourcing possible. But those are transient factors in the long run. In the long run technology stands alone as the disruptive factor. We can try to mask the problem with financial debt or economic redistribution, but the problem remains that unskilled labor is no longer needed, and skilled labor is an increasingly high hurdle to clear.
  • collyw 10y ago
    Isn't immigration making up for the low birth rates? It seems to be here in Europe.
    • jackcosgrove 10y ago
      Not if the immigrants are past school age and have not learned needed skills in their home countries. Implicit in the population growth factor is education and training that makes those new people marketable.
• brador 10y ago
  What we're missing is cash in peoples hands to spend on innovations. For many 80% of income is going to rent. How can you even hope to build an economy on that?
  • refurb 10y ago
    You do realize that most people don't live in Silicon Valley or NYC, right? I'd say a small fraction of the US population is paying "80%" of income for rent.
• nxzero 10y ago
  Real issue is that humanity's ability to exceed technology is limited. Even if humanity was to conserve more resources and invest more, majority of value and effort would be to increase the rate of returns from technology.
  • ArkyBeagle 10y ago
    Technology ( as the term is widely used ) is the principal mechanism by which resources are conserved.
    • toasterlovin 10y ago
      Do you consoder economies of scale a technology? I ask because it seems to me that economies of scale in manufacturing and agriculture have been a huge driver in producing more with less inputs (especially labor inputs).
      • nxzero 10y ago
        Robotic automation will replace the majority of human related services in the next 50 years, much like vehicles replaced the need of horse for travel. Any society that fails to embrace this future risks isolation and most likely, economic failure relative to those that do. For more on the topic, see "Humans need Not Apply" on YouTube: https://m.youtube.com/watch?v=7Pq-S557XQU https://m.youtube.com/watch?v=7Pq-S557XQU
      • ArkyBeagle 10y ago
        Economy of scale is a specialization of logistics, so yeah. Gears or transistors are not required for something to be a technology; a technology is just a bundle of techniques.
• boulos 10y ago
  People complaining that UBI wouldn't help are missing an important point. In the US, and most of the world, we have a demand problem not a supply problem. The UBI "plan" then is to bump up the wealth of those that would essentially immediately consume it, which generates demand. It's not controversial to argue that an extra $1000 a year to a millionaire will just end up being reinvested, while most Americans (the bottom 50%+1) would easily spend it all sloshing it back into the economy.
  • WillPostForFood 10y ago
    Then that's not going to result in much good. To grow the economy, you want investment, not people funneling a free $!000 to China for some cheap consumer goods.
    • MarkPNeyer 10y ago
      > you want investment In what? A company that sells goods to consumers who can't buy it? Those aren't doing any good. There are mountains of cash right now, all seeking investment. They have trouble finding anything worth investing in. This is why we see massive valuations - with zero interest rates, a tiny revenue stream is worth a huge amount of cash.
  • TaylorAlexander 10y ago
    I see that a UBI would help in the short term, by getting cash in to the hands of people who don't currently have cash. But it doesn't do anything to solve the systemic problems we have. Internet and telephony companies are still oligopolies that charge huge extractive sums of money for digital services, our food production system degrades the environment, and health care prices are out of control. Yes, we absolutely need to get more wealth into the hands of regular people, but setting a fixed income from on high doesn't do anything to change the power structures that led to so many people being disenfranchised in the first place. To me, there is a problem when power is concentrated in one place, and remote megacorporations flood the market with goods that won't last but are so cheap most people (irrationally) choose them. The end result is that those in power have no connection to consumers except as sources of money, and people and the environment get treated as disposable. I see the solution as something more like what the New Economics Movement has been talking about, which has a big focus on local businesses. What do you think of this video? https://www.youtube.com/watch?v=kDw4dZLSDXg https://www.youtube.com/watch?v=kDw4dZLSDXg
• bsbechtel 10y ago
  I'm shocked to see no one here has even discussed over-regulation as an issue. The more things you tell people they can't do, and instead mandate they do things they may not want to or need to do, the less opportunity they have to do things they want to do, which is what people generally are willing to pay for (an thus increases economic growth).
  • deleted 10y ago
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  • beisner 10y ago
    It hasn't been mentioned because compared to the last 70 years of high growth there are now fewer regulations on business and industry than ever before, in the US at least.
    • bsbechtel 10y ago
      That's not at all true: http://madisonproject.com/wp-content/uploads/2012/10/regulations.png http://madisonproject.com/wp-content/uploads/2012/10/regulat...
      • beisner 10y ago
        I'm not sure that simply showing the absolute number of regulatory policies helps to show that the economy is more regulated than ever. For instance, how many of those regulations have to do with the explosion of computers and the Internet, which were industries that simply didn't exist before 1997? I'd like to see a breakdown of the scopes of the regulations and types of the regulations. I'd be inclined to agree with you if the majority of regulations were economically focused, but I suspect that a majority of the regulations are environmental, health, and information related.
  • Animats 10y ago
    Nah. The US isn't that heavily regulated. Anybody can start a business. It's been decades since the ICC limited entry into trucking and the CAB limited entry into the airline business. Whining about regulation is mostly complaining that you can't dump your externalities (pollution, employee injuries, etc.) on other people.
• davidf18 10y ago
  The article speaks mostly of Macroeconomic forces such as increasing the money supply. The problems with the economy are mostly caused by microeconomic issues. Politically induced scarcity ("economic rents") that results in higher prices, externalities, and asymmetric information. A very, very large problem is the use of zoning laws which reduce density and overuse of historic landmark status which artificially increases land value and hence the cost of renting apartments and buying houses. This results in a transfer of income and wealth from people renting apartments and buying houses to landlords. Income that should be going towards purchasing goods and services and thus stimulating the economy goes towards landlords instead. Removing the politically induced artificial restriction on zoning would lower the cost of housing and stimulate a housing boom. This is the reason for the high cost of housing in NYC, SF, LA, Boston, Washington DC and other cities. In NYC, there is a limit of 13,000 taxi medallions which resulted in a medallion market value of $1.2 million. After Uber/Lyft came along the value dropped to $700,000 and not surprisingly the cost of taking Uber/Lyft has decreased compared to taking a taxi. This makes it so that New Yorkers can spend less income on taxis and taxi-like vehicles and more on goods and services. Of course course, the "taxi medallion landlords" have lost big time, because the political scarcity of medallions has been undermined. Many occupations have unnecessary licenses or unreasonable licensing requirements in order to create scarcity in that occupation creating artificially high prices while keeping others who would like to work out of the market. Stop the "rent-seeking" of "economic rents" through Federal Laws and we'll make sure the markets are more efficient a huge growth to the economy. What is baffling, and perhaps others can comment is why the NYTimes is writing economics columns without addressing the microeconomic inefficiencies which includes "economic rents." Can't they find someone with a basic understanding of economics to write an appropriate column?
• Animats 10y ago
  “Lack of demand creates lack of supply.” Exactly. Americans are spent out. The US savings rate is near a low. Americans are spending 95% of their income, and for the bottom 90%, it's more than that.[1] About 1 in 7 Americans has trouble getting enough food. What we're discovering is that, when it doesn't take that many people to make all the stuff, the economy winds down to a state where most people are just surviving. This is a new thing. Historically, the big problem was making enough stuff. For millenia, society ran out of labor before it could make enough stuff. We're past that. And we have no idea how to cope with this. [1] https://fred.stlouisfed.org/series/PSAVERT https://fred.stlouisfed.org/series/PSAVERT
  • ArkyBeagle 10y ago
    It's beyond being spent out. People are just off the consumption treadmill. There are substitutes for all the big heavy things people used to need.
    • Animats 10y ago
      Food, clothing, and shelter?
      • ArkyBeagle 10y ago
        To an extent, yes. It's possible to spend very little on these - of course, shelter will vary by region.
  • paulpauper 10y ago
    About 1 in 7 Americans has trouble getting enough food. but the obesity rate is actually higher among lower income earners As for job destruction, the jury is still out. It is generally accepted by economists that new technologies spawn jobs for all skill levels.
    • api 10y ago
      I'd change it to "quality food." Junk food is cheap.
• paulpauper 10y ago
  People have been saying this since 2009, yet the S&P 500 is up 250% since then. We need to put things in perspective. The reality is: The US has greater inflation-adjusted GDP growth than most of the world, including much of Europe, the Middle East, and South America, and Japan http://i.imgur.com/SBqFqtt.jpg http://i.imgur.com/SBqFqtt.jpg Profits & earnings for tech companies, payment processing, retail, and consumer staples companies have far-outpaced GDP growth. A lot of the lag comes from the chronically weak financial, commodity, and energy sector. It's much harder to grow a large economy than a smaller one. There's diminishing returns to scale. It's harder to grow an economy at the same rate it was growing when it was 10x smaller. 2% real GDP growth, while slow, is still growth. Most people cannot perceive the difference between 2% growth and 7% growth. Real GDP is back to 2003 levels, and far fewer people were complaining about slow growth back then Slow growth doesn't preclude discovery and innovation, things like web 2.0, smart phones, apps, theoretical physics, mathematics, uber, self-driving cars, on-demand entertainment, etc. So while more growth may desirable, 'slow growth' isn't too much to lose sleep over. A lot of ppl have mentioned the UBI, but it's worth reminding that the effective income tax for the lowest 20-40% of earners is negative
  • ArkyBeagle 10y ago
    4% would be much preferable to 2%. 2% barely covers increases in productivity and population growth.
  • lifty 10y ago
    Of course the S&P 500 has been growing, central banks are buying stocks left and right. What's worth mentioning is that both governments and companies have massively increased their debt during that period, so its really hard to judge what the 250% S&P 500 growth means.
    • jganetsk 10y ago
      The S&P 500 growth means that companies are confident enough in their future cash flow that they will borrow money against that to buyback their own stock. This has been a trend since the 80s. We are living in situation where, instead of competition driving profits down to 0, or profits being used to finance investment and growth -- profits are simply returned to shareholders. Low interest rates are only reinforcing this. It's a great time to be a shareholder, and not a great time to be a consumer.
• fsloth 10y ago
  I believe there are efficincies in the marketplace that are not captured in the financial data - everything in my daily life is much easier now that I have a smartphone in my pocket and everything is online. Maybe the fact that everything is more efficient means one can get more value with less - thus, making the daily consumer effectively better off although the capital is hurt. What does this mean for the economy in total? Everything except truly constrained things like land are utterly commoditized?
  • fsloth 10y ago
    To elaborate - we measure the price of the big mac, but put no price a) finding the big mac b) finding the cheapest bigmac (both of a and b are easier, but there is no way for the McBurger chain to capture the value of this) c) discovering bigmacs are actually bad for you, abstaining from them and saving a ton in healthcare costs later on, and also living longer (thus, consuming and producing more over ones lifespan).
    • Barrin92 10y ago
      It makes sense to not measure those things because they don't increase our overall happiness or productivity. You can't live off imgur cat pictures or spreadsheets about big mac nutrition. If that were the case the Western populations would be as happy as they were never before. People need a house, an occupation that gives meaning to their lives, the right to political participation and shape their everyday experiences. These things are currently under a lot of fire and it won't go away by appeasing the population with Netflix. It's really not that much of a mystery, if a whole segment of the population is robbed of these opportunities it's going to get ugly.
      • fsloth 10y ago
        "It makes sense to not measure those things because they don't increase our overall happiness or productivity." I disagree. The accessibility of everything nowadays reduces the opportunities for frustration very often (i.e I don't need to queue at a bank at my lunch hour except in very special circumstances). Thus - more happiness. "You can't live off imgur cat pictures or spreadsheets about big mac nutrition." No, my comment was not about the internet alone. It was about the secondary effects accessibility of information has on daily life in the strictly physical domain. "People need a house, an occupation that gives meaning to their lives, the right to political participation and shape their everyday experiences." Yes, I agree. The human life is very shallow without the joy of self-expression. I was not suggesting smartphones connected to internet will replace life. My comment was about the fact how they reduce the tedious, non-productive segments of life.
• Ben-G 10y ago
  I think there are multiple interesting factors at play here: most importantly downward pressure on prices (brought by technology) and the unequal distribution of wealth/income. Technology has made a lot of stuff far cheaper than it used to be. Instead of buying a photo camera, a video recorder a tape recorder, etc. you can buy a smartphone for the price of one of these individual items (at 1980/90 inflation adjusted prices). A lot of services we consume have become a lot cheaper as well. Compare Netflix & Spotify for a few $ months to buying individual movies & CDs. A lot of people spend their free time on Youtube/Facebook/Reddit essentially spending nothing at all. A lot of younger people living in cities are no longer purchasing cars or homes. Overall travel has become a lot cheaper as well. IKEA has commoditized furniture which used to be extremely expensive a few decades ago. Cheaper prices mean lower spending & lower GDP. At the same time a smaller group of large companies is capturing the profits in the low cost sectors (again IKEA, Netflix, Google, Facebook). These companies are making huge profits per employee and they are facing very little successful competition. A majority of the middle class (that doesn't work for any of these highly profitable companies) has very limited free cash flow, due to the rising cost of housing and education and the stagnation of wages. They can't afford to purchase expensive homes, expensive furniture or expensive cars. More wealth is going to the highest earners, where each additional $ contributes a lot less to GDP than it would in the hands of a middle class household. --- I'm throwing a lot of stuff together here, but this is what I'm missing from most discussions about the economy: try to describe trends with the concrete situation at hand rather than with generic theories that have been around for decades yet have mostly failed to predict the economic outlook correctly (it seems like the rise of behavioral economics could help here)
• Mz 10y ago
  I get paid to write online. The things I write are typically intended to be published somewhere online. I rarely read paper books or magazines, yet I consume information all day. When a system is infused with information, it often can accomplish the same thing -- or something better/more -- with less material matter. I think no one is measuring any of that. The fact that I can do freelance work online means I can earn less (gross) and keep more of it (net) because I do not need a car to get to work or clothes to meet dress code, etc. So, I am seeing real gains in my quality of life -- paying down debt, eating better, better health etc -- than I could achieve when I had a corporate job. The "overhead" for having a corporate job meant that by the time I quit, I was far deeper in debt than when I got the job. It was a frustrating, frightening way to live. Now, the money I earn is net gain, not "Oh, my god, I can't eat without a job, but having a job has me barreling towards bankruptcy!"
  • ArkyBeagle 10y ago
    This. The disconnect from "having a real job" and working is spreading. The corporate sector seems to be rapidly declining in exactly this way. In my most recent gig, having to be onsite was a huge drain on productivity. It really needed to be roughly 10% of my time. I stayed way ahead of my job mainly by doing stuff at home - just the moronic network filters alone meant I had ... 10x the bandwidth available. But onsite was still required. I have two kids around 30 or so; neither has an onsite corporate fulltime job.
  • internaut 10y ago
    More people need to think like you. ROI is what matters. It is not just monetary either, people working long hours often make suboptimal eating and sleeping decisions which damage their health.
• pastProlog 10y ago
  There are two ways producing widgets can grow 10%. The standard way is where production methods stay the same, and 10% more offices/factories are added and 10% more workers are added. The reason this would be done is because there was a 10% growth in demand for widgets. This would be due to a 10% growth in population that could afford widgets, or a 10% growth in income for consumers/workers that they decide to spend on widgets. With population growth shrinking in the standard consumer societies, that aspect goes out. Insofar as income, the average US inflation-adjusted hourly wage today is below what it was 43 years ago - it has shrunk. So the demand is not really increasing. Since demand for widgets in general is not going up, companies are not desperate to employ the average worker, and thus wages are stagnant (or as I said, the average US inflation-adjusted hourly wage has shrunk over the past 43 years). When were companies investing the capital necessary for automation, technological improvement etc.? From the 1940s to the 1960s. When demand was high due to increased population (baby boom). There was a baby boom because after a long depression, the economy started paying good wages to the average worker due to strong unions and government stimulus starting heavily during World War II. Money in workers/consumers pockets led to increased consumer demand. Due to the highest unionization rate in American history after World War II you have high wages at these growing companies. How to lower costs? Invest in automation, invest in technological improvement. Without high wages, and some of the other factors mentioned, the financial impetus to invest in technological improvement and automation fades. It's always there, but it ebbs in the absence of high demand, high wage employees.
  • deleted 10y ago
    [deleted]
• acd 10y ago
  It would be interesting to analyze central bank interest rate vs inflation and test for R2 r-squared errors. http://www.zerohedge.com/news/2016-07-05/central-bank-death-cross http://www.zerohedge.com/news/2016-07-05/central-bank-death-... https://www.imf.org/external/np/pp/eng/2013/041813a.pdf https://www.imf.org/external/np/pp/eng/2013/041813a.pdf There might be diminishing return for every new credit money created which in turn leads to lower growth. It is also not certain that low interest rates will lead to inflation. If you were a big company and suddenly got a lot of cheap credit. Would you A) increase the wages of your workers or B) invest in cheaper production through automation? What does choice A) or B) yield for consumer prices, do they go up or down?
  • jganetsk 10y ago
    You would do neither. Instead, you would do C) borrow to buyback stock. http://www.wsj.com/articles/share-buybacks-the-bill-is-coming-due-1456685173 http://www.wsj.com/articles/share-buybacks-the-bill-is-comin...
• karma_vaccum123 10y ago
  In addition to the other good observations..."quarterly capitalism" has reduced risk appetite. Furthermore, we live in a very regulated world. Rules can be beneficial but tend to also slow progress
• bogomipz 10y ago
  We got not in a small part by China having double digit growth in GDP for well more than a decade, this or course is no longer the case. Double digit growth is not sustainable. The fact that it went on for as long as it did was an anomaly. Also double digit growth is something that while not sustainable is also maybe something that might not be desirable either. I would recommend this read on the subject: http://hbswk.hbs.edu/item/the-curse-of-double-digit-growth http://hbswk.hbs.edu/item/the-curse-of-double-digit-growth
• YZF 10y ago
  I'm more amazed we had the high growth we've had in the past. Why would the steady-state of such a complex worldwide system be at a point where we have good employment, rising standard of living, growing populations, relative peace? There are so many other local minima which we've managed to hit over man kind history... The key word is sustainability. Without it something has to give. It should be obvious that given finite resources on this planet we can't continue expanding our population and the standard of living indefinitely. The reason the trajectory we were on could not continue is that it was not sustainable. We can't have more people in the world, every such person living in a McMansion, with two cars in the garage, buying new gadgets all the time. And really why? Wouldn't it be better to have a contracting population that consumes less? Humanity would be better off trying to reduce the population size, reduce consumption ($ and resources), maximizing the utility/$ of goods rather than the absolute $ of crappy goods sold. Aiming for more equal distribution of wealth. Less conflicts. Social security (so sure, basic income but not as a catalyst of growth). Everyone should work less hours and earn enough to sustain themselves with a reasonable standard of living. So this is all perhaps a deflationary, negative growth, environment.
  • didibus 10y ago
    Agree wholeheartedly. Sustainability is key. The last generations were raised being told that success is growth, I hope the next generation will be raised knowing that success is sustainability.
  • politician 10y ago
    > Wouldn't it be better to have a contracting population that consumes less? No. Because would you voluntarily sterilize yourself and your partner to live this ideal? We have an entire solar system to colonize, don't spread your defeatist message before we even get off world. We have nigh-infinite energy in the form of fission and solar systems. We have infinite food and space. The bottleneck is distribution.
• EGreg 10y ago
  Low growth is sustainable! Rampant consumerism and the drive by corporations to move money faster and faster by changing resources to garbage is a drug that needs to be stamped out. The addiction to population growth just to fund social security schemes is similar. Societies can get addicted too. Now we just have to figure out how to weather the human->robot worker transition smoothly.
• pessimizer 10y ago
  The financial industry and elites sucking up all of the capital and holding it, while heavily lobbying to maintain a low-tax environment and to prevent governments from spending on infrastructure and lifestyle improvements for the general population, although they generally are borrowing at near zero or negative interest rates. This results in insufficient demand and secular stagnation. No investment = no growth. Luxury goods and services are doing well, though. Also, the United States is not adding jobs at a healthy clip; the jobs are worse and the prime-age (25-54) employment rate has only retraced halfway since the stock crash nearly 10 years ago. The US intentionally pushes a strange number for joblessness that drops people from being counted, and can be adjusted through legislation lengthening and then reducing the period during which unemployment benefits can be collected. The rate jobs are being added would be fine for an economy not recovering from a crash. This is not that economy. 1) 15 years ago marks the crashing of the dotcom bubble, which was used to recover from the recession of the early 90s, which was caused by Reagan ruining the country. So, IMO the way to view it is that Reagan destroys the working class and causes it to live on credit and prayer while cutting infrastructure spending and lowering taxes on the rich. The best thing he does is spend an enormous amount on the military and other welfare for the rich, which creates some sort of replacement demand, although he finances it by driving the national debt into the stratosphere. 2) Clinton deregulates everything, ends welfare as we know it, and encourages a bubble in stocks. A bubble is not a boom - a bubble is a time when people take out loans with collateral that is on fire. During this, he raises taxes, which shifts the Reagan debt to personal debt. The stock bubble crashes as soon as he leaves, and what seemed to be a reasonable amount of debt for the working class to carry became a crushing amount of debt. 3) Then Bush encourages another bubble to save the economy, and it's in houses, an asset that is spread widely among the working class. They mortgage those houses to pay off their debt, and many get to buy some stuff. Bush immediately starts spending again like a maniac in the Reagan model, with an administration consisting largely of exactly the same people: wars on multiple fronts, welfare and tax cuts for the rich, and massive government contracts for insiders. 4) The bubble crashes as Bush leaves, and Obama comes in with a mandate for a massive national veer to the left, wastes most of it on an inadequate healthcare program of right-wing origin that is very nearly a no-op, and in almost every other way is continuity to the Bush administration. He freezes government spending in the lowest interest rate environment in history, and fills the demand hole by handing free money to wealthy people through the bailouts and QE, shifting all of that public debt partially to private working/middle class debt. 5) The rest of that free money has nowhere to go, due to the previously mentioned historically low interest rates, and in addition the tailing off of the marginal return on further investments in technology and industries based on the invention of the transistor, so it ends up in a combination of traditional large industry/natural resource extraction, banks (betting on a repeat of the experience of the bursting of the property bubble, where banks failing from intentionally taking on irrational risk was rewarded by direct, open payments of cash and grants of credit), and tech companies in-name-only, where service companies use the internet in place of phones (as in the original dotcom bubble where they were used in place of mail-order catalogs), or where the actual profits were made in services for B2B, such as advertising or computing infrastructure (the kind of stuff that large industries/finance/fake-tech-companies can park all of their cash in.) tl;dr it's just kleptocracy. Majorities of the youth and the marginalized now openly despise government, and have made this election cycle the scariest one we'll see until the midterms which will be the scariest one until the next presidential election. This "low-growth world" is the closest thing we're going to get to a bubble in this financial cycle, since the working/lower-middle classes are seeing absolutely no benefit from QE and the bank bailouts (unlike dotcom and the property bubble.) The only place to fall is open rebellion, tribal violence, and the aimless violence of suicide, mass shootings, and property crime. /rant (sorry)
• didibus 10y ago
  I'm so tired to hear about growth. Growth is not a very beneficial situation to be in. We should focus on sustainability. Do we tell people to grow as fat as they can be? No, we encourage a sustainable in and out, just what we need for a happy and healthy life. Billionaires are not a thousand times happier or healthier then millionaires. Growth is overrated. There's a baseline of wealth that we must sustain, then we need to focus on horizontally scaling that baseline to as many people as possible, and finally, we must work to sustain that scale too. Growth appears twice in this equation, but always at a very well defined scale. We need to grow to reach the baseline, and then grow to have everyone base-lined. Once we have achieved the above in a sustainable way, then we should focus all our remaining efforts into having fun, being curious, enjoying ourselves, and enjoying each others company. This should similarly be handled in a sustainable way. A heroine high is not a sustainable enjoyable and fun activity. Going for a walk along a park or a coast is. The dosage is important, a night out partying here and there is sustainable, day after day of it is not. Sprinkle in some learning and curiosity, I for example, would keep coding for pleasure. In fact, sustainability will probably motivate people towards sciences and technological advancement even faster, as we'll finally let free of our intrinsic motivations to do so. To quote Nietzsche: "To escape boredom, man works either beyond what his usual needs require, or else he invents play, that is, work that is designed to quiet no need other than that for working in general." The first part of that quote is Growth, endless, unhealthy, never ending Growth, simply to address our own boredom. The second part is sustainable life, easy, playful, and fun. I really hope as we progress, I stop hearing about Growth, and I start hearing a lot more about Sustainability.
  • jomamaxx 10y ago
    "Growth is not a very beneficial situation to be in." Again this is false. There are so many financially illiterate people here on Hackernews. Growth is a great situation to be in. When there is growth - there is money for projects, hospitals, infrastructure etc. When there is no growth - everything goes out the window, and the first thing to go are longer term things like 'sustainability'. You want to switch to solar - then you need a lot of 'growth' - why? Because the US cannot function on 40 cents/kwh electricity. Now - growth by 'adding bodies' - which is where most growth comes from in the West - is bad. Immigration is where 80% of GDP growth comes from and that is definitely a Ponzi scheme. IF you normalize for growth across US and EU countries, it's much more similar. The US simply imports people to grow the GDP whereas EU does less of that. So, to your point, measuring GDP/capita would be a good start for 'sustainable growth'.
• api 10y ago
  We let worker wages stagnate such that there is now insufficient demand.
• mrleinad 10y ago
  "As a matter of arithmetic, the slowdown in growth has two potential components: people working fewer hours, and less economic output being generated for each hour of labor. Both have contributed to the economy’s underperformance." Really? So it's basically the workers fault because they're lazy?
• ilaksh 10y ago
  Because we are focusing more and more on sustainability, which means more conservation, less consumption all around, and therefore low growth. Beyond that, the entire foundation of economics is flawed. Computer scientists and software engineers should seriously examine the underlying assumptions of economics and revise them to be in line with technical reality. Money is a technology. Think about the design from first principles. If you are an economist, you probably can't do that, because the design is fixed in your mind and first principles aren't known or considered unchangeable.
• ryanmarsh 10y ago
  > 81 percent of the United States population is in an income bracket with flat or declining income over the last decade. That number was 97 percent in Italy, 70 percent in Britain, and 63 percent in France. Ok so growth slowed in the West, but weren't a lot of people brought into the middle class in the East? > It argued that the internet would not have the same transformative impact on how much economic output would emerge from an hour of human labor as 20th-century innovations like electricity, air transport and indoor plumbing did. There's lots of back office automation going on in the Fortune 500 that is eliminating white collar labor. I seriously doubt these statements about productivity. If its productivity per capita they want then just wait until self driving trucks wipe out millions of jobs. Am I missing something here? Isn't this basically what happens when labor (the jobs I mean) moves somewhere else and automation eats away at whatever is left?
• williesleg 10y ago
  One word, the illuminati. Started in around 1960.
• mac01021 10y ago
  I'm hearing lots about this low-growth economy from various major news sources, but it doesn't seem to me to be consistent with the data that I can look up on my own. For example, the chart here seems to me to show regular traditional reasonbly-fast growth rates.(http://www.statista.com/statistics/188105/annual-gdp-of-the-united-states-since-1990/ http://www.statista.com/statistics/188105/annual-gdp-of-the-...) If you look at a 20-year plot of the S&P 500 (not the same thing as the GDP, I know, but still some kind of indicator of economic health) the net growth probably is low, but only because of the giant housing crash that causes a rapid setback right in the middle of the time period we're measuring. It looks like we've been growing at full speed ever since. So what's the deal?
  • somethingsimple 10y ago
    > It looks like we've been growing at full speed ever since. S&P 500 valuations after the crisis are out of touch with reality. Look here: http://www.multpl.com/shiller-pe/ http://www.multpl.com/shiller-pe/. The stock market is incredibly overpriced i.e. companies' earnings aren't growing as much as people and institutions are buying stocks, driving their prices up. The reason for the bull market is that with near zero interest rates, everyone is looking for an investment vehicle that offers better inflation-adjusted returns than cash and bonds, even if it means taking more risk.
• bjornsing 10y ago
  I think it partly has to do with how we measure growth (i.e. GDP). For example, try using a laptop and a mobile phone from 2001 for a week or so. How does that feel? No growth, ehu? ;P Another aspect I think is how much "non-monetized" value the Internet is creating. What would you pay for access to an Internet search engine (like Google or one of it's competitors), if you really had to? Going without is just not an option, but the price still hovers around zero. That brings us to yet another aspect; the Internet puts a huge downward pressure on all (comparable) prices. I think this is a major factor behind the lack of inflation: hiking prices is just not possible the way it used to be.
  • danieltillett 10y ago
    This is taken into account in the GDP deflator (i.e. inflation).
• jgord 10y ago
  Piketty argues, from extensive historical data, that the hi growth of the 1950s-1970s was unusual, and low growth is the norm. So we might want to look at another aspect, such as how wealth is distributed - the low growth rate tends to accentuate the accumulation of growth on capital, so those who inherited a lot of wealth capture even more of it over time, without having to do anything with that capital [ such as investing in startups, building next gen transport systems ]. Which means we most likely need a much more aggressive tax on uber-high incomes and uber-large inheritance wealth. [ Im not saying don't look at wealth creation technologies such as - nanoscale 3d printing, VR-work-from-home, asteroid-mining etc. ] Reading Piketty's Capital is a bit like waking up in the matrix after taking the red pill - the gradual torrent of facts hits you viscerally, because you really had no idea things were this extreme. As preparation, I recommend watching this short vid on wealth distribution - https://www.youtube.com/watch?v=QPKKQnijnsM https://www.youtube.com/watch?v=QPKKQnijnsM
  • jgord 10y ago
    Another way to get this point across is - The overall growth rate is ~2%, but if you happen to be very wealthy, the growth rate you experience [ on capital ] is ~6% to ~10%.
  • Amygaz 10y ago
    Piketty is one of the rare to actually pinpoint the problem and call it like it is. This NY Times article definitely does not, even if has some of the elements. Even early on it writes: "This trend helps explain why incomes have risen so slowly since the turn of the century". Maybe it is the other way around. I mean, if our economy is based on increasing production for the sake of increasing production, so by the same vain consumption needs to keep up, but then people can't afford consuming, or whatever they are consuming wasn't the result of value addition. Then there is the CBO farce, and the use and abuse of GDP, and also believing to know what other people actually wants to buy, while also omitting to include what is it that 81% of the people with declining income can buy.
• jgord 10y ago
  Should we make it a policy not to link paywall urls ?
  • somethingsimple 10y ago
    I didn't get a paywall, and I'm not a subscriber.
• maxander 10y ago
  > Like most things in economics, the slowdown boils down to supply and demand: the ability of the global economy to produce goods and services, and the desire of consumers and businesses to buy them. What’s worrisome is that weakness in global supply and demand seems to be pushing each other in a vicious circle. This is the sort of thing that makes people think economists live on a different planet. "Demand," in particular the "desire of consumers and individuals" for things, is something we have in spades- for a good example, walk down a main street of any city and you'll find some people who desparately want to stop being homeless. The problem, and on a more general scale this is the whole problem of our kind of economy, is that their demand doesn't matter. These homeless people could, in many cases, work- they could do things that generate more value than they require in exchange to live decent lives. But their kind of work is ubiquitous, and they have no control over the market for it; as a result, the market has been manipulated by much more savvy actors to shift that labor market against them. Once this happens to a kind of laborer, an entire segment of "demand" is functionally removed from the economy. The answer to that sort of thing has been known for ages- unions, substantial minimum wages, perhaps even basic income. But while the article talks about the kind of economic inequality that these measures combat, it does an impressive job of not putting two and two together. Economic stagnation and inequality are two sides of the same coin, but no one talks about this- because the managers of the economy are, predictably, wealthy, and have everything to lose to redistribution of wealth.
• SlipperySlope 10y ago
  Free Trade is the problem. The developed countries must impose 50% or higher tariffs on imported goods, services and intellectual property to protect their workers. The USA enjoyed very high growth rates in the 1800s. When economists get around to simulating the economy via agent based modelling of every decision making financial entity, akin to how weather is forecasted in voxels, then Free Trade will be revealed as the root cause of the slow growth rate of the developed countries.
• tbihl 10y ago
  In first generation post-WW2, we built out productive infrastructure, and started to do so with our savings. In the second generation, we expanded with debt spending and started to increase consumer debt. Now, most well-educated new entrants to the market have already taken more debt than they have an appetite for, so they're saving to pay down that debt. There may be quite a few who are still doing frivolous things with their money that could go to service the debt, but in the end we're all paying off activity that already happened, to one extent or another.
  • ThrustVectoring 10y ago
    This is entirely due to the baby-boomer demographic changes. Saving on a generational and national scale is basically impossible: things you make today are going to break down, wear out, or become obsolete thirty years from now. The only way the retiring generation can receive care is by obligating or mandating younger workers to pay for it. This is the core of why college is pushed so hard, why home ownership is pushed so hard, and why interest rates are so low. The baby-boomers need to have someone paying back debt thirty years from now, so there's a ton of money sloshing around trying to fund current consumption.
    • chrisdbaldwin 10y ago
      "things you make today are going to break down, wear out, or become obsolete thirty years from now." Planned obsolescence started not too long ago and everything now needs replacing much earlier than thirty years. We can see its inefficiency in every industries generated from this money printing scheme. Turning what once was considered permanent and high quality will now break and need replacing. Everybody is doing it, and it's hard to stop, but it probably should stop. https://www.youtube.com/watch?v=-1j0XDGIsUg https://www.youtube.com/watch?v=-1j0XDGIsUg
      • ThrustVectoring 10y ago
        Even without planned obsolescence, it's still difficult to make things that have value thirty years from now. Even infrastructure has issues on this timescale: nuclear reactors are designed to function for forty years with maintenance, and roads something like 26 years before re-doing the asphalt. And there's only so much infrastructure that's worth building, based off the intensity of economic activity that it facilitates.
• jack9 10y ago
  > The United States is adding jobs at a healthy clip, as a new report showed Friday, and the unemployment rate is relatively low One of those isn't true and the other is misleading. Healthy would be something to combat the massive existing unemployment. Unemployment Rate has little to do with growth. Let's not talk at all about how GDP numbers are being manipulated quarter after quarter and the endless easing putting us in a freefall, since that news is inconvenient for the administration who did it (Clinton then Obama...hmmm). The republicans just continue existing policies anyway so it's self-serving Fed shenanigans as usual. Typical vacuous NYT narrative is what I got out of it.
• danieltillett 10y ago
  When you get to a 70% service sector of course growth is going to be low [1]. Waiters aren’t anymore efficient than they were 100 years ago (probably less) and the same applies to nearly every service industry. Without improvements in unit labor costs then the economy can't grow per capita. 1. http://data.worldbank.org/indicator/NV.SRV.TETC.ZS http://data.worldbank.org/indicator/NV.SRV.TETC.ZS
• apatters 10y ago
  Is it possible that some things are just a lot cheaper than they used to be, and from a macro perspective focused totally on dollar figures this looks like shrinkage? I used to drive to the bookstore and spend $22 on a brand new hardcover book because it was written by a famous author and promoted heavily at the bookstore. Now I might buy a Humble eBook Bundle and pay $8 for 8 books, and the car, the bookstore, and the big advertising campaign are all long gone (but for the most part, not missed). There's very little out there I want to spend a lot of money on (travel is the main exception). And growth is mainly driven by wants, not needs.
• arekkas 10y ago
  "Growth" is really just cheap oil ("energy prices"). As this is an obvious path to imminent doom, energy prices go up and thus growth diminishes. Cheap(-er) energy is what's keeping the States ahead of the EU too. The world isn't black and white, mostly. Sometimes there is an easy explanation to things though.
• oldbuzzard 10y ago
  The Center for Economic Policy Research has a great free pdf ebook on Secular Stagnation from 2014 which has essays from a variety of economic heavyweights discussing the possibility of lower growth going forward. http://voxeu.org/content/secular-stagnation-facts-causes-and-cures http://voxeu.org/content/secular-stagnation-facts-causes-and...
• oldbuzzard 10y ago
  The Center for Economic Policy Research has a great free pdf ebook on Secular Stagnation from 2014 which has essays from a variety of economic heavyweights discussing the possibility of lower growth going forward. http://voxeu.org/content/secular-stagnation-facts-causes-and-cures http://voxeu.org/content/secular-stagnation-facts-causes-and...
• stuaxo 10y ago
  It's the rising inequality silly! All the gains going to the top is inefficient for the economy as a whole.
• anentropic 10y ago
  it's debt see Steve Keen eg https://www.youtube.com/watch?v=WPIQnOdjoZk https://www.youtube.com/watch?v=WPIQnOdjoZk
• spinchange 10y ago
  I'm still trying to find the time to complete Piketty's Capital, but one thing that I was surprised to learn from it thus far is that global population growth has a much greater impact on GDP growth than you might think. I'm loath to leave a comment like this without citing some of his data (not at my disposal, atm) but if I recall correctly, it's like more than half of GDP growth (roughly). As global population growth slows, and it is, invariably economic growth is going to slow down. It sounds like a common sense thing, but the numbers Piketty put on it were very surprising.