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Can Economic Growth Go Down to Near Zero?

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  • Can Economic Growth Go Down to Near Zero?

    For most today's societies it is important not only to attain a certain amount of wealth (per capita), but also to maintain a healthy economic growth rate.

    I'm wondering if there is a limit to economic progress (an end to economic growth), and if there is, where would it be. Perhaps, it is already on horizon?

    The poorest countries always grow the fastest: as new technologies are introduced and unused labour tapped the economy grows rapidly.

    The more developed countries grow much slower as investments in everything (infrastructure, technology, people) hit diminishing returns.

    Per capita growth of 3% means that each year the same number of people produce 3% more stuff than they did the previous year. This might seem little, but it's a huge figure given that there was virtually no economic growth in the entire history of the human species prior to the 19th century, and given that it doubles the wealth in about 20 years. Your kids will be able to afford twice as much stuff at 20 years as you could when you begat them.

    Or will they?

    Let's take Japan.



    For three decades, Japan's overall real economic growth had been spectacular: a 10% average in the 1960s, a 5% average in the 1970s, and a 4% average in the 1980s.

    ...

    Real GDP in Japan grew at an average of roughly 1.5% yearly between 1991-1999, compared to growth in the 1980s of about 4% per year.

    ...

    In 2008, however, Ota Hiroko, the Minister of State for Economic and Fiscal Policy, announced that Japan's economy can no longer be considered 1st class economy due to a number of facts including: the sixth straight annual decline in the country’s per capita gross domestic product, resulting in the fall of Japan's GDP per capita to 18th among the 30 member nations of the Organization for Economic Cooperation and Development (OECD) in 2006 and the reduction of Japan’s share of aggregate world income to below 10% for the first time in 24 years.


    Japan has hit the roof. We know when, even as we don't really know why. Occasionally it still shows some vigour, but from the way it has been going the past decade or so it doesn't at all seem likely that Japanese will be able to buy twice as much stuff in 20 years as they can now.

    Japan is significant because it is in so many ways ahead of the rest of the world, but it is by no means the only one. Some European economies (which shall not be named) grow pretty slowly too. It is possible that this is only a temporary phenomena (in historical terms a decade or two are nothing), but it is also possible that this is it, that we're seeing an end of an era.

    Why? Because they're trying and not succeeding. Today's governments are dedicated to economic growth. Economics as a discipline has advanced, we have much better tools to understand the economy and try to help it. However, it doesn't seem to work that way. France can't produce 103 Renaults this year for each 100 of last year because Sarkozy wants it to. Even less can a hairdresser do more haircuts (indeed, could a service-only based economy grow at all?)

    I'm not trying to sound pessimistic, really, this is just thinking out loud. Even at growth of 1% a year it takes only about 70 years to double the economy. That's pretty good, historically. It could put a strain on social stability of some societies though. We depend on growth very much. Imagine a world without pay rises, and a world in which you get almost no return on your savings. Actually, in Japan, you almost don't, but Japan is probably the most socially stable country on Earth.

    I'm getting to the end of this post. I don't really have a point. What are your thoughts on this? Is there a limit to economic growth? What's going on with growth slowdown in many developed economies? Are western countries viable at annual growth of, say 0.5%?

  • #2
    Economic growth can even go negative.
    Christianity: The belief that a cosmic Jewish Zombie who was his own father can make you live forever if you symbolically eat his flesh and telepathically tell him you accept him as your master, so he can remove an evil force from your soul that is present in humanity because a rib-woman was convinced by a talking snake to eat from a magical tree...

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    • #3
      I bought 4 pieces of oceanfront here in the Phils last trip. One super little spot not too far from us I paid $2500 for. I'm trying to sell it 2 years later for $10,000. No rush tho, in 3 years the international airport will open on our island and it will be worth even more, possibly alot more. Not only is the market here driven by western buyers but also from Korea and Japan. One property I wanted last time I got out bid by a Korean.

      I've never made any money here, just spent a ton. It would be a nice change of pace.

      I'm concerned about the job market when we go back to Oregon though.
      Long time member @ Apolyton
      Civilization player since the dawn of time

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      • #4
        I think growth in GDP per capita in a developed country depends almost entirely on technological innovation.

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        • #5
          Originally posted by Lancer
          I bought 4 pieces of oceanfront here in the Phils last trip. One super little spot not too far from us I paid $2500 for. I'm trying to sell it 2 years later for $10,000. No rush tho, in 3 years the international airport will open on our island and it will be worth even more, possibly alot more. Not only is the market here driven by western buyers but also from Korea and Japan. One property I wanted last time I got out bid by a Korean.

          I've never made any money here, just spent a ton. It would be a nice change of pace.

          I'm concerned about the job market when we go back to Oregon though.
          Does appreciation of property values contribute to growth of GDP?

          I know GDP has some other flaws like calling destroying a place and rebuilding it growth even when the rebuilt version may be somewhat less valuable than the original.

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          • #6
            It can go massively negative even.

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            • #7
              Originally posted by Geronimo
              I think growth in GDP per capita in a developed country depends almost entirely on technological innovation.
              Yes, it does. And it's been said that human knowledge doubles in short periods, but I am sceptical about how much of that is knowledge that can be applied.

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              • #8
                Originally posted by chegitz guevara
                Economic growth can even go negative.
                Of course it can. So far it has been growth interrupted with recessions and very rare depressions. Do you think it is likely that we see the reverse?

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                • #9
                  Economic growth is a statistical illusion.

                  A growth rate of 3%, for instance, certainly does not mean that the people of a country are producing 3% more "stuff". The US has been recording growth rates of 3% or more for the last decade while generally producing less and less "stuff"----- less steel, fewer automobiles, less grain, even fewer motion pictures.

                  A growth rate of 3% indicates that the measured money value of the goods produced by a country increased by 3%. This is a very different thing. Especially for modern economies, what the growth rate measures is not entirely clear. As such, its statistical worth is debatable.

                  Which helps explain why you are not able to buy twice as much stuff as your parents. You are (hopefully at least) able to buy exactly the same amount of stuff---- ie, one house, one car, 2500 calories a day and some entertainment.
                  VANGUARD

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                  • #10
                    A growth rate of 3%, for instance, certainly does not mean that the people of a country are producing 3% more "stuff". The US has been recording growth rates of 3% or more for the last decade while generally producing less and less "stuff"----- less steel, fewer automobiles, less grain, even fewer motion pictures.


                    This is very disingenuous, given that you've ignored the service sector entirely.

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                    • #11
                      Re: Can Economic Growth Go Down to Near Zero?

                      Originally posted by VetLegion
                      The poorest countries always grow the fastest: as new technologies are introduced and unused labour tapped the economy grows rapidly.

                      The more developed countries grow much slower as investments in everything (infrastructure, technology, people) hit diminishing returns.
                      The poorest countries have more population growth. Population growth is a huge factor of economic growth at this point in time, and in most points in time. It's usually a much bigger factor than technological advancement.
                      I drank beer. I like beer. I still like beer. ... Do you like beer Senator?
                      - Justice Brett Kavanaugh

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                      • #12
                        Originally posted by Kuciwalker
                        A growth rate of 3%, for instance, certainly does not mean that the people of a country are producing 3% more "stuff". The US has been recording growth rates of 3% or more for the last decade while generally producing less and less "stuff"----- less steel, fewer automobiles, less grain, even fewer motion pictures.


                        This is very disingenuous, given that you've ignored the service sector entirely.
                        A very big portion of the service sector is completely worthless, actually not producing anything of real value.
                        I drank beer. I like beer. I still like beer. ... Do you like beer Senator?
                        - Justice Brett Kavanaugh

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                        • #13
                          Originally posted by Vanguard
                          Economic growth is a statistical illusion.

                          A growth rate of 3%, for instance, certainly does not mean that the people of a country are producing 3% more "stuff". The US has been recording growth rates of 3% or more for the last decade while generally producing less and less "stuff"----- less steel, fewer automobiles, less grain, even fewer motion pictures.

                          A growth rate of 3% indicates that the measured money value of the goods produced by a country increased by 3%. This is a very different thing. Especially for modern economies, what the growth rate measures is not entirely clear. As such, its statistical worth is debatable.

                          Which helps explain why you are not able to buy twice as much stuff as your parents. You are (hopefully at least) able to buy exactly the same amount of stuff---- ie, one house, one car, 2500 calories a day and some entertainment.
                          OK, so the growth rate is unimportant...? Why is everyone so concerned about recessions then?

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                          • #14
                            My hunch is that in real terms, the cost of entertainment has gone down massively, which is something to be thankful for. Videos and CDs used to be extortionately priced. Case in point: I can across an old Mr Bean video with two 30 minute episodes. The price was £18.99.

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                            • #15
                              Consider also that while we might not buy twice as much physical stuff, the stuff we do buy is higher quality (see computers for the most extreme example).

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