Can Economic Growth Go Down to Near Zero?

[Dinner]

Japan has big problems with efficiency in large sectors of its economy. Take for instance retail and distribution, Japan's regulation require goods to pass through a series of protected distributors before finally getting to a retail store and those retail stores are also fairly highly regulated in that it takes a lot of political glad handing to get approval to build a new one. The result is goods are a lot more expensive in Japan then in the US even though the cost to make those goods is nearly identical. The US typically has a lot fewer levels in the distribution network and individual retailers have a lot less pricing power because there are so many competing stores vying for the costumer's money.

Look at the automotive industry in Japan. The manufacturers are world class but there are few independent retail outlets and the regulations are decidedly protectionist and anti-consumer. Japanese almost never have a car which is older then 5 years because the Japanese government requires all sorts of expensive "safety" tests on older cars. The reason is the Japanese government wants people to ditch that 5 year old car and buy a shiny new car thus goosing demand for the domestic manufacturers. Also it is extremely difficult to import a car into Japan as every single car must be hand inspected by a government agent at the port; the claim is this is to insure the car meets Japanese regulations but the defacto reason is to make life hard on importers and make sure the domestics keep the lion's share of the market.

If Japan liberalized these protectionist/favoritist measures and went more towards a free market approach then they'd find prices would drop and economic efficiency would increase bringing up growth with it.

[Vanguard]

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.

Are you saying that lawyers produce twice as much law now as they did twenty years ago? That each sales clerk sells twice as many TVs? That each fast food cook grills twice as many burgers?

Of course not. So what does it actually mean to experience 3% real growth in services?

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).

But this isn't "growth". It is "improvement in quality". The two things are not interchangable.

Improved quality of goods, for example, does not make you rich in twenty years. It just allows you to buy slightly improved stuff at twice the price.

OK, so the growth rate is unimportant...? Why is everyone so concerned about recessions then?

Because, while economic growth will not make everybody rich, decreasing business activity can definitely make a large number of people poor. Poverty is a threshold effect sensitive to business fluctuations.

[Kidlicious]

Originally posted by Oerdin
Japan has big problems with efficiency in large sectors of its economy. Take for instance retail and distribution, Japan's regulation require goods to pass through a series of protected distributors before finally getting to a retail store and those retail stores are also fairly highly regulated in that it takes a lot of political glad handing to get approval to build a new one. The result is goods are a lot more expensive in Japan then in the US even though the cost to make those goods is nearly identical. The US typically has a lot fewer levels in the distribution network and individual retailers have a lot less pricing power because there are so many competing stores vying for the costumer's money.

Look at the automotive industry in Japan. The manufacturers are world class but there are few independent retail outlets and the regulations are decidedly protectionist and anti-consumer. Japanese almost never have a car which is older then 5 years because the Japanese government requires all sorts of expensive "safety" tests on older cars. The reason is the Japanese government wants people to ditch that 5 year old car and buy a shiny new car thus goosing demand for the domestic manufacturers. Also it is extremely difficult to import a car into Japan as every single car must be hand inspected by a government agent at the port; the claim is this is to insure the car meets Japanese regulations but the defacto reason is to make life hard on importers and make sure the domestics keep the lion's share of the market.

If Japan liberalized these protectionist/favoritist measures and went more towards a free market approach then they'd find prices would drop and economic efficiency would increase bringing up growth with it.

The US is not the example of free market competition that you think it is. The reason being because that's no good for business. You can't make enough profit in that kind of environment. There is no such thing as consumer friendly business. Capitalism is about making profit.

Things are only better in the US statistically (in some regards), but people use those statistics to make it look like things are much better than they are. The fact is that most people who have lived in this country long enough know that those statistics are ****ing bogus.

[Kidlicious]

Originally posted by VetLegion


OK, so the growth rate is unimportant...? Why is everyone so concerned about recessions then?

When the economy is booming some people take another tone, as if recessions don't exist, as if all the paper money matters.

[DanS]

Originally posted by Vanguard
Are you saying that lawyers produce twice as much law now as they did twenty years ago? That each sales clerk sells twice as many TVs? That each fast food cook grills twice as many burgers?

Yes. At least.

[Whoha]

Originally posted by Oerdin
Japan has big problems with efficiency in large sectors of its economy. Take for instance retail and distribution, Japan's regulation require goods to pass through a series of protected distributors before finally getting to a retail store and those retail stores are also fairly highly regulated in that it takes a lot of political glad handing to get approval to build a new one. The result is goods are a lot more expensive in Japan then in the US even though the cost to make those goods is nearly identical. The US typically has a lot fewer levels in the distribution network and individual retailers have a lot less pricing power because there are so many competing stores vying for the costumer's money.

Look at the automotive industry in Japan. The manufacturers are world class but there are few independent retail outlets and the regulations are decidedly protectionist and anti-consumer. Japanese almost never have a car which is older then 5 years because the Japanese government requires all sorts of expensive "safety" tests on older cars. The reason is the Japanese government wants people to ditch that 5 year old car and buy a shiny new car thus goosing demand for the domestic manufacturers. Also it is extremely difficult to import a car into Japan as every single car must be hand inspected by a government agent at the port; the claim is this is to insure the car meets Japanese regulations but the defacto reason is to make life hard on importers and make sure the domestics keep the lion's share of the market.

If Japan liberalized these protectionist/favoritist measures and went more towards a free market approach then they'd find prices would drop and economic efficiency would increase bringing up growth with it.

Japan, a smallish Island with no resources to speak of, is the worlds second largest economy. They may in fact be doing something right.

[Kidlicious]

Their currency is regularly too strong and their consumers actually save money. Poor Japan

[Kidlicious]

Originally posted by DanS


Yes. At least.

I guess the questiom maybe should have been do Americans consume twice as many hamburgers and twice as much law, but then that doesn't really sound like a good thing.

[C0ckney]

it is if you're in the hamburger or law business.

[Ben Kenobi]

Services don't count? Man.

People are more productive because of specialisation. Because there are people who provide services, that frees up people from having to do that themselves. How many of you would want to cut your own hair? In the time saved, you are producing something of real value.

[Kidlicious]

Originally posted by Ben Kenobi
Services don't count? Man.

People are more productive because of specialisation.
Because there are people who provide services, that frees up people from having to do that themselves. How many of you would want to cut your own hair? In the time saved, you are producing something of real value.

Ben, specialisation was played out a long time ago. For example, people haven't cut their own hair for a long time now, not that that really produced that much value if any at all. Now you have all kinds of jobs created that didn't exist before, but in fact not much value is created from the at all. They exist to provide monopoly power to corporations, or serve some other non-productive purpose.

[chequita guevara]

Originally posted by VetLegion
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?

No, because as soon as we started to see it we'd see revolution.

[Adalbertus]

A very big portion of the service sector is completely worthless, actually not producing anything of real value.

Could some economically educated person explain this, please?

I've heard this before, but I wonder to which extent it is a strange sort of "materialism" in the sense "if I can't lay hands on it, it is worthless". To me, the service sector (probably) can be divided in three parts:
- Services which are desired by someone, like those provided by nurses, cleaning personnel, artists, haircutters, entertainers, etc. . Of course, there is nothing to put hands on, except you sell the hairs or the dust, but the services are requested nontheless.
- Services which are not directly desired but help the rest of the world to work more smoothly: Banks, lawyers (partly), administration (partly), advertisement (partly), ...
- The only part I see as really worthless: "Services" nobody really needs or wants, but which are enforced by those who have the power to install them: Administration (the rest), advertisement (the rest), lawyers (the rest), ...
The problem here is that administration tends to create new and mostly useless rules which to enforce you need more administrators, or that lawyers/advertisers mostly negate the effect of other lawyers/advertisers, thus creating work for more lawyers/advertisers (Which is why the cigarette industry usually doesn't complain about advertisement restrictions - it saves them money without being a threat to their sales.)
I see this as an annoyingly big portion but not as a very big portion of the service sector.

So, what is the economist's point of view and more importantly: why?

[Kuciwalker]

That's actually a pretty good analysis.

[Kidlicious]

Originally posted by Adalbertus
The problem here is that administration tends to create new and mostly useless rules which to enforce you need more administrators, or that lawyers/advertisers mostly negate the effect of other lawyers/advertisers, thus creating work for more lawyers/advertisers (Which is why the cigarette industry usually doesn't complain about advertisement restrictions - it saves them money without being a threat to their sales.)
I see this as an annoyingly big portion but not as a very big portion of the service sector.

I don't think it's just advertisers and lawyers, although you could categorize this type of worker as such. I would include any job that would theoretically not exist in a perfect competition situation. That includes many more workers. For example, the cost of direct labor to produce the service that I produce is only about 10% of the price. In a situation of perfect competition it would be much much closer to the price.