There is a growing realization that high growth for many nations is no longer in the cards. Oh, if you live in one of the developing nations of Africa- you can say this is wrong. But, even in China, which is slowly entering that state of economy that includes Israel… While neither which is officially a “First World” nation, they are, for all intents and purposes, there- and their growth rates are so demonstrating. Robust growth- growth over 3-4% over 5 years or more- is something that will only occur in those states that are becoming industrialized, not for those with existing corporate/services infrastructure.
Standards of living in America used to double every 35 years (through 1975). Now, we will be lucky to have them double every century. (If the current economic policies persist, we will be lucky to have them double- period.)
Many feel that innovation can change my prognosis. But, they are wrong- innovation is still prevalent. But, computerization and robots will not render any change in the standards of living for the masses. They do augment productivity- but at the expense of those effecting the labor. Years ago, an innovation could render the ability of one person to accomplish a task manifold; now those innovations simply reduce the number of employees.
Health care innovations may make it possible for our costs to drop- but they won’t be employing more people. Yes, we have a shortage of practitioners now- but that is more related to location (doctors are in cities and not in rural areas, for example) and the coverage that will be extended to the 50 million Americans who will gain access to the system- but that is not a long term trend.
3D printing (about which I have written often- and have two more posts in the queue) will change our manufacturing systems. But, it will not cause a positive change in the number of employees- or yield a long-term change in the rates at which they are paid.
Driverless cars? The ones dreamt about in Futurama, the GM exhibit of the 1963 World’s fair, could make it possible for people to travel from one location to another safer and more economically. But those innovative concepts won’t increase employment- instead, they may even reduce our needs for bus drivers, railroad personnel, and the like.
No, our best hope to change our economy is to do what we all know we need to do. But, we just haven’t committed to it. Because we are afraid of the deficit bugaboo. But, if we invest in our infrastructure- building roads, bridges, and the like (ok- we first have to REbuild them- because the ones we have are falling apart)- it will create employment. Yes, it will cost money (at ridiculously low interest rates, I might add), but folks will leave unemployment (which costs the states money), buy raw materials (which means more employment), and will augment our tax base.
That’s what it will take to get our folks back to work. We can also start fixing our electrical grid, water and wastewater systems, and our school buildings (making them more secure, improving efficiencies, and they all involve more employees, as well). Oh- and they will probably lower our (transportation and utility) costs, which will improve profits for businesses.
The austerity program that Britain tried in this new economy already proved that the austerity concept didn’t work. It won’t work for us, either. Instead, why not rely on that adage- you have to spend money to make money?
You went all New DEAL Franklin Delano on us, Roy. Which, I agree with. That said, because we are now an investment and service based economy and not so much the industrialism…along with that wonderful way of bringing us back, we need to get some pant kicking on the industry side as we re-build our infrastructure. Our current economy means growth for the few and struggle for the rest. Service based (for we the many) is a low wage nightmare of constant struggle not only for the many but for our nation. Investment is well, like banking our whole nation in Vegas. 😉 Great post! Shared and such!
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I’m not so sure that this is New Deal, Lisa…Since the New Deal clearly intended to rely upon manufacturing to pick up the slack.
Glad you liked it!
I agree that we are not likely to go back to the “good old days” when the standard of living doubled in every 35 years.
I think you are right on target….we have to spend money to make money. The place to start spending money is to replace and update our infrastructure.
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I certainly hope we start doing so- for our kids (in their schools), for my car (which has not yet learned how to jump over potholes), and for our lives- so we can breathe, drink clean water, etc, Janette!
As noted, there is a tremendous amount of work to be done, more than enough to employ the masses. But there is no willingness to pay for it. Some would say there is no capitol to pay for it, but that is more of a political notion than a practical one.
You hit the nail on the hand with your spelling error- there may be capital to pay for it, but those in the capitol lack perspective, George!
Yep, we know that austerity isn’t working – it still isn’t working and they are still pushing on with it. Ouch!
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It’s so much fun when one has to listen to claims that economics is a science (dismal or otherwise) and then watch them NOT follow the scientific principles of hypothesis, experiment, examine, and modify, Harriet!
I’m not sure the UK experiment has proved that austerity doesn’t work yet – I think the Greek experiment shows it more, but it was in a much worse state. Also, I’m curious as to how ‘First World’ nations are classified?
Cheers,
Gordon
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OK, Gordon- let me know when you think it has. Because, like Germany, the economy is at best listless.
I don’t make the determinations of First/Second/Third/Developing terms. Those determinations come from the OECD, the World Bank, and other international economic authorities. (I also think we are about to retire these terms, too!)
Great post, Dr. Roy! You are so right about the fact that economic growth has not gone to most of the population over my lifetime (I was born in 1979). I have heard people insist that “creative destruction” will save us all, but when I go to the grocery store, a lot of people don’t go to the cash register with a cashier. I only do if I go early in the morning or late in the evening (when there usually aren’t any humans running registered), but I refuse to make a conscious choice to make someone’s job obsolete. Heck, I bagged groceries in high school. How many grocery stores still have bag boys on the payroll?
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I notice that, too, Steve. But, at least the two stores that I visit (Safeway in Alexandria and a small independent grocer with great prices and great produce) do use the baggers. The first one to keep the lines moving quickly. The second, unfortunately, seems to be done as a means to insure that neither the register employee nor the shopper “make any mistakes”….