The Great Stagnation-Has the USA Stopped Growing?
The Great Stagnation, by Tyler Cowen purports “the ‘low-hanging fruit’ of economic growth: free land, technological breakthroughs, and smart kids waiting to be educated” is over. (Bloomberg Businessweek, The Autistic, Encyclopedic, Economic, Electronic, Idea Engine, May 26, 2011, by Brendan Greeley)
IS GROWTH OVER FOR THE USA?
Tyler Cowen, brilliant Harvard educated economist implies that we have:
- Educated the farm kids
- Filled homes with several cars
- Recently created new and fun technologies which entertain more than promote economic growth
Due to these recent economic developments, maybe demand is stagnating. A scary possibility is that recent economic growth was based on the faulty platform of easy credit without major innovation. In fact, some of the recent technologies have slowed growth. Why go to a movie and pay $9.00 per ticket when you can have film, entertainment, and miscellaneous programming streaming on your television for $7.00 per month. My recent garage sale was publicized for free throught Craigslist. Who lost out? The newspapers who charge $10.00-$20.00 for an advertisement.
If these theories are correct, consider how your salary will be affected with slowing growth-stagnating wages. In fact, check your own recent pay stubs. Who has received raises greater than 3% (proxy for rate of inflation) in recent years? And don’t forget about recent job growth – dismal.
INVESTMENTS AND RETIREMENT ACCOUNTS
If companies do not increase profitability at a decent clip, their stock prices will falter. Anyone with shares of stock will experience slowing growth in their investment portfolios leading to lower eventual wealth.
There are several economic growth scenarios to consider; no growth, slowing growth, normal growth, and rapid growth.
As a student of economics and investing, I realize that new, small companies have the potential to grow rapidly. If a company realizes 3 million dollars in revenue per year, it’s easy to double or even triple that amount for several years. Large and established behemonths with billions of dollars in sales cannot double their sales rapidly.
Following that logic, older, large, developed economies will grow more slowly than newly emerging economies.
It’s only common sense that USA growth will slow as it’s economy grows larger.
I believe the answer regarding future economic growth lies somewhere between stagnation and rapid growth.
The likelihood of future innovation and development is present. Think about alternative energy or clean energy automobile innovations. When my parents were children, the internet, VCR’s, and space travel were unheard of.
Certainly, there will be inventions in the future that we cannot fathom today. Be wary of dire predictions. After all, wasn’t the world supposed to end on May 21st? Stick to a well thought out and balanced spending and investing plan and look to boost your income when possible.
What are your thoughts on the future economic growth in devloping countries?
image credit; btjones