Is US economic growth over?

Is US economic growth over? Faltering innovation confronts the six headwinds by Robert J Gordon of Northwestern University

A thought experiment helps to illustrate the fundamental importance of the inventions of IR2 compared to the subset of IR3 inventions that have occurred since 2002. You are required to make a choice between option A and option B. With option A you are allowed to keep 2002 electronic technology, including your Windows 98 laptop accessing Amazon, and you can keep running water and indoor toilets; but you can’t use anything invented since 2002.

Option B is that you get everything invented in the past decade right up to Facebook, Twitter, and the iPad, but you have to give up running water and indoor toilets. You have to haul the water into your dwelling and carry out the waste. Even at 3am on a rainy night, your only toilet option is a wet and perhaps muddy walk to the outhouse. Which option do you choose?

I have posed this imaginary choice to several audiences in speeches, and the usual reaction is a guffaw, a chuckle, because the preference for option A is so obvious. The audience realises that it has been trapped into recognition that just one of the many late 19th century inventions is more important than the portable electronic devices of the past decadeon which they have become so dependent.

In summary: Innovation is having less and less impact on our economic output and there might not be a technology to save us. Moreover, growth will be near flat according in his view point, noting that,

We began with the tantalising (and frightening) suggestion in the green line of Figure 2 that per capita real GDP growth could slow down to a rate of a mere 0.2% by 2100. How large might be the numerical effect of the six headwinds? A plausible set of numbers can be constructed to reduce the growth rate of real per-capita consumption of the bottom 99% of the income distribution down to 0.2% per year, but this “exercise in subtraction” needs to be qualified carefully (the qualifications come at the end).

It's pretty strong stuff.

Please read the paper before commenting.

You didn't really expect this fake economy to last forever did you?

reply to post by GreenGlassDoor


I hate to be the bearer of bad news yet again, but American "economic progress" ended in 1933 with the drafting of the Emergency Banking Act (if you do not know what that is, look it up and be prepared to be highly peeved.) Put basically, the banking cartel instigated the great depression and then came in and said "Well, since you can't keep your finances in order, we'll do it for you." and, in effect, turned the United States government into a corporation. When you couple that with the fact that every dollar that has been put into circulation since then is actually a certificate of debt, it's not such a stretch to say that any economic progress that is reported is illusory and, in actuality, is representative of an equal amount of debt. I'm sorry, but it still amazes me that most people still haven't gotten that small but extremely important detail yet. What's kind of funny is that it this is all information that is readily available if you would only look for it. Conspiracy sites are the wrong place to look up anything of real importance. Check out the writings of Von Mises and you will see that most conspiracy theories (and I emphacize the theory part) are just there to distract you from the most important information that can be had. The fact is, the truth is not a conspiracy, as what they are doing is by no means illegal. The literal definition of conspiracy is two or more parties meeting to plan a crime. If it's not a crime in the eyes of the law (which they change to suit themselves while taking more power away from us anyways), it's not a conspiracy, it's just what is. You guys should be less concerned with theories and more concerned with facts that have been well documented and proven, yet are for the most part, ignored because they are just too inconvenient and boring for most people to even pay attention to.

When I read your extract, my immediate answer to the question was answer B, and I guess I assumed that would be the answer for anyone! It was a surprise to see most people didn't (or so he claims).

I most definately would want to keep all my technology with internet and all that, and use an outhouse and go get my water at the river than the alternative!

Heck, we have the ancient family house here that we all reunite at regularly, and it only has an outhouse, and we have to get water from the village pump. Even at a a high altitude (chilly temps.) it isn't that bad. In fact it makes you take a break from the computer and use your muscles a bit!

All that question proves is that people have gotten too lazy to face their own survival needs- which makes such inventions (the toilet and running water) maybe not such a good thing in the long run!

reply to post by GreenGlassDoor


Dear GreenGlassDoor,

I would ask you to define economic growth. If we look at quality of life I think we get a better idea of what we should be attempting to achieve. The United States has enough resources, including oil reserves that are yet unused, to provide sufficient food, energy, housing for everyone living here. We don't even need to trade with foreign nations to have a better quality of life. If economic growth means taking more from other countries than we give back then we will not see growth.

reply to post by AQuestion


It is defined as GDP per capita in the article.

As the article states:

Globalisation does not reduce the growth of all American wages; it hits the middle hardest. Top executives of multinational industrial and financial firms can enjoy rising incomes based on their firms’ reach across the world. The CEOs of Coca-Cola and Boeing enjoy a worldwide market, and the rise of the emerging markets is an opportunity rather than a threat to them and adds to their bonuses and value of their stock options.

reply to post by GreenGlassDoor


Dear GreenGlassDoor,

Yes the article defines it as GDP; but, I asked how you defined it. The bigger question is are we creating a better life for ourselves, that is how you truly define the growth of a nation. If we lived in a nation where everyone was productive, had enough to eat and a place to stay I would think we were better off. If we live in a nation where everyone is barely getting by, doesn't have enough to eat and we shipped all of our resources to another country then I would say we were worse off regardless of our GDP.

reply to post by Bluesma


I don't necessarily agree with that. After all, with people tossing their sewage into the streets or directly into the river, the wealthy enjoyed living on the "up-wind" side of town. We'll just write off the people who live down river or in the drainage basins. They'll die of dysentery, cholera, or typhoid.

The implications of the article will eventually force these kinds of infrastructure choices. If the government lacks a tax base by which to actually tax for defense and roads, it simply won't get done. Leaky pipes are already causing water shortages in the major US cities (but that's a story for another day).

On a small scale you can get away with it. 10 million people pooping onto the earth in a concentrated area will cause problems.

The world has actually been here precisely before, with such debt load, collapsing exports, floods of cheap Chinese goods, crippled banking system etc...and it ended with the world's biggest ever financial collapse, the great crash of 1345AD, triggered by the default of a major sovereign nation, the Kingdom of England on all its debts.

The result was catastrophic...with all the merchant houses collapsing in northern Italy, the tax revenue collpased and Princes and rulers had no spare money to donate to the monasteries which ran all the poor relief, hospitals and schools at the time. Result? The Black death spread like wild fire, and man went back to mumbojumbo stiff to solve his problems like burning witches instead of irrigation to make the crops grow, so everyone starved. 1 in 3 of the world's population diedover the next few decades and it took the world 150 years to recover form it.

reply to post by GreenGlassDoor



Economic growth is tied to population growth. So we have to ask ourselves: can we continue to increase food production to meet the exponential growth of humankind? If the answer is "yes", then our economic growth in the US will continue for quite sometime.

But I would posit that the answer is "No". Therefore, and regardless of all the analysis of the individuals in the OP article, economic growth is at a point where it cannot continue. Further, I would also posit that our world is at a critical crossroads. Zero hour will happen in the next generation, and could be dramatic and self destructive. How we handle it leading up to that point will be key. We can create our own future, but I expect that future to be grim given the way the scales currently sit.

reply to post by rickymouse


If the fiat system in place now can make it through the decade it could possibly last forever.

It really is amazing we've made it this far. Hundred trillion plus money supply and counting. Unbelievable.

reply to post by Bluesma


I'm going to build an outhouse next year. It will have solar lights and a solar powered heated toilet seat.