Is Economic Implosion Inevitable?

American Thinker ^ | 04/18/2013 | Leonid Chuzhoy

[SeekAndFind]

The last three centuries have been a period of unprecedented economic growth. The world's GDP doubled in the 18th century, increased six times in the 19th and then shot up 40 times in the 20th. Understandably, the public now considers growth to be the natural state of economy, while periods of recession are viewed as temporary aberrations.

Unfortunately, the recent recession is qualitatively different. Consider the basic economic equation:

Size of economy (GDP) = Individual productivity x Working age population x Employment rate

The economic expansion in recent centuries was due to two factors: a) exponential population growth that followed advances in public sanitation and medical science; b) technological revolutions in industry and agriculture which have drastically increased individual productivity. Occasionally, one-time events, such as a burst of speculative bubble or rising commodity prices, could produce a sudden drop in the employment rate and plunge economy into recession. However, all past recessions were bound to be temporary thanks to the long-term demographic and technological trends.

These trends have now been reversed:

1) Fertility rate fell below replacement level in nearly all developed countries. As a result, the labor force stopped growing, while the dependent elderly population is still increasing. In addition, natural growth is lowest in the most productive social groups and highest among groups that receive public assistance.

2) The past growth in individual productivity was largely driven by mechanization. Machines, which could cheaply perform simple repetitive tasks, have drastically reduced the need for human labor in agriculture and manufacturing sectors. As a result, the labor force is now concentrated in the service sector jobs that cannot be easily replaced by machines. Unlike industry and agriculture, where the output per worker has increased by at least two orders of magnitude,

[Paine in the Neck]

“Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty.

This is known as ‘bad luck’.” - Robert Heinlein

[douginthearmy]

My dad’s favorite: “Never underestimate the power of human stupidity.” -Robert Heinlein

[DH]

First of all, let’s remember that the government does not really know what the GDP is. It’s only speculation, distorted facts, imagined number of workers and everything else is pulled out of political air.

IT’S ALL SMOKE AND MIRRORS.

[Vince Ferrer]

Eventually the economy will be seen as a social problem, especially too many two income families. If one currently unemployed parent just stays home and raises kids, and especially homeschools them, a lot of economic and social problems can be solved.

[mjp]

the labor force is now concentrated in the service sector jobs that cannot be easily replaced by machines.

Not only are agriculture, mining, construction,and manufacturing all engaged in the production of goods,but also, all of the so-called service industries center on goods. Service industries that are performed not as auxiliaries to the production,distribution,or ownership of goods, vitally depend on the use of goods in their rendition.

Whether or not an economy is in a state of economic progress, stagnation, or retrogression depends on whether or not the supply of capital goods is greater than the consumption of capital goods, not whether or not the economy is a service economy.