We’re in a Low-Growth World. How Did We Get Here?

http://www.nytimes.com/2016/08/07/upshot/were-in-a-low-growth-world-how-did-we-get-here.html

by e15ctr0n • 10 years ago

180 347 10 years ago

jganetsk5• 10 years ago

It seems that a potential solution to this, as various economists have proposed, is "helicopter money". In other words, have the central bank print money and distribute it to the people. The main criticism for this is that it is irreversible -- there would be no asset to balance the liability on the Fed's balance sheet. But this is an extremely simple problem to solve: monetize government debt. In that case, we would no longer call it "helicopter money", and recognize it for what it is: basic income. Despite all its flaws, basic income inspires a wide variety of Internet discussions about social justice and robots (as if automation is something that just started happening now, and not at the beginning of the 18th century) but ultimately it can be understood as a tool of monetary policy. And if you manage to hand people free money and yet the economy STILL doesn't grow, and inflation STILL doesn't rear it's head -- guess what? That's a GOOD thing. That's called... utopia. So maybe we should stop caring about GDP, and measure progress with a different metric: how much basic income can our country stably generate?

formula12• 10 years ago

If companies and service providers know that an individual canpay $50 more. What insentive do they have to keep costs low? As it stands the price of living is absurd. Free money would only provide excuses for higher charges. GDP can be increased by making people buy more but is that really the solution?

As it stands we have a ton of communities that are not sustainable and end up a net loss. Where Mcdollars have value. The issue with these communities is that they cannot produce their own food, materials for housing or clothes and once factories leave they export nothing. If you want higher gdp, making sustainable communitiesis far better than printing free money. One makes more areas attractive to live tge other makes the average citizen have umbilical cord connected to the central bank

susan_hall3• 10 years ago

jganetsk had already answered your question, you simply have to read what they wrote. Anticipating a question like "What insentive do they have to keep costs low?" they answered before you wrote, when they wrote: "And if you manage to hand people free money and yet the economy STILL doesn't grow, and inflation STILL doesn't rear it's head -- guess what? That's a GOOD thing."

Put differently, the government should print money until inflation appears. This is what Keynesian economists have been recommending since 2008, yet most Western governments went in the opposite direction and engaged in long bouts of austerity.

blazespin2• 10 years ago

Growth as a result of consumption is destructive. We need to find ways to 'grow' our economy without increasing consumption. For example, measure growth by how people are becoming more educated. If people could live healthily and intelligent and only work 10 hours a week until they were 100, wouldn't that be better than being able to buy a new car every year? Or a 5000sq house with the latest big screen tv?

I believe (or rather, I pray) that we have hit peak consumption which will lead to this problem forevermore. We need to find new ways to improve ourselves than shopping more.

weisser• 10 years ago

Exciting to see that this is the top comment (at least for now) because I think this is the sort of attitude and vision for the future that will solve many of the health problems in this world. I'm also very excited by YC's UBI experiment.

People should be able to not worry about basic needs and be able to focus on enriching their lives and, by doing so, the world around them.

I encourage people to check out the entry for the Civilian Conservation Corps (https://en.wikipedia.org/wiki/Civilian_Conservation_Corps) - few people realize how important programs like this can be.

jackcosgrove3• 10 years ago

It would seem to me that UBI would increase consumption, and reinforce our perceptions of success.

SilasX• 10 years ago

The problem is that the media almost always use this implicit syllogism:

"70% of GDP is consumer spending. Therefore, the economy depends on consumer spending. Therefore, we need to goose consumer spending if we want to help the economy."

acqq6• 10 years ago

No, the problem is that the whole western economy can "logically" function only based on "growth" as in "more consumption, more production every year." But math is not on our side:

http://www.informationclearinghouse.info/article25458.htm

TaylorAlexander2• 10 years ago

Absolutely agree. Check out videos on youtube under the search "New Economics" for more info about this. There's some great channels (like the New Economy Coalition) with full lectures, but check out this short primer video on the concept: https://www.youtube.com/watch?v=FrIhloNEwT8

See my comment about this in another thread for more links: https://news.ycombinator.com/item?id=12243080

whenwillitstop• 10 years ago

The problem is that we live in a world governed by natural forces, and not by spiritual revolutions.

Normal_gaussian• 10 years ago

Can you elaborate on this? What are you classing as natural forces? Spiritual revolutions?

Such a small comment is so easy to dismiss because what you mean is not clear and those of us reading it can dismiss it as trite, obvious, or irrelevant without consideration or if we do give it consideration we are at the mercy of our own interpretation of the words used - either way it makes something you obviously cared enough about to write a null contribution to the conversation.

ZenoArrow3• 10 years ago

Which natural forces are you referring to? Are you sure that they are natural forces (rather than learned behaviour)?

tunap2• 10 years ago

You mean 'unnatural forces'? As a species we have made great progress in mitigating natural forces. Not utopian, but there is enough resources, logistics and actors to feed the entire world, if a relative few didn't have to take all they can sequester for themselves. I see more forces pertaining to greed (infinite inflation racket, regulations as barriers, control of *-opolies, artificial shortages boost prices) holding back humanity.

carapace• 10 years ago

Spiritual revolutions are natural forces.

pjmorris• 10 years ago

Natural forces like quantitative easing (QE)? Money, as an abstraction and a tool, seems to be about as far from a natural force as is conceivable.

icebraining• 10 years ago

Robert "Bobby" Kennedy's 1968 speech is appropriate: https://www.theguardian.com/news/datablog/2012/may/24/robert...

blazespin2• 10 years ago

That is incredibly uplifting and deeply deeply disturbing at the same time.

yolesaber• 10 years ago

Thank you so much for this

psadri2• 10 years ago

Our culture of consumption has roots in our biological drives. We are more attractive reproductive mates if we have more material resources. Therefore, a bigger house >> a small house, etc. although, as a side note, we seem to have lost the direct connection between the two -- people continue to want fancy stuff well past their reproductive age.

For the world you want to become true, something else must become biologically attractive.

herval2• 10 years ago

That sounds veeeery far-fetched. How about societies where material resources aren't the main goal? How does that explain poor people having more babies? Is there any known correlation between "having more stuff" and reproduction at all?

If any, the somewhat accepted reproductive drive is "passing down your genes" - and people/animals/any creature that displays more "power" tends to attract more mates. And power doesn't translate to material resources in most cultures/societies/animal races...

pasquinelli• 10 years ago

"although, as a side note, we seem to have lost the direct connection between the two..."

or there is no direct connection between the two.

ArkyBeagle9• 10 years ago

Most consumption doesn't involve big houses and TVs. Those exist as signal items mainly because they're paid for with debt, which increases the amount of money in circulation.

Education is now a good that also increases debt, with mixed results. Throwing money at it does not change the predictive value of the standardized tests used to "ration" education.

Without increases in the money supply, there simply won't be growth. There's only so much the central banks and government can do; at some point, people either spend or they don't.

The one thing that can be done is to try to adjust inflation upwards, which increases the risk of lazy investments.

vixen99• 10 years ago

'we have hit peak consumption'. I'm wondering - who is the 'we' you have in mind? Folk across vast areas of the planet might be at a loss to know what you're on about.

paulpauper3• 10 years ago

not sure how a functioning economy can exist without consumption of some form.

herval2• 10 years ago

Likewise, people were very skeptical about centralized currency/printed money when it was first introduced. Or if you want something more recent - skeptical that industry would ever surpass agricultural production, or services would ever overtake industrial goods, without destroying economy. Doesn't mean it _can't_ happen...

tcbawo• 10 years ago

Other than spending money, there is only saving and investment. Some believe that our current lack of demand is caused by too much money chasing too few investments.

acd2• 10 years ago

This is very true its destructive to the environment to just be zombie consumers buying more "stuff". If you would be given carbon emissions as a currency and then you could choose to spend it. Products may be different. A long lasting product would be cheap and a short lasting product would be expensive.

superuser25• 10 years ago

Product consumption isn't anything special these days, it's all about services now.

tunap2• 10 years ago

Additionally, how about giving some weight to packaging; especially the ubiquitous petro derived variety.

superuser25• 10 years ago

Slightly off-topic, but since you brought it up.

A 40" TV is, like, $300 [0]. The average American watches 5 hours a day [1]. Replace your TV every year, that's $0.16 per hour of entertainment. I probably pay more than that in bus fare and late fees to use the public library.

Big-screen TVs don't belong on the list of excessive consumption items anymore. They are incredibly cheap and deliver enormous utility relative to expenditures that get drastically less hate, like a data plan for even the cheapest smartphone, plane tickets/vacations in general, picking the crossover instead of the compact sedan, picking the very slightly nicer apartment, etc.

[0] http://www.bestbuy.com/site/tvs/led-tvs/pcmcat193400050018.c...

[1] http://www.recode.net/2016/6/27/12041028/tv-hours-per-week-n...

susan_hall3• 10 years ago

I think "TV" is a stand-in for "watching TV". That is a common sense reading. And what do you watch on TV? Your statement is correct if you only watch broadcasts, but that is only 9% of the USA public. Almost 90% of USA households have cable. The cable is a monthly fee. That changes the economics that you suggested.

In the UK, the economics are slightly different, but recall that UK taxpayers pay a fee to the BBC.

curun1r• 10 years ago

I don't know about you, but I don't see watching 5 hours of TV per day as being compatible with the living healthily and being intelligent that the poster you're replying to offered as an alternative, so putting TV on that list seems appropriate.

Money isn't the only currency we use to pay for our current lifestyle. Time, attention, energy, passion and such are all necessary to participate in the kinds of life we want to be living. TVs may not cost a lot in money, though as another poster rightly pointed out, TV also includes programming charges too, but that sedentary activity (both physically and mentally) has a lot of non-monetary costs that prevent you from doing and experiencing other things.

sliverstorm• 10 years ago

Watching too much TV, though, can lead to massive externalities on the health system, as sedentary leisure catches up to us later in life.

heimatau• 10 years ago

Maybe if Cable is free but...most places it's ~$50 a month[1]. Which means the cost of entertainment is closer to $.53 per hour[2]. Which isn't cheap as cheap as you say.

[1] http://electronics.costhelper.com/cable-tv.html

[2] - [$300 TV + ($55 x 12 months) ] / (5 hours of watching TV x 365 days a year)

jganetsk5• 10 years ago

Instead of measuring GDP as our metric, measure how much basic income can be generated without causing inflation. Rising basic income levels with stable GDP and stable prices (or even falling) is utopia.

nercht122• 10 years ago

Agreeable, in theory at least. The fact is, though, when one person gains, someone else loses out, in this case, biz owners. Corporate execs aren't going to raise wages and keep prices the same, not unless they have some means to compensate for it (Hello, McDonalds!)

narrator2• 10 years ago

Keynesianism says that spending money on anything is good, no matter what. War is good, make work projects that do nothing are good, spending money on frivolous consumer goods is good, etc.

Austrian school recognizes that investing in productive capital that lowers the cost of production and resources consumed in production is actual real economic progress. For example, let's say you have an island with coconuts. If you pay everybody $100 to go out and buy coconuts, the price is going to just go up. If you pay them $100 to plant more coconut trees or make tools to harvest them more efficiently, there are going to be more coconuts and the price is going to go down. Keynesianism would say the two are equivalent economically because AD = C + I + G + (X-M) and in this equation C and I are perfectly interchangeable.

If you want to read the long version of that I'd suggest Hayek's critique of the paradox of savings: https://mises.org/library/hayek-paradox-saving

TheOtherHobbes• 10 years ago

Hayek is one of the reasons we're in this mess, so - coconuts or no - it's hard to believe that more Hayek is a solution.

I don't recall Keynes saying any of the things you claim he said. He actually said this:

"If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing."

Perceptive readers may notice a certain hint of irony in the above, which Austrian economists - being literally minded, on the whole - may have missed.

golemotron• 10 years ago

We need to find ways to 'grow' our economy without increasing consumption. For example, measure growth by how people are becoming more educated.

That isn't the same as growing the economy. Changing the definition of a word doesn't not change the reality of the thing it refers to. In this case, economic stagnation due to lack of growth.

edcastano• 10 years ago

I couldn't agree more, and am ecstatic that there are other like minded people. I believe my response to this Quora question, is one way to get this outcome. Would be curious to get your reaction to the idea.

https://www.quora.com/In-your-opinion-what-should-the-United...

The only good tax…a tax on “bads”

The U.S. federal government first imposed a [temporary] personal income tax in 1861, in order to pay for the Civil War. The tax was later made permanent in 1913. In other words, our country is stuck on a nineteenth century tax model, collecting 95% of our revenue from labor and investment. I believe government slaps taxes on income and investment out of sheer momentum. If all you have is a hammer, everything looks like a nail. If we were designing a tax framework from the ground up, it would surely look different. In its simplest form, I’d say it would entail taxing “bads” instead of taxing “goods”. Let me explain.Of the $2.4 trillion in federal tax receipts collected every year in the U.S., 95% comes from taxing labor and investment. These are activities that generate social benefits; jobs, goods, and technological progress. Economists call these positive externalities, but we can simply call these “goods”. On the flip side, less than 2% of the $2.4 trillion in federal revenue comes from taxing—waste, pollution, and resource depletion—activities that generate social ills like obesity, heart disease, cancer, urban sprawl, materialism, and resource wars. Economists call these negative externalities but we can simply call these “bads”. A sensible tax policy would entail taxing “bads” instead of “goods”. Today we have it backwards, with the bulk of the federal tax burden, (95%) falling on taxing “goods” like labor and investment, instead of “bads” like resource depletion, waste and pollution.

Some will argue that such a system would be regressive and punish those that can least afford it. However, this system can be combined with a monthly federal stipend of a couple of hundred dollars for every single man, woman and child in the country to make the system progressive. In this scenario, those who save energy and resources, make money, and those that waste it, pay. Nonetheless, everyone, rich or poor would have a strong incentive not to be wasteful. More importantly, it would eliminate the disincentive to work.

This approach would help solve some of our nation’s largest problems. People would be healthier since the prices we pay for food would reflect the energy and resource intensity of meat vs. produce…thus leading people to consume more produce. We’d start seriously investing in energy efficiency, not because of government mandates, but because it would make financial sense. The approach might even help put our fiscal house in order since it would imply eliminating corporate welfare and all subsidies, including those for clean energy. Market forces would take over without all the loopholes that inevitably skew our personal decisions and ultimately the national economy.

Families would have a strong incentive to save and invest, instead of waste and consume, reversing a century of falling savings rate. It might even help reverse the last 60 years of cultural decay…combating materialism, consumerism, and the decline of the family.

I won’t argue at what level our economy should be taxed. My point is that if we will have any tax what-so-ever, it should not come from the work of; the policeman protecting our streets, the agent insuring our home, or the entrepreneur creating new industries and jobs for society. If nothing can be said to be certain except for death and taxes, then let’s use taxes to help us live longer, richer lives, and leave a world for our children that is not worse off than the one we found.

--------------------------------------------- ---------------------------------------------

This led me to create this site http://www.writegreen.org. Might have to give is 30 seconds or so to load (I've got it hosted on slow Heroku tier) The idea was to empower citizens to use their own philosophy to advocate sustainability with our politicians. The ideas is, change your politicians, not just your light bulbs.

Roboprog5• 10 years ago

Or perhaps we should replace the income tax with a property tax? Thus, you can only keep property if you are productively using it, or some such thing. Perhaps subject to some kind of sliding scale to have a higher rate on more expensive items.

See also: "Jubilee", a topic you will almost never hear mentioned in American churches.

refurb4• 10 years ago

Growth as a result of consumption is destructive....For example, measure growth by how people are becoming more educated."

You realize that consumption includes education, right?

KMag• 10 years ago

But the measurement of consumption is in currency, typically USD. If you get that education via a free MOOC, then its contribution toward consumption measures is the cost of the electricity and bandwidth you used... essentially zero.

jeffdavis• 10 years ago

Great comment. I'd like to see this idea developed a little more thoroughly -- any suggestions?

flukus• 10 years ago

I believe (or rather, I pray) that we have hit peak consumption which will lead to this problem forevermore. We need to find new ways to improve ourselves than shopping more.

I think if we had more time we could certainly be consuming more, at least it's my limiting factor (besides money).

Imagine if we halved the work week or invented a pill that would let us survive on 1 hour sleep a night, that creates a lot more hours of consumption.

jldugger• 10 years ago

For example, measure growth by how people are becoming more educated. If people could live healthily and intelligent and only work 10 hours a week until they were 100, wouldn't that be better than being able to buy a new car every year?

At least on the margins, nobody is doing this. And I doubt it's because the GDP numbers says not to.

jomamaxx12• 10 years ago

"Growth as a result of consumption is destructive. "

I'm sorry, but this is completely ridiculous.

'Consumption' is the primary driver of economic growth, and it will always be thus.

Without 'consumption' there is literally no economy.

If people want to work 10 hour weeks, they can do that, though I should point out, most kinds of work activities, especially the high value ones, don't work that way.

Better to work 40 hour weeks for 10 years, save everything, and retire.

Surely we need to find a way to clean up after ourselves and solve the problem of fewer resources and more garbage, but in general 'consumption' is good, or else there is no 'work' and no 'jobs' - even 10 hr/week jobs.

ting_bu_dung2• 10 years ago

it's interesting that the report mentioned the start of 2001 as the low GDP growth for US and EU......but it's also around the same time that China joins WTO.

For 15 years, jobs, communities and quality of goods were sacrificed in US and europe for cheap, shoddy goods that were produced by laborers in China in abysmal conditions, the rewards reaped by Chinese communist party insiders.

For 15 years, US and european companies outsourced their money and time to China, only come to find out that by being short sighted to profit, they've lost their trade secrets, technologies, know-hows, skills, market shares to Chinese manufacturers and technology companies. They paid a big price to learn that with the Chinese government, Only China wins. There's no win-win for both. When dealing with Chinese government, you lose.

So we're at an interesting intersection in 2016. China's membership in WTO is at its end this year. China is exposed as having an authoritarian regime that is hiding trillions of debt and likely having a 0-2% gdp growth. It is exposed as having an anti-foreign environment where companies like Uber, Wynn, Yum, Apple are all suffering. What will happen?

ting_bu_dung2• 10 years ago

"“Made in China 2025” initiative, which aims to ensure Chinese-made components and materials account for 70 percent of China’s manufacturing inputs by 2025."

http://atimes.com/2016/07/us-warns-at-wto-of-china-backslidi...

US warns at WTO of China backsliding on economic openness

Roboprog5• 10 years ago

I'm not voting for Trump, but he has definitely hit a nerve with his anti-China rhetoric - "cuz it's true!". I'm pretty sure that sentiment also alienated him from most of his party's establishment.

I don't know that I will vote for Hillary, either, since the Clintons are like "Full speed ahead!!!" with the free traitor, er, trader, crap.

I voted for Bernie :-(

rm_-rf_slash2• 10 years ago

I often see articles like these result in a broad call for a universal basic income. The reasons are simple: it doesn't dictate what you should or should not spend your money on; it provides a standard-of-living floor; it balances out the inequalities of a globalized and increasingly automated world.

I have a different proposal: instead of guaranteeing basic income, guarantee broad access to basic services.

Off the top of my head, I see five basic services anybody in an industrialized society ought to have provided for them: food/water, shelter, transportation, health care, electricity/information. If these needs can be met cheaply enough, then we won't need a guaranteed income. The basics are cheap enough and if you want a higher standard of living, you can work towards it, but in a market society there are winners and there are losers, and at least under the guaranteed service mechanism, the losers aren't mired in poverty.

In the short term, food/water and electricity/information are nearly cheap enough to be universal. We just don't choose to provide it in a low-tax society.

Medium term, health care costs can be reduced through automated diagnosis and operations. Some automated surgeons exist today and there was a recent report that IBM's Watson was able to correctly diagnose patients.

Long term issue will be shelter and transportation. Even with self-driving automobiles, providing shelter for everybody will require a delicate balance between dense urban housing (which is currently in high demand and very expensive) and suburban sprawl (which is harmful to the environment and requires vast and expensive infrastructure like roads and water).

By investing heavily in an ultra-low-cost society, governments can ensure all people have access to the services they need, while refraining from redistribution-via-taxation, which, while good in intentions, dents the very growth and ROI necessary to make these big investments.

al_biglan• 10 years ago

This. One other thing I might suggest is some sort of variable cost model where every person gets 1 unit of water per day for free and then consumption above that scales up. Most people will consume more than the bare minimum to survive (lets say the unit is 2 liters). Doing this raises the base for everyone to be able to contribute to society yet still collects money needed for infrastructure costs, etc. ) One we have some of the utilities under this system, things like health care would be nice follow-ons.

ap222133• 10 years ago

The problem with that approach is that it's very centralized in a soviet kind of way. You have a small group of people deciding what people should get and how they should get it. The state then becomes the decider of what people need - and that distorts market forces. In that model, you will get bread queues and tenements.

If you give people real money, it allows them to 1) be creative in how they use it, and 2) stimulate 2-sided markets, which enables creation of new things.

contingencies5• 10 years ago

While it's true that centralization does have its problems (nobody wants a Soviet style system), I feel that you are conflating political issues with the original point, which was that giving out money is unnecessary if access to basic services is guaranteed. I do think that's an interesting point.

On the political side, since the Soviet system we have seen some incredibly effective centralized planning from China, who have an arguable 3000 year nominal history of political meritocracy and no democratic hangups. Also, we now have new options emerging through technology: direct, lower cost referendum-like voting on a broader range of issues being one.

Finally, "real money" is a very loaded phrase... just because a government guarantees a scrip does not make it any more real than, say, Bitcoin or human time. What drives fiscal systems, fundamentally, is the shared belief that a dollar acquired today can be useful if spent tomorrow. If you look at the key properties of money - ie. medium of exchange, unit of account, and store of value - then what the centralized, universal access to basic services proposal removes is all three properties of the handout: exchange, accounting, and storage.

What are the impacts here? Exchange: people are properly accounted for by the government when seeking services and cannot ask for things they do not use personally. (This could be seen as positive, but could also be seen as negative if the government is particularly inefficient at scheduling the supply of services.) Unit of account: There is no need to account monetarily for services that are provided, instead they are simply recorded has having been provided and the supply-side costs (medicine, food ingredients, etc.) are accounted for as standard. Storage: Society as a whole has an interest in allocating efficiently the resources used in basic services (shelter/food/medicine/education) as this is cheaper overall and results in less wasted resources; allowing recipients to store and hoard these is probably not in society's interest.

Overall then, perhaps there are some positive points in avoiding executing UBI in terms of cash handouts, and instead focusing on services. Of course, the real gotcha is going to be transition and utility ... without major society-wide restructuring, the cash-based approach promises a far simpler path of transition.

morgante10• 10 years ago

Are you proposing the the government directly provide these services? No thanks. You're providing an alternative to UBI without providing any explanation of why it would be superior, while ignoring the very real impact which competition has on lowering costs and increasing quality.

What is the benefit of that? Generally, government services are inferior to those provided by the market. Just take a sample of public housing or government cheese to see why having the government provision services is suboptimal.

If the government wants to get into these businesses, it should do so as a non-profit corporation directly competing with private sector alternatives. Then we can see if government cheese is actually more desirable than private alternatives.

in a market society there are winners and there are losers, and at least under the guaranteed service mechanism, the losers aren't mired in poverty.

UBI would be a market solution and could still prevent losers. Poverty reduction and personal choice are not mutually exclusive.

What you're proposing has been tried before and failed.

contingencies5• 10 years ago

the very real impact which competition has on lowering costs and increasing quality.

Oh please, what fallacy. Here on HN you have neoliberal truisms like this being repeated, at the same time as articles about celebrated icons of American capitalism clearly stating that in business they always seek to establish monopolies and that competition is for losers.

As an example of how fallacious this line of bullshit is, look at what privatization and 'competition' did to Australian telecommunications (instantly bought by foreigners, now a national security threat... some of the most expensive internet in the western world... metered downloads in 2016... new government program to fund infrastructure is broken down in to a government-pays, private-industry profits model... fiber is virtually unheard of, and is exceptionally difficult to acquire even eg. for a relative who lives right opposite the Sydney Opera House in central Sydney!) Whereas, here in China everyone can have fiber and a flat screen and a mobile phone for almost nothing, and they had no infrastructure at all 20 years ago.

rm_-rf_slash2• 10 years ago

Just to clarify, I didn't say the government should provide such services, but rather invest heavily in the cheapening of such services, such that the private sector can provide them at such a low cost that they become trivial expenses. For example, subsidized agricultural research results in cheaper food, but the government isn't responsible for growing crops or distributing them.

Mz5• 10 years ago

I think we need minimum basic housing a lot more than we need basic income. I think basic income is a problem.

We are suffering from "housing inflation" in the US and that is causing serious problems.

morgante10• 10 years ago

We are suffering from "housing inflation" in the US and that is causing serious problems.

No, we really don't. There are huge portions of the country where housing is cheap and plentiful.

The problem is that there aren't jobs there. If we had UBI, people could avoid barely scraping by on low-wage jobs in cities and instead thrive in low-cost areas.

tim333• 10 years ago

A lot of it seems insufficient demand after asset bubbles. Houses or whatever keep going up for a while, people mortgage themselves to the hilt to buy and when the bubble pops cut back spending to pay off the debts over the following decade or three. That leads to less spending jobs tax revenue and so on.

The solution I think should be something like governments borrowing money at the near zero rates we have at the moment and doing stuff like investing in infrastructure and things that will boost spending. When you get back to too much money chasing too few goods and inflation they can back off but we're way off that point in most economies at the moment.

dilemma• 10 years ago

The solution I think should be something like governments borrowing money at the near zero rates we have at the moment and doing stuff like investing in infrastructure and things that will boost spending. When you get back to too much money chasing too few goods and inflation they can back off but we're way off that point in most economies at the moment.

This is a popular idea but the problem is that in practice the cutting back never happens, so you end up with government policy together with central bank interest rates causing deeper recessions, or even creating the depressions they were intended to prevent.

smallnamespace• 10 years ago

Note that very long run GDP per capita growth is driven more or less by technological change, and there's no reason to expect that technological change is constant.

Major technological innovations are often discrete, their impact can take decades to be fully realized in the economy, and the timing of the next major innovation is unpredictable.

ArkyBeagle9• 10 years ago

There is a great deal of grumbling, dour dissent with any sort of technological change outside of the tech sector - aka the "true believers". I'd stop short of calling it Luddism but it's like that.

I've presented far too many solutions to non-specialists who stared in unblinking misunderstanding at these solutions to think otherwise.

tomjen3• 10 years ago

There are a lot of calls in these comments for basic income, or schemes like it. But that is just redistributing existing wealth, not creating new growth, which is exactly the problem we have. You have to produce things before they can be consumed, and this is also the case with economics.

mindslight3• 10 years ago

UBI is even worse than redistributing existing wealth. It is a simplistic plan to throw more fuel on the monthly-rent fire, ignoring that price feedback will eagerly consume it.

I had been wondering why it had quickly gained mainstream popularity, but then I realized it is simply the latest way central banksters can conjure money to have it collected by their cronies.

What we need is an end to this many-decades regressive policy of forcing inflation, so that a middle class is once again able to save and thereby gain economic security and bargaining power.

imtringued• 10 years ago

A lot of people move to the city because that's where the jobs are. If the job is no longer the primary motivation to choose their location then they would go into a low cost city and decrease the pressure on the housing market of the high cost city.

Oh and inflation is already very low.

morgante10• 10 years ago

In case you were unaware, inflation is incredibly low and has been so for quite some time.

Thinking that handing out free money will automatically and immediately cause price inflation is naive. If that were true, why would we still have such low inflation after nearly a decade of expansionary monetary policy?

ap222133• 10 years ago

Historically, the wealthy do not create many things. When not funding wars (which do advance knowledge, btw) or accumulating capital, they use their disposable income to fund intellectual things (which can be science) and art and the crafting of luxury goods. But, they're generally not inventors. Why would they be? They already have the lush lifestyle. And, while it's fun to think about things, invention requires a lot of work and grit and getting dirty. But, worse - invention makes you look like a weirdo to your peers, who would prefer things stay in stasis. So, the inventors usually come from the middle classes.

Historically, middle classes are formed when there are unexpected population booms (because usually, more population means more production). And, during these times, there's a short window of time when production exceeds consumption. And, when that happens, there's room for excess production to go toward invention. If it is all timed right, the invention period can produce excess growth which can create more invention, etc. But, naturally, Human systems fall back to wealth inequality, because that's a stable equilibrium.

Now, it's going to be very unexpected if we have another population boom anytime soon since we're moving more toward population plateau. And, at 7.35 billion people, we'd need the world to quickly support a couple billion more. But, another big, apocalyptic war could happen or maybe disease, in which case there would be a subsequent imbalance in production and consumption. Otherwise, things will kind of reach the equilibrium point and stay there for a long time.

Basic income is cool (in my mind), because it frees up large portions of the population to invent new stuff. There's currently a very short window of opportunity for basic income (or something similar), because most elite are (naturally) against it. But, another alternative, maybe, could be if all the billionaires of the world suddenly realize that they're all going to die soon and they collectively decide to continue on this earth for a lot longer (since many don't believe in God anyway). In that case, they could dump most of their capital in life-extending inventions, and that could keep things going for longer. (The cynic in me has always wondered if that's partly what billg is doing with all his humanitarian stuff - save a few billion people, get the smartest of them into becoming inventors, and as a side-effect get (virtual) immortality.)

jackcosgrove3• 10 years ago

Using the Solow growth model, economic growth has three factors: population growth, technological improvement, and financial savings. All three factors are reducing growth in the developed world. Populations are stagnant or declining, technology may be displacing more jobs than it creates, and we are in more debt than ever.

So what is the root cause? Birth rates fell because of declining economic prospects, and savings declined for the same reason as well. Alone among these three factors, technology has continued its advancement, except now instead of improving labor it is a substitute for labor.

There were other supply shocks, such as the oil crises and more importantly the baby boom in developing countries that made outsourcing possible. But those are transient factors in the long run.

In the long run technology stands alone as the disruptive factor. We can try to mask the problem with financial debt or economic redistribution, but the problem remains that unskilled labor is no longer needed, and skilled labor is an increasingly high hurdle to clear.

collyw6• 10 years ago

Isn't immigration making up for the low birth rates? It seems to be here in Europe.

jackcosgrove3• 10 years ago

Not if the immigrants are past school age and have not learned needed skills in their home countries. Implicit in the population growth factor is education and training that makes those new people marketable.

brador• 10 years ago

What we're missing is cash in peoples hands to spend on innovations. For many 80% of income is going to rent. How can you even hope to build an economy on that?

refurb4• 10 years ago

You do realize that most people don't live in Silicon Valley or NYC, right?

I'd say a small fraction of the US population is paying "80%" of income for rent.

nxzero2• 10 years ago

Real issue is that humanity's ability to exceed technology is limited. Even if humanity was to conserve more resources and invest more, majority of value and effort would be to increase the rate of returns from technology.

ArkyBeagle9• 10 years ago

Technology ( as the term is widely used ) is the principal mechanism by which resources are conserved.

toasterlovin4• 10 years ago

Do you consoder economies of scale a technology? I ask because it seems to me that economies of scale in manufacturing and agriculture have been a huge driver in producing more with less inputs (especially labor inputs).

boulos• 10 years ago

People complaining that UBI wouldn't help are missing an important point. In the US, and most of the world, we have a demand problem not a supply problem. The UBI "plan" then is to bump up the wealth of those that would essentially immediately consume it, which generates demand. It's not controversial to argue that an extra $1000 a year to a millionaire will just end up being reinvested, while most Americans (the bottom 50%+1) would easily spend it all sloshing it back into the economy.

WillPostForFood• 10 years ago

Then that's not going to result in much good. To grow the economy, you want investment, not people funneling a free $!000 to China for some cheap consumer goods.

MarkPNeyer• 10 years ago

you want investment

In what?

A company that sells goods to consumers who can't buy it?

Those aren't doing any good.

There are mountains of cash right now, all seeking investment. They have trouble finding anything worth investing in. This is why we see massive valuations - with zero interest rates, a tiny revenue stream is worth a huge amount of cash.

TaylorAlexander2• 10 years ago

I see that a UBI would help in the short term, by getting cash in to the hands of people who don't currently have cash. But it doesn't do anything to solve the systemic problems we have. Internet and telephony companies are still oligopolies that charge huge extractive sums of money for digital services, our food production system degrades the environment, and health care prices are out of control.

Yes, we absolutely need to get more wealth into the hands of regular people, but setting a fixed income from on high doesn't do anything to change the power structures that led to so many people being disenfranchised in the first place.

To me, there is a problem when power is concentrated in one place, and remote megacorporations flood the market with goods that won't last but are so cheap most people (irrationally) choose them. The end result is that those in power have no connection to consumers except as sources of money, and people and the environment get treated as disposable.

I see the solution as something more like what the New Economics Movement has been talking about, which has a big focus on local businesses. What do you think of this video?

https://www.youtube.com/watch?v=kDw4dZLSDXg

twblalock• 10 years ago

UBI won't help because in reality, it will not look like what it's proponents think it will.

It is naive to assume that the Congress will pass anything near as simple and elegant as the UBI proposals put forward by advocates. It won't replace many parts of our current welfare system, but will be an additional cost on top of them. It's also naive to expect that everyone will receive the same amount under UBI, which would make it neither universal nor basic. UBI proponents really ought to read this: http://marginalrevolution.com/marginalrevolution/2013/11/wha...

It's also a fact that under every realistic* version of UBI ever proposed, the poorest people in the US would receive less money from the government than they do now, while people who do not need money from the government would start to receive it. It is therefore a regressive policy.

* by realistic, I mean "does not have an annual cost greater than the entire US government revenue."

bsbechtel2• 10 years ago

I'm shocked to see no one here has even discussed over-regulation as an issue. The more things you tell people they can't do, and instead mandate they do things they may not want to or need to do, the less opportunity they have to do things they want to do, which is what people generally are willing to pay for (an thus increases economic growth).

beisner2• 10 years ago

It hasn't been mentioned because compared to the last 70 years of high growth there are now fewer regulations on business and industry than ever before, in the US at least.

bsbechtel2• 10 years ago

That's not at all true:

http://madisonproject.com/wp-content/uploads/2012/10/regulat...

Animats3• 10 years ago

Nah. The US isn't that heavily regulated. Anybody can start a business. It's been decades since the ICC limited entry into trucking and the CAB limited entry into the airline business. Whining about regulation is mostly complaining that you can't dump your externalities (pollution, employee injuries, etc.) on other people.

politician2• 10 years ago

Banking?

bunderbunder2• 10 years ago

Interesting, then, that this slowdown should coincide so closely with a period of increasing de-regulation.

ArkyBeagle9• 10 years ago

Regulation isn't all one thing - some is increasing, some is declining.

CountSessine2• 10 years ago

should coincide so closely with a period of increasing de-regulation

The last 16 years has seen little or no de-regulation. The last serious bout of de-regulation that I can remember was back in the 80's when Reagan threw out the rulebook on airlines or when the RBOCs were allowed to reconstitute themselves.

rsync• 10 years ago

"I'm shocked to see no one here has even discussed over-regulation as an issue."

I think regulation (and the notion of over/under regulation) is a fascinating and worthwhile discussion to pursue. Honestly, it's something people should be debating.

However, I insist that you describe the low, or no, regulation regimes you have lived under (or visited for significant periods ... months/years).

When and where ?[1]

There is a "must be this tall to ride" barrier for discussing small government and/or over regulation, and this is it. As a community we should insist on this basic test of legitimacy.

[1] Yes, I'll accept NOLA. Maybe even Houston in the 90s ...

clarkmoody• 10 years ago

However, I insist that you describe the low, or no, regulation regimes you have lived under (or visited for significant periods ... months/years).

Seriously? So we can't ever discuss the way things should be without firsthand experience of living under those conditions?

Scenario:

You are a slave living in a mining pit. Each day you look up from your drudgery and see free people picnicking in the grass high on the edge of your pit. You turn to the man chained next to you and say, "I believe a world where we were free would be better than this one. Look at those people up there."

He turns to you and says, "I insist that you describe the low / no slavery regimes you have lived under before we can debate the merits of your proposal."

You stare incredulously at your fellow slave.

someguydave• 10 years ago

"I'm shocked to see no one here has even discussed over-regulation as an issue. "

HN isn't known for being skeptical of authoritarian statist solutions to your problems.

davidf18• 10 years ago

The article speaks mostly of Macroeconomic forces such as increasing the money supply.

The problems with the economy are mostly caused by microeconomic issues. Politically induced scarcity ("economic rents") that results in higher prices, externalities, and asymmetric information.

A very, very large problem is the use of zoning laws which reduce density and overuse of historic landmark status which artificially increases land value and hence the cost of renting apartments and buying houses. This results in a transfer of income and wealth from people renting apartments and buying houses to landlords.

Income that should be going towards purchasing goods and services and thus stimulating the economy goes towards landlords instead. Removing the politically induced artificial restriction on zoning would lower the cost of housing and stimulate a housing boom.

This is the reason for the high cost of housing in NYC, SF, LA, Boston, Washington DC and other cities.

In NYC, there is a limit of 13,000 taxi medallions which resulted in a medallion market value of $1.2 million. After Uber/Lyft came along the value dropped to $700,000 and not surprisingly the cost of taking Uber/Lyft has decreased compared to taking a taxi. This makes it so that New Yorkers can spend less income on taxis and taxi-like vehicles and more on goods and services. Of course course, the "taxi medallion landlords" have lost big time, because the political scarcity of medallions has been undermined.

Many occupations have unnecessary licenses or unreasonable licensing requirements in order to create scarcity in that occupation creating artificially high prices while keeping others who would like to work out of the market.

Stop the "rent-seeking" of "economic rents" through Federal Laws and we'll make sure the markets are more efficient a huge growth to the economy.

What is baffling, and perhaps others can comment is why the NYTimes is writing economics columns without addressing the microeconomic inefficiencies which includes "economic rents." Can't they find someone with a basic understanding of economics to write an appropriate column?

Animats3• 10 years ago

“Lack of demand creates lack of supply.”

Exactly. Americans are spent out. The US savings rate is near a low. Americans are spending 95% of their income, and for the bottom 90%, it's more than that.[1] About 1 in 7 Americans has trouble getting enough food.

What we're discovering is that, when it doesn't take that many people to make all the stuff, the economy winds down to a state where most people are just surviving. This is a new thing. Historically, the big problem was making enough stuff. For millenia, society ran out of labor before it could make enough stuff. We're past that. And we have no idea how to cope with this.

[1] https://fred.stlouisfed.org/series/PSAVERT

paulpauper3• 10 years ago

About 1 in 7 Americans has trouble getting enough food.

but the obesity rate is actually higher among lower income earners

As for job destruction, the jury is still out. It is generally accepted by economists that new technologies spawn jobs for all skill levels.

api2• 10 years ago

I'd change it to "quality food." Junk food is cheap.

bufordsharkley2• 10 years ago

Agreed-- most of the assumptions we've been working on are no longer true, and we're not adjusting to these changes very well.

I've been interested lately in some very old economists who, insofar as they remained extremely general, have become more and more prescient. Henry George's writings on the post-scarcity "fools' paradise"[0] are more relevant than ever.

We see this today, as the return to scarce natural resources (such as land) and IP is far outstripping the increases to the return of labor.

[0] http://www.econlib.org/library/YPDBooks/George/grgPP15.html#...

foobarian2• 10 years ago

If production ends up centralized not through some communist revolution, but merely by advancing technology, do we still end up with an essentially centralized economy? It's hard to even call it an economy, it's more a distribution schedule driven from the bottom by a fear of a bloody uprising.

ArkyBeagle9• 10 years ago

It's beyond being spent out. People are just off the consumption treadmill. There are substitutes for all the big heavy things people used to need.

Animats3• 10 years ago

Food, clothing, and shelter?

refurb4• 10 years ago

Your link shows the US savings rate has doubled since 2005. Sure it's lower than 30 years ago, but it's also a lot higher than other countries.

pilom3• 10 years ago

Sounds like we need to start spending globally. Massive infrastructure spending in third world countries to encourage demand for our products.

vosper2• 10 years ago

If that worked then it would be a short term fix that would run out when the third world countries are elevated to the same state.

hurricaneSlider2• 10 years ago

Um. No thanks.

Unless you're being sarcastic, the casual way in which this is being proposed makes me very uncomfortable. That is imperialism in all but name. An example of such a phenomena is that South Africa was forced to take on millions of tons of American "waste" poultry. It hurts our economy and makes us policy slaves. The IMF is another institution which has a long history of forcing African countries to act counter to their best interests. We'd like to retain some scraps of our sovereignty.

tbihl4• 10 years ago

To add on, we spent our savings, then we maxed out adults on debt, and now we've nearly maxed college students. Unless we start being more OK with children carrying large debts, I think we have to come to terms with the fact that our trajectory was always unsustainable, and we've finally found the side opposite where we started.

Roboprog5• 10 years ago

With all due respect:

"a state where most people are just surviving."

It's not new. It's called feudalism. When a powerful elite owns just about everything, a minority of the people serve as specialists at the master's pleasure, and the rest are peasants/serfs (or rogues/thieves).

paulpauper3• 10 years ago

People have been saying this since 2009, yet the S&P 500 is up 250% since then.

We need to put things in perspective.

The reality is:

The US has greater inflation-adjusted GDP growth than most of the world, including much of Europe, the Middle East, and South America, and Japan http://i.imgur.com/SBqFqtt.jpg

Profits & earnings for tech companies, payment processing, retail, and consumer staples companies have far-outpaced GDP growth. A lot of the lag comes from the chronically weak financial, commodity, and energy sector.

It's much harder to grow a large economy than a smaller one. There's diminishing returns to scale. It's harder to grow an economy at the same rate it was growing when it was 10x smaller.

2% real GDP growth, while slow, is still growth. Most people cannot perceive the difference between 2% growth and 7% growth.

Real GDP is back to 2003 levels, and far fewer people were complaining about slow growth back then

Slow growth doesn't preclude discovery and innovation, things like web 2.0, smart phones, apps, theoretical physics, mathematics, uber, self-driving cars, on-demand entertainment, etc.

So while more growth may desirable, 'slow growth' isn't too much to lose sleep over.

A lot of ppl have mentioned the UBI, but it's worth reminding that the effective income tax for the lowest 20-40% of earners is negative

ArkyBeagle9• 10 years ago

4% would be much preferable to 2%. 2% barely covers increases in productivity and population growth.

lifty• 10 years ago

Of course the S&P 500 has been growing, central banks are buying stocks left and right. What's worth mentioning is that both governments and companies have massively increased their debt during that period, so its really hard to judge what the 250% S&P 500 growth means.

jganetsk5• 10 years ago

The S&P 500 growth means that companies are confident enough in their future cash flow that they will borrow money against that to buyback their own stock. This has been a trend since the 80s.

We are living in situation where, instead of competition driving profits down to 0, or profits being used to finance investment and growth -- profits are simply returned to shareholders. Low interest rates are only reinforcing this. It's a great time to be a shareholder, and not a great time to be a consumer.

jf271• 10 years ago

The S&P is growing because companies are borrowing to buy back their stock. It is illegal stock manipulation but that law is no longer enforced. This makes money that used to be taxed as dividends eligible for capital gains treatment and it taxed at a lower rate than it would be as dividends. this lowers tax income to the government. A downward spiral with no end in sight.

spiderjerusalem• 10 years ago

| but it's worth reminding that the effective income tax for the lowest 20-40% of earners is negative

Can you explain why this is so? Interesting way to put it..

Roboprog5• 10 years ago

Earned Income Credit, for one thing. I can't speak to the accuracy of the 20 to 40 % claim, but I remember getting a significant EIC credit one year in the 80s.

jomamaxx12• 10 years ago

"The US has greater inflation-adjusted GDP growth than most of the world,"

A) If you normalize for immigration, it's not that good. US imports bodies to grow it's GDP

B) It's maybe 'better than most' - but it still stinks.

I'm 42. Most of my life, 4-5% growth was the norm. No more.

We are in a new world for sure.

Ben-G• 10 years ago

I think there are multiple interesting factors at play here: most importantly downward pressure on prices (brought by technology) and the unequal distribution of wealth/income.

Technology has made a lot of stuff far cheaper than it used to be. Instead of buying a photo camera, a video recorder a tape recorder, etc. you can buy a smartphone for the price of one of these individual items (at 1980/90 inflation adjusted prices).

A lot of services we consume have become a lot cheaper as well. Compare Netflix & Spotify for a few $ months to buying individual movies & CDs. A lot of people spend their free time on Youtube/Facebook/Reddit essentially spending nothing at all.

A lot of younger people living in cities are no longer purchasing cars or homes. Overall travel has become a lot cheaper as well. IKEA has commoditized furniture which used to be extremely expensive a few decades ago.

Cheaper prices mean lower spending & lower GDP.

At the same time a smaller group of large companies is capturing the profits in the low cost sectors (again IKEA, Netflix, Google, Facebook). These companies are making huge profits per employee and they are facing very little successful competition.

A majority of the middle class (that doesn't work for any of these highly profitable companies) has very limited free cash flow, due to the rising cost of housing and education and the stagnation of wages. They can't afford to purchase expensive homes, expensive furniture or expensive cars.

More wealth is going to the highest earners, where each additional $ contributes a lot less to GDP than it would in the hands of a middle class household.

---

I'm throwing a lot of stuff together here, but this is what I'm missing from most discussions about the economy: try to describe trends with the concrete situation at hand rather than with generic theories that have been around for decades yet have mostly failed to predict the economic outlook correctly (it seems like the rise of behavioral economics could help here)

Mz5• 10 years ago

I get paid to write online. The things I write are typically intended to be published somewhere online. I rarely read paper books or magazines, yet I consume information all day. When a system is infused with information, it often can accomplish the same thing -- or something better/more -- with less material matter.

I think no one is measuring any of that. The fact that I can do freelance work online means I can earn less (gross) and keep more of it (net) because I do not need a car to get to work or clothes to meet dress code, etc. So, I am seeing real gains in my quality of life -- paying down debt, eating better, better health etc -- than I could achieve when I had a corporate job. The "overhead" for having a corporate job meant that by the time I quit, I was far deeper in debt than when I got the job. It was a frustrating, frightening way to live. Now, the money I earn is net gain, not "Oh, my god, I can't eat without a job, but having a job has me barreling towards bankruptcy!"

ArkyBeagle9• 10 years ago

This. The disconnect from "having a real job" and working is spreading. The corporate sector seems to be rapidly declining in exactly this way.

In my most recent gig, having to be onsite was a huge drain on productivity. It really needed to be roughly 10% of my time. I stayed way ahead of my job mainly by doing stuff at home - just the moronic network filters alone meant I had ... 10x the bandwidth available.

But onsite was still required.

I have two kids around 30 or so; neither has an onsite corporate fulltime job.

internaut• 10 years ago

More people need to think like you.

ROI is what matters. It is not just monetary either, people working long hours often make suboptimal eating and sleeping decisions which damage their health.

fsloth4• 10 years ago

I believe there are efficincies in the marketplace that are not captured in the financial data - everything in my daily life is much easier now that I have a smartphone in my pocket and everything is online. Maybe the fact that everything is more efficient means one can get more value with less - thus, making the daily consumer effectively better off although the capital is hurt. What does this mean for the economy in total? Everything except truly constrained things like land are utterly commoditized?

fsloth4• 10 years ago

To elaborate - we measure the price of the big mac, but put no price a) finding the big mac b) finding the cheapest bigmac (both of a and b are easier, but there is no way for the McBurger chain to capture the value of this) c) discovering bigmacs are actually bad for you, abstaining from them and saving a ton in healthcare costs later on, and also living longer (thus, consuming and producing more over ones lifespan).

Barrin92• 10 years ago

It makes sense to not measure those things because they don't increase our overall happiness or productivity.

You can't live off imgur cat pictures or spreadsheets about big mac nutrition. If that were the case the Western populations would be as happy as they were never before. People need a house, an occupation that gives meaning to their lives, the right to political participation and shape their everyday experiences. These things are currently under a lot of fire and it won't go away by appeasing the population with Netflix.

It's really not that much of a mystery, if a whole segment of the population is robbed of these opportunities it's going to get ugly.

pastProlog• 10 years ago

There are two ways producing widgets can grow 10%.

The standard way is where production methods stay the same, and 10% more offices/factories are added and 10% more workers are added. The reason this would be done is because there was a 10% growth in demand for widgets. This would be due to a 10% growth in population that could afford widgets, or a 10% growth in income for consumers/workers that they decide to spend on widgets.

With population growth shrinking in the standard consumer societies, that aspect goes out. Insofar as income, the average US inflation-adjusted hourly wage today is below what it was 43 years ago - it has shrunk. So the demand is not really increasing. Since demand for widgets in general is not going up, companies are not desperate to employ the average worker, and thus wages are stagnant (or as I said, the average US inflation-adjusted hourly wage has shrunk over the past 43 years).

When were companies investing the capital necessary for automation, technological improvement etc.? From the 1940s to the 1960s. When demand was high due to increased population (baby boom). There was a baby boom because after a long depression, the economy started paying good wages to the average worker due to strong unions and government stimulus starting heavily during World War II. Money in workers/consumers pockets led to increased consumer demand.

Due to the highest unionization rate in American history after World War II you have high wages at these growing companies. How to lower costs? Invest in automation, invest in technological improvement.

Without high wages, and some of the other factors mentioned, the financial impetus to invest in technological improvement and automation fades. It's always there, but it ebbs in the absence of high demand, high wage employees.

acd2• 10 years ago

It would be interesting to analyze central bank interest rate vs inflation and test for R2 r-squared errors.

http://www.zerohedge.com/news/2016-07-05/central-bank-death-...

https://www.imf.org/external/np/pp/eng/2013/041813a.pdf

There might be diminishing return for every new credit money created which in turn leads to lower growth.

It is also not certain that low interest rates will lead to inflation. If you were a big company and suddenly got a lot of cheap credit. Would you A) increase the wages of your workers or B) invest in cheaper production through automation? What does choice A) or B) yield for consumer prices, do they go up or down?

jganetsk5• 10 years ago

You would do neither. Instead, you would do C) borrow to buyback stock.

http://www.wsj.com/articles/share-buybacks-the-bill-is-comin...

karma_vaccum123• 10 years ago

In addition to the other good observations..."quarterly capitalism" has reduced risk appetite.

Furthermore, we live in a very regulated world. Rules can be beneficial but tend to also slow progress

bogomipz• 10 years ago

We got not in a small part by China having double digit growth in GDP for well more than a decade, this or course is no longer the case. Double digit growth is not sustainable. The fact that it went on for as long as it did was an anomaly. Also double digit growth is something that while not sustainable is also maybe something that might not be desirable either. I would recommend this read on the subject:

http://hbswk.hbs.edu/item/the-curse-of-double-digit-growth

YZF• 10 years ago

I'm more amazed we had the high growth we've had in the past. Why would the steady-state of such a complex worldwide system be at a point where we have good employment, rising standard of living, growing populations, relative peace? There are so many other local minima which we've managed to hit over man kind history...

The key word is sustainability. Without it something has to give. It should be obvious that given finite resources on this planet we can't continue expanding our population and the standard of living indefinitely. The reason the trajectory we were on could not continue is that it was not sustainable. We can't have more people in the world, every such person living in a McMansion, with two cars in the garage, buying new gadgets all the time. And really why? Wouldn't it be better to have a contracting population that consumes less?

Humanity would be better off trying to reduce the population size, reduce consumption ($ and resources), maximizing the utility/$ of goods rather than the absolute $ of crappy goods sold. Aiming for more equal distribution of wealth. Less conflicts. Social security (so sure, basic income but not as a catalyst of growth). Everyone should work less hours and earn enough to sustain themselves with a reasonable standard of living. So this is all perhaps a deflationary, negative growth, environment.

didibus2• 10 years ago

Agree wholeheartedly. Sustainability is key. The last generations were raised being told that success is growth, I hope the next generation will be raised knowing that success is sustainability.

politician2• 10 years ago

Wouldn't it be better to have a contracting population that consumes less?

No. Because would you voluntarily sterilize yourself and your partner to live this ideal?

We have an entire solar system to colonize, don't spread your defeatist message before we even get off world.

We have nigh-infinite energy in the form of fission and solar systems. We have infinite food and space. The bottleneck is distribution.

EGreg• 10 years ago

Low growth is sustainable! Rampant consumerism and the drive by corporations to move money faster and faster by changing resources to garbage is a drug that needs to be stamped out. The addiction to population growth just to fund social security schemes is similar. Societies can get addicted too.

Now we just have to figure out how to weather the human->robot worker transition smoothly.

pessimizer2• 10 years ago

The financial industry and elites sucking up all of the capital and holding it, while heavily lobbying to maintain a low-tax environment and to prevent governments from spending on infrastructure and lifestyle improvements for the general population, although they generally are borrowing at near zero or negative interest rates. This results in insufficient demand and secular stagnation. No investment = no growth.

Luxury goods and services are doing well, though.

Also, the United States is not adding jobs at a healthy clip; the jobs are worse and the prime-age (25-54) employment rate has only retraced halfway since the stock crash nearly 10 years ago. The US intentionally pushes a strange number for joblessness that drops people from being counted, and can be adjusted through legislation lengthening and then reducing the period during which unemployment benefits can be collected. The rate jobs are being added would be fine for an economy not recovering from a crash. This is not that economy.

1) 15 years ago marks the crashing of the dotcom bubble, which was used to recover from the recession of the early 90s, which was caused by Reagan ruining the country. So, IMO the way to view it is that Reagan destroys the working class and causes it to live on credit and prayer while cutting infrastructure spending and lowering taxes on the rich. The best thing he does is spend an enormous amount on the military and other welfare for the rich, which creates some sort of replacement demand, although he finances it by driving the national debt into the stratosphere.

2) Clinton deregulates everything, ends welfare as we know it, and encourages a bubble in stocks. A bubble is not a boom - a bubble is a time when people take out loans with collateral that is on fire. During this, he raises taxes, which shifts the Reagan debt to personal debt. The stock bubble crashes as soon as he leaves, and what seemed to be a reasonable amount of debt for the working class to carry became a crushing amount of debt.

3) Then Bush encourages another bubble to save the economy, and it's in houses, an asset that is spread widely among the working class. They mortgage those houses to pay off their debt, and many get to buy some stuff. Bush immediately starts spending again like a maniac in the Reagan model, with an administration consisting largely of exactly the same people: wars on multiple fronts, welfare and tax cuts for the rich, and massive government contracts for insiders.

4) The bubble crashes as Bush leaves, and Obama comes in with a mandate for a massive national veer to the left, wastes most of it on an inadequate healthcare program of right-wing origin that is very nearly a no-op, and in almost every other way is continuity to the Bush administration. He freezes government spending in the lowest interest rate environment in history, and fills the demand hole by handing free money to wealthy people through the bailouts and QE, shifting all of that public debt partially to private working/middle class debt.

5) The rest of that free money has nowhere to go, due to the previously mentioned historically low interest rates, and in addition the tailing off of the marginal return on further investments in technology and industries based on the invention of the transistor, so it ends up in a combination of traditional large industry/natural resource extraction, banks (betting on a repeat of the experience of the bursting of the property bubble, where banks failing from intentionally taking on irrational risk was rewarded by direct, open payments of cash and grants of credit), and tech companies in-name-only, where service companies use the internet in place of phones (as in the original dotcom bubble where they were used in place of mail-order catalogs), or where the actual profits were made in services for B2B, such as advertising or computing infrastructure (the kind of stuff that large industries/finance/fake-tech-companies can park all of their cash in.)

tl;dr it's just kleptocracy.

Majorities of the youth and the marginalized now openly despise government, and have made this election cycle the scariest one we'll see until the midterms which will be the scariest one until the next presidential election. This "low-growth world" is the closest thing we're going to get to a bubble in this financial cycle, since the working/lower-middle classes are seeing absolutely no benefit from QE and the bank bailouts (unlike dotcom and the property bubble.) The only place to fall is open rebellion, tribal violence, and the aimless violence of suicide, mass shootings, and property crime.

/rant (sorry)

fharper1961• 10 years ago

Please don't apologize for your posting. So far it is the best/most interesting part of the whole thread.

refurb4• 10 years ago

15 years ago marks the crashing of the dotcom bubble, which was used to recover from the recession of the early 90s, which was caused by Reagan ruining the country.

I couldn't disagree more. The US economy was crap through most of the 1970's. The 1980's was one of the strongest periods of growth in the US for a long time. And the growth in wages was across all income quintiles. In fact, the runaway growth for the top income brackets started to take off in the 1990s.[1]

[1]http://www.advisorperspectives.com/dshort/updates/Household-...

pessimizer2• 10 years ago

The 80s weren't a strong period for investment, they were a strong period of deficit defense spending and tax cuts, which were stimulative. When that became unsustainable, the bottom dropped out of the economy. The history of the presidency since Reagan has been continuous giveaways to the wealthy financed by credit taken out by the middle class on phantom assets that vanish into thin air as the president exits. The way the Reagan era was different was that the asset was American world hegemony as a hedge against the eternal threat of Russia (which collapsed partially because it couldn't spend as fast as we could in Afghanistan.)

(Also, according to every graph on the page you linked, the incomes of the top 5% started their climb in 1981, dipped in 1989, recovered to the 1981 trend in 1993, and maintained it steadily until 2001. I don't know how you're reading that differently. After 2001, even the incomes of the top 5% are stagnant, and the important groups become the top 1% and the top 0.1%.)

didibus2• 10 years ago

I'm so tired to hear about growth. Growth is not a very beneficial situation to be in. We should focus on sustainability. Do we tell people to grow as fat as they can be? No, we encourage a sustainable in and out, just what we need for a happy and healthy life.

Billionaires are not a thousand times happier or healthier then millionaires. Growth is overrated.

There's a baseline of wealth that we must sustain, then we need to focus on horizontally scaling that baseline to as many people as possible, and finally, we must work to sustain that scale too. Growth appears twice in this equation, but always at a very well defined scale. We need to grow to reach the baseline, and then grow to have everyone base-lined.

Once we have achieved the above in a sustainable way, then we should focus all our remaining efforts into having fun, being curious, enjoying ourselves, and enjoying each others company. This should similarly be handled in a sustainable way. A heroine high is not a sustainable enjoyable and fun activity. Going for a walk along a park or a coast is. The dosage is important, a night out partying here and there is sustainable, day after day of it is not. Sprinkle in some learning and curiosity, I for example, would keep coding for pleasure. In fact, sustainability will probably motivate people towards sciences and technological advancement even faster, as we'll finally let free of our intrinsic motivations to do so.

To quote Nietzsche: "To escape boredom, man works either beyond what his usual needs require, or else he invents play, that is, work that is designed to quiet no need other than that for working in general."

The first part of that quote is Growth, endless, unhealthy, never ending Growth, simply to address our own boredom. The second part is sustainable life, easy, playful, and fun.

I really hope as we progress, I stop hearing about Growth, and I start hearing a lot more about Sustainability.

jomamaxx12• 10 years ago

"Growth is not a very beneficial situation to be in."

Again this is false.

There are so many financially illiterate people here on Hackernews.

Growth is a great situation to be in. When there is growth - there is money for projects, hospitals, infrastructure etc.

When there is no growth - everything goes out the window, and the first thing to go are longer term things like 'sustainability'.

You want to switch to solar - then you need a lot of 'growth' - why? Because the US cannot function on 40 cents/kwh electricity.

Now - growth by 'adding bodies' - which is where most growth comes from in the West - is bad. Immigration is where 80% of GDP growth comes from and that is definitely a Ponzi scheme.

IF you normalize for growth across US and EU countries, it's much more similar. The US simply imports people to grow the GDP whereas EU does less of that.

So, to your point, measuring GDP/capita would be a good start for 'sustainable growth'.

erikpukinskis• 10 years ago

I'm financially illiterate, so you'll have to pardon me. But why is growth necessary for spending? If my income is steady at $10,000,000 a year, I have money for projects, hospitals, and infrastructure. No growth, but I do have money.

collyw6• 10 years ago

As someone else pointed out "growth for the sake of growth is the ideology of a cancer cell".

beachstartup• 10 years ago

There are so many financially illiterate people here on Hackernews.

it's people using misappropriated financial terms to describe their social ideologies, even though the financial terms are ideologically neutral. they can be used to describe many different social configurations, not just the ones that currently exist.

api2• 10 years ago

We let worker wages stagnate such that there is now insufficient demand.

mrleinad• 10 years ago

"As a matter of arithmetic, the slowdown in growth has two potential components: people working fewer hours, and less economic output being generated for each hour of labor. Both have contributed to the economy’s underperformance."

Really? So it's basically the workers fault because they're lazy?

ilaksh• 10 years ago

Because we are focusing more and more on sustainability, which means more conservation, less consumption all around, and therefore low growth.

Beyond that, the entire foundation of economics is flawed. Computer scientists and software engineers should seriously examine the underlying assumptions of economics and revise them to be in line with technical reality.

Money is a technology. Think about the design from first principles. If you are an economist, you probably can't do that, because the design is fixed in your mind and first principles aren't known or considered unchangeable.

ryanmarsh• 10 years ago

81 percent of the United States population is in an income bracket with flat or declining income over the last decade. That number was 97 percent in Italy, 70 percent in Britain, and 63 percent in France.

Ok so growth slowed in the West, but weren't a lot of people brought into the middle class in the East?

It argued that the internet would not have the same transformative impact on how much economic output would emerge from an hour of human labor as 20th-century innovations like electricity, air transport and indoor plumbing did.

There's lots of back office automation going on in the Fortune 500 that is eliminating white collar labor. I seriously doubt these statements about productivity. If its productivity per capita they want then just wait until self driving trucks wipe out millions of jobs.

Am I missing something here? Isn't this basically what happens when labor (the jobs I mean) moves somewhere else and automation eats away at whatever is left?

mac01021• 10 years ago

I'm hearing lots about this low-growth economy from various major news sources, but it doesn't seem to me to be consistent with the data that I can look up on my own.

For example, the chart here seems to me to show regular traditional reasonbly-fast growth rates.(http://www.statista.com/statistics/188105/annual-gdp-of-the-...)

If you look at a 20-year plot of the S&P 500 (not the same thing as the GDP, I know, but still some kind of indicator of economic health) the net growth probably is low, but only because of the giant housing crash that causes a rapid setback right in the middle of the time period we're measuring. It looks like we've been growing at full speed ever since.

So what's the deal?

somethingsimple2• 10 years ago

It looks like we've been growing at full speed ever since.

S&P 500 valuations after the crisis are out of touch with reality. Look here: http://www.multpl.com/shiller-pe/. The stock market is incredibly overpriced i.e. companies' earnings aren't growing as much as people and institutions are buying stocks, driving their prices up. The reason for the bull market is that with near zero interest rates, everyone is looking for an investment vehicle that offers better inflation-adjusted returns than cash and bonds, even if it means taking more risk.

bjornsing• 10 years ago

I think it partly has to do with how we measure growth (i.e. GDP). For example, try using a laptop and a mobile phone from 2001 for a week or so. How does that feel? No growth, ehu? ;P

Another aspect I think is how much "non-monetized" value the Internet is creating. What would you pay for access to an Internet search engine (like Google or one of it's competitors), if you really had to? Going without is just not an option, but the price still hovers around zero.

That brings us to yet another aspect; the Internet puts a huge downward pressure on all (comparable) prices. I think this is a major factor behind the lack of inflation: hiking prices is just not possible the way it used to be.

danieltillett2• 10 years ago

This is taken into account in the GDP deflator (i.e. inflation).

jgord3• 10 years ago

Piketty argues, from extensive historical data, that the hi growth of the 1950s-1970s was unusual, and low growth is the norm.

So we might want to look at another aspect, such as how wealth is distributed - the low growth rate tends to accentuate the accumulation of growth on capital, so those who inherited a lot of wealth capture even more of it over time, without having to do anything with that capital [ such as investing in startups, building next gen transport systems ]. Which means we most likely need a much more aggressive tax on uber-high incomes and uber-large inheritance wealth.

[ Im not saying don't look at wealth creation technologies such as - nanoscale 3d printing, VR-work-from-home, asteroid-mining etc. ]

Reading Piketty's Capital is a bit like waking up in the matrix after taking the red pill - the gradual torrent of facts hits you viscerally, because you really had no idea things were this extreme.

As preparation, I recommend watching this short vid on wealth distribution - https://www.youtube.com/watch?v=QPKKQnijnsM

jgord3• 10 years ago

Another way to get this point across is -

The overall growth rate is ~2%, but if you happen to be very wealthy, the growth rate you experience [ on capital ] is ~6% to ~10%.

Amygaz2• 10 years ago

Piketty is one of the rare to actually pinpoint the problem and call it like it is. This NY Times article definitely does not, even if has some of the elements. Even early on it writes: "This trend helps explain why incomes have risen so slowly since the turn of the century". Maybe it is the other way around. I mean, if our economy is based on increasing production for the sake of increasing production, so by the same vain consumption needs to keep up, but then people can't afford consuming, or whatever they are consuming wasn't the result of value addition.

Then there is the CBO farce, and the use and abuse of GDP, and also believing to know what other people actually wants to buy, while also omitting to include what is it that 81% of the people with declining income can buy.

jgord3• 10 years ago

Should we make it a policy not to link paywall urls ?

somethingsimple2• 10 years ago

I didn't get a paywall, and I'm not a subscriber.

maxander• 10 years ago

Like most things in economics, the slowdown boils down to supply and demand: the ability of the global economy to produce goods and services, and the desire of consumers and businesses to buy them. What’s worrisome is that weakness in global supply and demand seems to be pushing each other in a vicious circle.

This is the sort of thing that makes people think economists live on a different planet. "Demand," in particular the "desire of consumers and individuals" for things, is something we have in spades- for a good example, walk down a main street of any city and you'll find some people who desparately want to stop being homeless. The problem, and on a more general scale this is the whole problem of our kind of economy, is that their demand doesn't matter.

These homeless people could, in many cases, work- they could do things that generate more value than they require in exchange to live decent lives. But their kind of work is ubiquitous, and they have no control over the market for it; as a result, the market has been manipulated by much more savvy actors to shift that labor market against them. Once this happens to a kind of laborer, an entire segment of "demand" is functionally removed from the economy.

The answer to that sort of thing has been known for ages- unions, substantial minimum wages, perhaps even basic income. But while the article talks about the kind of economic inequality that these measures combat, it does an impressive job of not putting two and two together. Economic stagnation and inequality are two sides of the same coin, but no one talks about this- because the managers of the economy are, predictably, wealthy, and have everything to lose to redistribution of wealth.

SlipperySlope• 10 years ago

Free Trade is the problem.

The developed countries must impose 50% or higher tariffs on imported goods, services and intellectual property to protect their workers.

The USA enjoyed very high growth rates in the 1800s.

When economists get around to simulating the economy via agent based modelling of every decision making financial entity, akin to how weather is forecasted in voxels, then Free Trade will be revealed as the root cause of the slow growth rate of the developed countries.

tbihl4• 10 years ago

In first generation post-WW2, we built out productive infrastructure, and started to do so with our savings. In the second generation, we expanded with debt spending and started to increase consumer debt. Now, most well-educated new entrants to the market have already taken more debt than they have an appetite for, so they're saving to pay down that debt. There may be quite a few who are still doing frivolous things with their money that could go to service the debt, but in the end we're all paying off activity that already happened, to one extent or another.

ThrustVectoring2• 10 years ago

This is entirely due to the baby-boomer demographic changes. Saving on a generational and national scale is basically impossible: things you make today are going to break down, wear out, or become obsolete thirty years from now. The only way the retiring generation can receive care is by obligating or mandating younger workers to pay for it.

This is the core of why college is pushed so hard, why home ownership is pushed so hard, and why interest rates are so low. The baby-boomers need to have someone paying back debt thirty years from now, so there's a ton of money sloshing around trying to fund current consumption.

chrisdbaldwin• 10 years ago

"things you make today are going to break down, wear out, or become obsolete thirty years from now."

Planned obsolescence started not too long ago and everything now needs replacing much earlier than thirty years. We can see its inefficiency in every industries generated from this money printing scheme. Turning what once was considered permanent and high quality will now break and need replacing.

Everybody is doing it, and it's hard to stop, but it probably should stop.

https://www.youtube.com/watch?v=-1j0XDGIsUg

jack9• 10 years ago

The United States is adding jobs at a healthy clip, as a new report showed Friday, and the unemployment rate is relatively low

One of those isn't true and the other is misleading. Healthy would be something to combat the massive existing unemployment. Unemployment Rate has little to do with growth. Let's not talk at all about how GDP numbers are being manipulated quarter after quarter and the endless easing putting us in a freefall, since that news is inconvenient for the administration who did it (Clinton then Obama...hmmm). The republicans just continue existing policies anyway so it's self-serving Fed shenanigans as usual. Typical vacuous NYT narrative is what I got out of it.

danieltillett2• 10 years ago

When you get to a 70% service sector of course growth is going to be low [1]. Waiters aren’t anymore efficient than they were 100 years ago (probably less) and the same applies to nearly every service industry. Without improvements in unit labor costs then the economy can't grow per capita.

1. http://data.worldbank.org/indicator/NV.SRV.TETC.ZS

apatters• 10 years ago

Is it possible that some things are just a lot cheaper than they used to be, and from a macro perspective focused totally on dollar figures this looks like shrinkage?

I used to drive to the bookstore and spend $22 on a brand new hardcover book because it was written by a famous author and promoted heavily at the bookstore.

Now I might buy a Humble eBook Bundle and pay $8 for 8 books, and the car, the bookstore, and the big advertising campaign are all long gone (but for the most part, not missed).

There's very little out there I want to spend a lot of money on (travel is the main exception).

And growth is mainly driven by wants, not needs.

arekkas• 10 years ago

"Growth" is really just cheap oil ("energy prices"). As this is an obvious path to imminent doom, energy prices go up and thus growth diminishes. Cheap(-er) energy is what's keeping the States ahead of the EU too.

The world isn't black and white, mostly. Sometimes there is an easy explanation to things though.

oldbuzzard• 10 years ago

The Center for Economic Policy Research has a great free pdf ebook on Secular Stagnation from 2014 which has essays from a variety of economic heavyweights discussing the possibility of lower growth going forward.

http://voxeu.org/content/secular-stagnation-facts-causes-and...

stuaxo• 10 years ago

It's the rising inequality silly! All the gains going to the top is inefficient for the economy as a whole.

anentropic• 10 years ago

it's debt see Steve Keen eg https://www.youtube.com/watch?v=WPIQnOdjoZk

spinchange• 10 years ago

I'm still trying to find the time to complete Piketty's Capital, but one thing that I was surprised to learn from it thus far is that global population growth has a much greater impact on GDP growth than you might think. I'm loath to leave a comment like this without citing some of his data (not at my disposal, atm) but if I recall correctly, it's like more than half of GDP growth (roughly). As global population growth slows, and it is, invariably economic growth is going to slow down. It sounds like a common sense thing, but the numbers Piketty put on it were very surprising.

We’re in a Low-Growth World. How Did We Get Here?

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