Forbes magazine, both in paper and on-line, has always struck me as one of the good places for intelligent people to explore economics and investing ideas. John Mauldin, shown below, has a nice blog piece entitled: Impossible Things And Our Economic Recovery. This is well worth reading and is presumably the first of a group of pieces he will write on the topic. I encourage you to read it/them.
I responded with the following comment which may have a delay in being posted or may not appear at all. Who knows? I just write these things. Forbes controls the “publication,” at least on their site. So here’s the comment:
Well done, John. It’s all true, unfortunately. That so few people understand basic economics and continue to vote for the status quo is sad.
As you say, an increase in GDP depends upon an increase in (working age) population and/or workforce productivity. Back in 1999 Harry Dent’s book The Roaring 2000s Investor described the international demographic and technology trends we could expect to see play out in the 2000s. Country by country, I’d say he did pretty well with it. Dent’s book is now too old to be on the World Future Society’s current book list. Those folks who never read Dent’s book aren’t reading the rest of the WFS’s book list, either. (Here’s where we mumble something about those who do not study history, or the future in this case, are condemned to relive it, or play it out, or mumble mumble mumble…) Dent’s arguments, much like yours, rely on inescapable economic concepts.
The US has “outsourced” most of our manufacturing jobs. Big mistake. The US has created a pink puffy cloud of financial nonsense to spur personal consumption. Big mistake. The political structure of the US has enabled powerful, wealthy individuals to become ever more so. Big mistake. Increasing disparity in wealth translates into increasing political partisanship. Big mistake. The founding fathers are spinning in their graves.
Don’t you wonder what happens when somebody brings a war to our soil? Whoops, they already did that. I meant to pose the question: what happens when we can no longer manufacture anything of value? What happens when we don’t or can’t produce steel or silicon or the basic components of our modern lives? Maybe vertical integration isn’t always the best path for a corporation, but it has a lot of strategic safety for a country. It isn’t likely the US government will try to reverse our decreasing ability to manufacture. We are far along on our way to becoming a farming and service economy. That will not permit us, ultimately, to pay off our consumption debts. And if the rest of the world becomes angry because they believe the US is responsible for economic problems faced everywhere today, what leverage do these other countries have against us? A lot. Financially and production-wise.
The US has the benefit of observing economic laboratories around the world. Some have worked better than others. But the results of those lab experiments are not readily visible to the average American. Our media would rather produce cheap junk reality shows. One thing the world laboratory has proven is that universal healthcare is a good economic foundation for a country. But that doesn’t play out well with the power and wealth entrenched in the USA. The US used to have a small wealthy class, a small poor class, and a large middle class. The middle has been crushed over the last 10 to 20 years. Now .1% of the US population controls some 20% of the country’s wealth. Big mistake.
I love the French. Their food, their wine, their art, their language, their French Revolution. Watching the Enron, Adelphia, Countrywide, etc. stories unfold, who wouldn’t want to see a guillotine factored into the proceedings?
Let’s just say it establishes a threshold beyond which tyranny is unacceptable to a rising middle class. Whoops, the US middle class is not rising and it lacks leadership to establish significant changes. So it goes. The US government reflects the best interests of the wealthiest citizens. Capitalism and democracy have lead to politicians being hired by the wealthy and their corporations in return for the campaign funds that get them elected. Long term big mistake. Looking forward to see if you have any ideas how we can dig ourselves out of this hole!