Forget the stagnationists. Here are reasons to be cheerful.
A provocative new National Bureau of Economic Research working paper [PDF] by Northwestern University economist Robert Gordon makes for depressing reading. Gordon argues that over the coming century, U.S. economic growth could drop from the 2 percent per year rate it averaged for the last 150 years to less than 0.2 percent per year. Economic growth will slow, he says, because the one-time productivity boosts from three successive industrial revolutions—steam, electricity and internal combustion, and the Internet—are now played out. If that's not gloomy enough, Gordon identifies six “headwinds” that will further stall American economic growth. These factors include an aging population, a faltering educational system, rising income inequality, competition from globalization, stifling regulations, and the overhang of massive government and consumer debt.
There's no question that the sort of economic growth we in the developed world take for granted is an aberration in history. Gordon points out that in the United Kingdom between 1300 and 1700, GDP per capita rose at about 0.2 percent per year. In concrete terms, during the time of Edward Longshanks (1237-1307), average per capita GDP in England was $1,150 in today’s prices. By 1800, that had tripled all the way up to $3,450 per capita. Then it doubled again, to about $6,350, shortly after the turn of the 20th century. At the beginning of the 20th century, the United States supplanted the U.K. as the world’s productivity leader and annual U.S. GDP per capita doubled between 1929 and 1957—from $8,000 to $16,000—and doubled again, to $32,000, by 1988.
If the U.S. were on track to double GDP per capita in the 30 years following 1988 that would imply an annual growth rate of 2.35 percent (setting aside complications like population growth). Instead, the U.S. GDP per capita has grown at 1.6 percent annually since 1988. At that growth rate, GDP per capita would not reach $64,000 until 2031. Currently, U.S. GDP per capita is about $47,000 , so doubling it from its 1988 base by 2018 to $64,000 implies an annual 5.35 percent growth rate for the next six years.
Good luck with that: Such a rate would be more than triple the actual GDP per capita growth rate the U.S. has experienced since 1988....MORE
