Un-growth and all that jazz…

Dünya Executive - - DATA -

► There are many the­o­ries try­ing to ex­plain ‘why na­tions fail’ or why economies re­main rel­a­tively stag­nant, with­out gen­uine de­vel­op­ment, tech­no­log­i­cal in­no­va­tion, sus­tain­able growth, etc. Early the­o­ries have pointed at rent-seek­ing, col­lec­tive ac­tion prob­lems, cog­ni­tive de­fi­ciency syn­dromes, rov­ing vs. sta­tion­ary ban­dits, etc.

► There are also the­o­ries that con­jec­ture GDP (GNP) is a de­fi­cient in­di­ca­tor of growth, wel­fare or de­vel­op­ment. While this may be cor­rect, propos­ing a vi­able al­ter­na­tive to GDP is no easy task. There are a num­ber of op­tions, but they may look too com­pli­cated some­times, too the­ory-de­pen­dent, too hard to mea­sure, too in­de­pen­dent from money met­rics and what not.

► Then there is the China puz­zle: a large coun­try trans­formed into some­thing else within three or four decades. The power of com­bined growth rate has made it pos­si­ble for China to out­pace Italy and sur­pass it in less than two decades in al­most all met­rics per­tain­ing to the econ­omy, even fi­nance.

► Then there is the sim­ple fact that fun­da­men­tal­ist Is­lam and de­vel­op­ment, and eco­nomic growth, and in­no­va­tion have not gone well to­gether for over 800 years. Then there is the fact that un­less all ed­u­ca­tion is mod­ern and com­pet­i­tive, and con­ducive to free think­ing, then a na­tion can and most likely will ‘fail’ in the end. This is one rea­son among many, but even one im­por­tant rea­son suf­fices.

► I fear that, putting aside the business cy­cle, po­ten­tial growth might con­tinue to fall in the com­ing years as well. So that in the end of a 7- to 9-year cy­cle, we may find our­selves in ex­actly the same sit­u­a­tion as wel­fare goes, hav­ing lost an en­tire decade in pur­suit of a long-de­ceased politico-eco­nomic model. This would mean a rel­a­tive re­gres­sion be­cause the world out­side won’t stay put.

► This may be a lot more im­por­tant than the zero growth the econ­omy faces in 2019. Af­ter all, ab­sent base ef­fects, and ad­justed for sea­son­al­ity and cal­en­dar ef­fects, the trend growth that re­mains therein will be a lot less than it was back in 2013 or even in 2015.

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