This is a preliminary abstract from the study as of September 2016. It will be updated as the study progresses and the full study will be published on-line when it is complete. Comments are solicited.
In 2008 the economy collapsed. This was due to overleveraged financial markets, especially the housing market and its related derivatives. Although the economy recovered rather quickly (by December 2012 as discussed in the 2014 edition of this abstract), some pundits and politicians maintain that we are still operating below our potential based upon the current GDP growth rates.
In the U.S. this rate has varied between minus 10% and plus 20% since 1947. It varied relatively wildly from 1947 to about 1980. It settled down after that and averaged about 4% through 2002. It then averaged 2 ½ to 3% until 2008 and 1.33% between 2008 and 2013 and 2.43% in 2014. So it is fair to say that our GDP Growth rate has been slowing down.
The question now is, “What is a reasonable expectation for the U. S. GDP growth rate?”
In order to answer this question with any degree of confidence I would have to study the U. S. National Income and Products Accounts document at http://www.bea.gov/national/pdf/allchapters.pdf . This 360 page document provides a detailed definition of GDP and other measures of our economy. I will eventually make my way through it but meanwhile, I’ll simply say that what we produce and consume is a function of many things such as our total population, the portion of that population that is employed, whether they are employed in production and distribution or in finance and government etc. – All of these factors are changing constantly. For instance, as the population ages and the retired portion of the population increases, GDP growth will decrease. As technology increases in complexity, more time must be spent in education and GDP will decrease (but the productivity of those still employed should increase). In addition, there are “Limits To Growth” such as the current Global Warming process which is already imposing constraints upon global GDP growth
– Reference: http://en.wikipedia.org/wiki/The_Limits_to_Growth and http://www.unav.es/adi/UserFiles/File/80963990/The%20Limits%20to%20Growth%20Informe%20Meadows.pdf and http://www.donellameadows.org/archives/a-synopsis-limits-to-growth-the-30-year-update/ and http://www.humansandnature.org/how-can-we-create-a-successful-economy-without-continuous-economic-growth
Considering these various limitations IMHO the 4% is probably no longer sustainable for the US. A growth rate of 3% may be the best we can hope for. Even that will require a sound strategic plan that is well and consistently executed. For instance, we must intentionally direct our growth toward those activities which will not further pollute the environmental sinks https://en.wikipedia.org/wiki/Ecological_economics that are already at or above capacity and cut back on those current activities which do pollute those limited sinks. This is a major undertaking which will cause significant economic dislocations which in turn will require a restructuring of our economic system. It will happen. The question is, “Do we want to manage it or just suffer through the chaos?”
Besides GDP and its growth rate, Per Capita GDP and its growth rate should also become a regularly referenced index. Looking at global historic Per Capita GDP growth rates, 1.6% would be a reasonable target. The per capita GDP for the US in 2009 was $46,795. In 2015 it was $55,836. This gives an average of 3.22% annual increase in per capita GDP. Twice the global average!
I am concerned that these modest growth potentials fly in the face of our traditional expectations. Pushing for continued growth rates of 4% – 6% is neither practical nor safe. As a nation we need to design and implement a sustainable economic system. Hopefully, it can be an evolutionary change to our current capitalist system with perhaps less reliance on market forces and more attention to the preservation of the commons https://en.wikipedia.org/wiki/Commons . Such a system may require more government regulation – on the other hand, it may not.
On a long range basis we need a national Economic Plan. Not something that prescribes production levels or anything that detailed but one that lays out strategic options and at least indicates which options are most likely to be adopted or carried forward. In particular, we need an economic planning process which will give direction to the education process and one that insures that the profits derived from the extraction of our natural resources are shared by all of the people.