We all know that growth when you’re well behind the possible technological production frontier is easier than growth when you’re at it. This is why a poor place like China or India can grow at 8-10%, year after year, for decades even, while mature economies struggle to manage a consistent 2.5-3%.
There was somewhere between none and f[*cough*] all economic growth in the US (and many other economies) in the 1929-1945 period. But the production frontier continued to move outwards, indeed, the 30s are one of the all time great decades for both technology and productivity improvements. The 50s to the 80s were simply playing catch up, in the same way that China and India are now.
Part of Tyler and I think Tim’s point is that if we are indeed entering an era of slower growth than what we saw in the 1945 to 1973, it is possible that we’ve simply smoothed out growth over a longer, more sustainable period of time. This, of course, assumes that we’re not on verge of a series of nasty surprises of an ecological or geopolitical or otherwise unanticipated nature.
This leads me to something else: one of the reasons we, and by that I mean we free-trading, market-loving, globalization-friendly types, are relatively mellow about offshoring and related phenomena is that we don’t foresee rival states coercing through classical means. GDP was invented to assess how much revenue we could raise to arm and equip a million-man army to win large-scale coalitional warfare. It’s hardly surprising that the social scientists and bureaucrats who first used it weren’t particularly interested in consumer surplus.
Even if we do see a return of serious, non-nuclear inter-state — unlikely, in my view — one assumes that it will be technology-driven. Stuxnet is a preview.
But in the extremely likely event that this is all wrong, all the cheap fun in the world won’t save us.