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When The Horse Is Dead, The Whip Won’t Help: It’s Time To Dismount And Acknowledge Growth Is Dead

When The Horse Is Dead, The Whip Won’t Help: It’s Time To Dismount And Acknowledge Growth Is Dead thumbnail

What is Economic Growth? Investopedia says…

Economic growth is an increase in the capacity of an economy to produce goods and services, compared from one period of time to another. Traditionally, aggregate economic growth is measured in terms of gross national product (GNP) or gross domestic product (GDP).

Ok, but what about the capacity to consume? Somehow, neither modern economics, the Federal Reserve, Wall Street nor the typical CFP has considered the world’s capacity to consume. Namely, note the total population but more importantly, focus on the change in the population over time (for this exercise, we exclude Africa because sadly they don’t matter economically…explained HERE).

First off…using the UN population data, how many babies are born and the change over time. The chart below shows total births per five year periods (excluding Africa). The number of global births peaked almost 30 years ago…about 1988. In the most recent five year period, 2010–>2015, births have declined by 71 million (about 14 million fewer annually) since that peak.

In 2008, the front edge of that declining number of children coming of age as 20 year olds, entering the global economy, seems to have had an impact on consumption. However, the battle being waged now by the Fed (& central banks globally), federal governments, and select parties is not to allow this declining capacity to consume to impact the capacity to produce more. Cognitive dissonance writ large at the highest levels.

On a change per 5 year basis, the chart below shows the change in births excluding Africa (blue/red columns) vs. the change in births in Africa (green line). The remainder of the charts show the UN’s (overly optimistic) medium population estimates. What has become a consistent decline across the world in births is estimated to be entirely offset by African births (a decline of <77> million ex-Africa is offset by +90 million births in Africa, 2015–>2050). However, economically, these people represent radically lower levels of consumption.

Alright, what about the 0-45 year old global population (excluding Africa). As one would expect, a declining number of total births is translating into slowing growth of the general population and an imminent turn to outright depopulation. The 0-45 year old population is so important for so many reasons…only they are capable of creating babies, form households, and generally drive economic growth as the buyer of the assets the elderly need to divest of in retirement.

And if we look at the change per five year period (below), the 90% deceleration in the 0-45 year old population growth since the ’85–>’90 peak is really hard to miss. This is an annual difference of 58 million new consumers that were entering the global economy during the peak vs. about 5.5 million entering now, in the ’15–>’20 period. That is a decline of about 53 million fewer new consumers entering the economy annually now than during the peak! How that “rounding error” negatively impacting the global economies’ ability to grow at previous levels isn’t mentioned by Fed chair Yellen is shocking (ok, not really). None of the pre-scripted questions Janet takes at her “press conferences” ever mentions that one.

Perspective is so important, so here is the 0-45 year old total population and five year changes charted below. There is nothing transitory about the slowing growth or slowing demand. There is nothing short term about this that would deem this a case for greater debt or lower interest rates. Any “green shoots” gleaned from lower rates and higher debt is the transitory feature.
The under and over 45 year old total populations, charted below. Essentially, all “growth” from here is the old living longer than previous generations.
Finally, the under 45 vs. over 45 year old five year change in populations, charted below.
So we have a general depopulation under way masked by a one time surge in elderly living longer vs. a collapse in low skill, low wage jobs being replaced by automation and innovation. Net-net, there will be fewer people and fewer people needed to continue producing…but producing more for fewer people with fewer jobs? Just one question, how will fewer people with fewer jobs continue to consume more?

My father-in-law sent me the following and I thought it economically apropos to close with. The horse called growth had a good run but it is dead…let’s stop the beatings.

Seeking Alpha



22 Comments on "When The Horse Is Dead, The Whip Won’t Help: It’s Time To Dismount And Acknowledge Growth Is Dead"

  1. makati1 on Tue, 27th Dec 2016 8:13 pm 

    “… how will fewer people with fewer jobs continue to consume more?”

    “..Growth Is Dead”

    Nuff said.

  2. rockman on Tue, 27th Dec 2016 10:39 pm 

    There is no such thing as growth so it cannot be alive or dead. There are economies: large ones and small ones…some with large populations. There economies that have little no no growth for decades: some are still stagnant and some growing well. Others with strong growth histories that are heading to minimal expansion. Etc, etc, etc…pick any possible history.

    Lumping the entire world or large subsets into sets of metrics is just a waste of space. No one here or elsewehere in the world cares what other economies are doing. No one in Detroit cares how the Houston economy is doing because it has little or no effect on there lives. And there are tens of millions of Chinese that are very please with the growth its economy has experienced. How long that satisfaction lasts…time will tell. There are some aspects of our world which making generalizations can make sense. But the “economy” doesn’t appear to be one of them.

    But someone at Seeking Alpha got paid to write this piece so it did give some boost to their “economy”. LOL.

  3. makati1 on Wed, 28th Dec 2016 12:35 am 

    Rockman, you put it into perfect words. No one gives a damn about how someone else’ economy is unless it impacts on their own welfare. I only follow what happens in the U$ because my family is there and a bit of my income dribbles from there.

    I have chosen the Philippines as my “hunker down and await Armageddon” location. I am only concerned about how the Philippine economy is doing, (Nicely, by the way.) not the rest of the world unless it impacts on my interests and welfare.

    I buy Filipino whenever I can to support the economy here. I avoid buying American most of the time. I tend to buy Asian if they have the same items as I would buy from America, which is often the case. And, they are cheaper. (And, often, better.)

    Generalities are for the dumbed down who are only concerned about the latest Kardashian sexcapades or their favorite football team’s scores. But then, they seem to be the majority in Western countries. Market to the masses. lol

  4. onlooker on Wed, 28th Dec 2016 1:27 am 

    Growth of any kind for humans is now cancerous growth. We must reduce our population, our footprint, everything about ourselves. If we cannot and it appears we cannot, then Nature will.

  5. joe on Wed, 28th Dec 2016 2:13 am 

    Good article for those who want a quick view on population globally. Regionally there are different patterns. People should understand the relationship of population to consumption. Thats not the whole story though. The article fully dismisses Africa because while they are a massive population growth, they are so poor due to bad government they hardly have an effect. The US and China and Europe between them probobly consume the vast majority of the worlds output. The problem in these regions is not they are growing physically or not, its that they have reached a limit on consumption and new ways of making them consume need to be found. In the end developed economies are at peak junk. Some people think China is not yet at peak junk, ok, you can always but more crap, but Chinas domestic economy earns nowhere near enough to buy the crap they make even at cut prices that they make and export. Chinas problem was Americas, they can have higher wages to buy more crap or they can have factories, but not both, thats how capitalism works.

  6. Cloggie on Wed, 28th Dec 2016 2:44 am 

    I have chosen the Philippines as my “hunker down and await Armageddon” location.

    All dressed up and nowhere to go.

    Waiting for Godot:

    https://www.youtube.com/watch?v=Wifcyo64n-w

    – With Trump WW3 has become unlikely.
    – Peak oil is not going to happen in your lifetime.
    – Climate change ditto.
    – The most likely real catastrophe will be global financial collapse. Do you really want to sit that one out in the Ps with the ATM saying game over and run the risk of ending as “filet Americain avec sauce Hollandaise?” for the hungry locals?

    You would be much better off in a farming community in heartland USA.

    Btw I’m glad for you that your survived the storm last week.

  7. onlooker on Wed, 28th Dec 2016 3:06 am 

    Cloggie, your entire argument rests on peak oil not happening soon and economic collapse not affecting rich countries tremendously. Well, peak oil is happening and will get worse and consequently us in rich countries are going to find life will get very uncertain and hard. Then again Asia with its reliance on imported food and also to some degree on the Green Revolution ie. modern industrialized agriculture will be also facing dire times as they do not have any margin or wiggle room. Not to mention water supplies becoming a terrible risk factor there. Also, do not be too comforted with climate change considering indications of runaway global warming having already kicked in and also super strong typhoons and hurricanes now becoming possible almost anywhere in the world. So a mixed bag, nobody can feel too secure going into this brave new world.

  8. Cloggie on Wed, 28th Dec 2016 3:25 am 

    Cloggie, your entire argument rests on peak oil not happening soon and economic collapse not affecting rich countries tremendously.

    Peak conventional oil will happen/is happening as announced but it is a relatively insignificant event because there is endless fossil replacement potential. Fracking is merely scratching the (sub-)surface:

    http://www.dailymail.co.uk/news/article-2593032/Coal-fuel-UK-centuries-Vast-deposits-totalling-23trillion-tonnes-North-Sea.html

    Financial and subsequent economic collapse will likely happen and will make life hard, even in rich countries. What will happen on top of that is that financial collapse could trigger social collapse and inter-ethnic strife, most of all in the US with its adventurous ethnic composition. But not all areas of the US will be affected by strife/civil war. Heartland USA will be a relatively good location to survive, much better than Asia.

  9. kiwichick on Wed, 28th Dec 2016 3:55 am 

    USA isn’t a good location now , let alone when the fracking bubble bursts…..too many guns in the hands of wing nuts

  10. joe on Wed, 28th Dec 2016 4:07 am 

    Cloggie, peak easy oil happened years ago. Thats why all additional oil is from tight or expensive sources. Investment collapsed in new oil sources when tight oil boomed. Thats Peak Oil, it means unreliable prices and poorer quality oil that needs higher margin prices to induce more investment. So the pattern will be ups and downs in prices and supplies trending towards lower profit and utility until the diminishing marginal returns on investment force humanity to change itself. Sadly its gonna be too late by then as Climate Change will do enormous harm by then. Heck, even Saudi is looking for investors.

  11. Cloggie on Wed, 28th Dec 2016 4:21 am 

    peak easy oil happened years ago. Thats why all additional oil is from tight or expensive sources. Investment collapsed in new oil sources when tight oil boomed.

    Aha, that’s why we have current 200$ oil.

    Not.

    The 2008 oil price peak made the breakthrough of tight oil possible and see where we are now: 50$ oil.

    And once the tight oil price will hit 150$ in its turn, expect UCG to kick in.

    So the pattern will be ups and downs in prices and supplies trending towards lower profit and utility until the diminishing marginal returns on investment force humanity to change itself.

    If we are to believe a real insider, rockman, then we shouldn’t worry too much about diminishing returns of the US oil industry. There is enough fossil fuel to make the renewable energy transition happen. In fact there is so much that it might even slow the transition, at least in the US.

  12. Davy on Wed, 28th Dec 2016 5:15 am 

    You can look at this from different angles. One view I have is growth as in systematic and macro and as in global with population, economy, and ecosystem has undergone a shift. This shift is a gradient or better it is declining momentum. We are now in the vicinity of actual decline. Currently we are in that slowdown from the inertia of limits and associated diminishing returns. This can be compared in some ways to a new calendar in an existential Mayan way. This is a process with embedded events. Our civilization is an organism of locations and peoples with some growing and some dying in an overall growth that appears to be stalling from the approach to limits. This civilization has a minimum systematic operating level that if breached will throw it into a new dynamic that will be less activity at a time of more consumption needs and population trends.

    Digging deeper we see aspects of that growth are corrupted. We have broad based decay and decline of social order. Our global infrastructure is in a negative flux. We are trying to build out a new and efficient techno world with less carbon but with an underlying dirty old economy that is too large and unsustainable decaying. Our basic infrastructure needs huge amounts of investment but there is not enough investments because of limits both physical and systematic. Our economy has entered a zone of decay and corruption. This may be the worst feature of this paradigm shift. Economies are our most complex aspect of society because they include human nature which is only partly rational. How do you model emotions which can be random and contradictory? Our global economy is now into a trap of deflation and inflation or as some say stagflation but stagflation at the limits of growth. This means it is physical and systematic. This is a predicament because you can’t easily resolve a stagflation that is both. If we had another continent to move to or another planet that could be what breaks this brittle threshold of bifurcation. The tensions could be reduced by the opening up of a new place for creativity and growth to occur. We have consumed our way to the end as always happens in a finite space what is left is a hyperinflation of a collapse of confidence.

    We have wonderful technologies with huge amounts of accumulated knowledge. This knowledge is at our finger tips. What is more amazing this knowledge is in everyone’s fingertips. Yet, this is much of the problem because we have knowledge and technology without adequate wisdom. Our global system of markets and relative democratic governance is engage in competitive cooperation in the pursuit of prosperity for all. What is lacking is the element of wisdom as a third dimension or what would complete a triangle of sustainable and resilient growth.

    We can talk about population degrowthing over decades but that is just a fantasy and a delusion. It is linear thinking reaching out far into the future to affect an ideology. Scale comes into play because of limits. Time is now speeding up in a sense because we are nearing limits and diminishing returns. We have to run every faster with change and adaptation because we are dealing with ever smaller or bigger scales instead of healthy balanced ones. We are in a dish and using up the vital food of civilization both physically and systematic. Population is now well in excess of sustainable. We are actually an order of magnitude in excess. That is a trap. This population if it were to even halve would destroy our economic and social arrangements that drive a complex economy of finance, economies of scale, and global distribution. A halving of our population and consumption quickly at a minimum is what is needed to increase our sustainability. Sadly that would likely only buy us time on a destroyed planet.

    Our networks and institutions cannot change quickly but they are faced with a destructive change moving quicker than they can accommodate. This is destroying them from within. The top is now a Ponzi arrangement of wealth transfer and the moral hazard of disregard for the traditional rule of law. This rule of law is multidimensional and is really just human wisdom. Human wisdom is breaking down while a population is growing and consuming beyond a safe range. Technology and knowledge are being applied not for reasons of wisdom but because they are now erroneously considered wisdom. More knowledge and technology is progress and considered better. This has gone into the spiritual with a global worship of progress and that has made it our fate.

    Wisdom is the highest of qualities of what is human. It allows us to choose what knowledge and technology is more human not what is more. If wisdom is adequate and healthy it can and should be about less. If it is truly of the highest quality it is what gives us survival. It would be what allows us to be within a healthy “Ecos” and in support of that “Ecos”.

    We developed so fast from premodern into modern the unfortunate result of this is we are just now getting a glimpse of what we are and where we are going and many metrics are pointing to a 6th great extinction and a human die off yet, we still have a momentum of manifest destiny of techno optimism driving humans on with hopium and optimism. It is very hard for true wisdom to plant itself with a population blinded by techno optimism. We live in a surreal world of a human civilization built like a house of cards. We have the capacity of wisdom but we have likely gone too far to change course now. Our wisdom has not caught up with our knowledge and it appears to be too late.

    I cannot say it is too late it just appears to me as one who searches for the truth and sees the wisdom of less as a requirement for survival. The wisdom of less means a die off and a consumption rebalance. This will never work at the leadership level of civilization. This will only work now at the individual level as a yielding to a train of fate. That fate is collapse and possibly extinction. The good thing for us mortal humans that may not matter for us individually but I fear it does matter for our civilization and possibly our species. Our fellow life on earth this circumstance is proving to be very sad indeed. Everything around us is dying as we accelerate our locust living consuming everything in our path. Even if we embraced less the shear momentum of 7BIL hungry people with large brains would and can consume what is left. Make the best of what you have while you can because we are on the other side heading down

  13. onlooker on Wed, 28th Dec 2016 6:11 am 

    Very good summation Davy. If I can for any new members I will sum up what you said. Our species is now on a collapse path both physically and systemic wise. This is because our numbers are too large, our economic arrangements are flawed given their reliance on copious amounts of energy and how interrelated they are. Plus, we have no sufficiently robust contingent plans to transition too, nor adequate time or resources now to accomplish this transition. We also are faced with a particularly ironic and diabolic catch 22. We continue to rely and need fossil fuels to power our civilization yet these same are fueling climate change which now threatens most of life on this planet. So we need to reduce our size and our footprint on a biophysical basis but the systems that allow for our survival themselves are degrading the planets biosphere and we have no humane way of substantially reducing our population. So we are in a predicament meaning a problem without solution. The best we can do is prepare as best we can for a collapse of the systems that under gird our survival and adopt some sort of strict limitations on ourselves in terms of consumption and procreation patterns. Unfortunately, these measures will only be effective once we have gone through the worse of collapse, meaning social chaos and die off

  14. Dredd on Wed, 28th Dec 2016 7:51 am 

    When the “economy” morphed into a plutonomy the writing was on the wall (The Homeland: Big Brother Plutonomy – 3).

    That writing on the wall was the riddle of neofeudalism (American Feudalism – 6).

    The embryo was a religious belief in Armageddon on the part of a famous Admiral which grew into the here and now (The Universal Smedley – 2).

  15. rockman on Wed, 28th Dec 2016 7:58 am 

    Kiwi – “…too many guns in the hands of wing nuts”. If reports are correct it has gotten much worse: with the results of the election a surge in weapon purchases by now fearful liberals. Bad enough with some right wing nuts…now a bunch left wing nuts with no firearm safety training. LOL.

  16. rockman on Wed, 28th Dec 2016 8:13 am 

    Mac – My response ties a bit with the MADOR concept I threw out some time ago: Mutually Assurd Distribution Of Resources. As resources, especially oil, become less available the stronger economies will use their position to monopolize those resources. Perhaps see a sense of that with China expanding its presence in the S China Sea. Given the comments of the president-elect about “resetting” trade relations with China heightens such speculations. My thought is that despite the rhetoric it could be more likely for the US and Chinese economies to not interfer with each others efforts to take advantage of weaker national economies.

  17. onlooker on Wed, 28th Dec 2016 8:43 am 

    Rock, your MADOR concept makes much sense. The bigger fish will eat the smaller ones no doubt. You already see this also in Africa even though you refer to countries somewhat stronger. It really is across the board where outright strength economic and otherwise is making bold moves, so the strongest are wielding their might that is for sure. Expect Europe to continue to be convenient target.

  18. rockman on Wed, 28th Dec 2016 1:49 pm 

    Looker – The harsh reality works on ever scale: from your neighbor pricing you out of the house of your dreams by out bidding you to a US refinery outbidding an African refinery…or a German refinery…or an English refinery.

    In a world of limited energy resources the definition of “allies” might not look the same as today.

  19. penury on Wed, 28th Dec 2016 2:56 pm 

    Growth is dead. Growth as defined by economists is dead. Growth which depends on unlimited resources at low cost which can be sold for higher prices is dead.Humans will be reduced to a “steady state” economy which will require a new definition of what ‘humans” require to exist. I think that in a few generations the definition of “needs” versus “wants” will totally be changed beyond our comprehension.

  20. Sissyfuss on Wed, 28th Dec 2016 3:41 pm 

    Rock, stop beating a dead horse. Growth is not being replaced, it is just going away. Survival will be in vogue once again once the inertia of the reset gathers steam. All I know is the near future is going to be very different but the devil will give us the details.

  21. makati1 on Wed, 28th Dec 2016 5:55 pm 

    Sissyfuss, rockman and a few others here want to straddle the fence concerning the future. Hedging their bets both ways. You can only do that in voodoo economics. Even then, you eventually lose.

    Hope is difficult to give up, but it should be obvious which side is winning and why. If your pantry (Earth’s resources) is full, but you cannot buy anything to replace what is used, eventually it is empty, no matter how much “hope” you have. And if you invite your relatives (population growth) to move in with you, the end comes faster.

    Hope is for religions and the uneducated. Reality is to be faced and prepared for as much as possible. Space Ship Earth is going to continue. It will just not have any sentient passengers.

  22. efarmer on Wed, 28th Dec 2016 8:31 pm 

    Yes, I see much of this logic, but I am still left puzzled by this thread. What was the horse’s name? If this story was true there would be a name, perhaps his favorite food, and maybe he had a Facebook page or something… Please don’t just make something up or tell me it was Mr. Ed to make me cry over losing another one of my favorite movie stars this year.

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