Table of Contents
The Age of Stagnation
The Age of Stagnation is written by Satyajit Das, an Indian-Australian who has worked in the financial sector. This book deals with the world economy in a period of stagnation and analyzes the factors of economic growth and the modern economic outlook from the author's personal point of view.
這本書其實是在2016年出版，已有了一段時間，我認為作者的看法對照2022年中現下的經濟情勢，可以看到某些共鳴。作者認為過去十年各國流行的政策 – 量化寬鬆、低利率無法持續刺激經濟，這點在2016年也許很多人不同意，不過也湊巧最近市場看法正好比較悲觀。對我來說本書最值得思考的，是在於最終的解決之道有沒有可能成功。總之，對各種談經濟的書籍平時有些涉獵的人，可以在這本書中吸收到一些有趣的觀點。以經濟類書籍而言，內容不長算是好讀，不過作者觀點相當強烈，因此我並不認為這是一本適合新手入門的書籍，最好是對不同經濟觀有些了解再讀。在這篇文章，我主要會記錄自己的讀這本書的總結和心得。
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Dynamics of Economic Growth
What are the drivers of economic growth? Real economic growth depends on higher productivity to provide more value. What we generally refer to as economic growth is the growth of GDP, which is the Gross Domestic Product (GDP), and is mainly based on the production side of the economy. In more recent history, between 1500 and 1820, the average annual growth rate of global GDP was 0.3%, mainly due to agricultural progress and population growth, while between 1820 and 1900, due to the Industrial Revolution and colonial expansion, the average GDP growth rate was 1.32%.
Overall, historically significant productivity growth has been based on several factors:
- Increase in productive population: In the early days, more and more people were fed because of advances in agriculture. In more recent times, more people could enter the labor market (e.g. women, colonial laborers).
- Technological innovation: Most notably the industrial revolution, where machines could replace human labor, or the increase in productivity in modern factories.
- New and more efficient natural resources: for example, the discovery of oil. This part also relies on more technological innovations to increase the efficiency of extracting and using the same natural resources, and ultimately to reduce the overall cost of production.
我們可以看到雖然生產力的成長有時是依賴人口增加，有時依靠科技創新，但歷史上實質經濟成長，都是因為使用資源效率的增加能夠滿足更多基本需求，使當時的人們生活過得更好 – 從沒飯吃變成有飯吃、從沒房子住變成有房子住、沒衣服穿變有衣服穿、某處的資源可以運到缺乏該資源的地方，讓不同地方的人生活變好。不再需要忙於處理基本需求的人(在家洗衣打掃、或是忙著打獵採集)，也代表釋放出來的人力資源可從事更多經濟活動，滿足更多人的基本需求。
Must the world economy come to a standstill?
Since the Second World War, the world economy has been on a long-term growth trend, so we are also accustomed to the assumption of long-term economic growth.
There are reasons for believing that the economy can (theoretically) continue to grow. In the past, real economic growth could be based on productivity, technological innovation, and increased efficiency in the use of resources, so it is only natural to think that as long as we can continue to make progress in these three areas, the economy will continue to grow as well. In the book, the author argues that economic growth cannot be sustained because productivity growth and innovation are slowing down, and there will soon be shortages of key resources (water, food, energy)...etc. I have a slightly different view on this. I take a slightly different view on this, if economic growth is defined as GDP growth, then although growth may slow down, as long as there is progress, there will indeed still be growth in output. However, we must pay attention to the question of whether or not "real economic growth" exists behind economic growth. The so-called real economic growth is not clearly defined in the book, so I will take it as the question of "whether everyone's life can be better off on average".
Fewer people ask themselves whether the world economy should actually come to a standstill after all. This book spends a lot of time discussing why economic growth is unsustainable and why past successes are one-offs that cannot be replicated. I'll summarize it briefly in terms of three main factors.
Why doesn't increasing the population help?
In fact, when we talk about increasing the population, what needs to be increased is the ratio of the productive population to the total population. If the number of people entering production is smaller than the growth of the whole population, this proportion will be reduced.
Let's look at an example of economic growth after World War II. After the end of WWII, productivity increased because people went back to work, and the technological advances of the war created new products and markets, and the post-war economy started out in a depression, resulting in an unprecedented GDP growth rate. The current population growth is due to the increase in human life expectancy and the movement of the population towards aging. First of all, due to the low fertility rate, the number of people entering the labor market is decreasing and the number of people leaving the labor market is increasing. This is the part that is easier to understand.
However, this is only a reduction in the workforce, and it does not matter if technological advances have made up for the shortfall, right? But we should also take into account another thing, that is, the impact of population growth on the use of resources. We can hardly imagine how much more energy has been consumed by the digital economy. Many of the new economic activities created by the new industries that have successfully stimulated the economy over the past two decades use large amounts of natural resources, such as making cell phones. If you do the math, the way we use resources now is virtually unsustainable in terms of per capita consumption.
Why is stimulating innovation no longer useful?
Let's take a look at the history of technological innovation over the past few centuries.
- 1750-1830 Invention of coal, steam engines, railroads, textiles
- 1870-1900 Invented electricity, internal combustion engines, running water, central air-conditioning systems, molecular recombination technology (transformed petroleum, chemistry, pharmaceuticals), communication devices (telephone, phonograph, photography, radio, film)
- From 1960 to the present, computer technology has been invented to automate repetitive, low-value tasks. Innovations since the 1990s have been less significant, and new features in recent years have been more entertainment-oriented.
The contribution of education and research to the economy has been declining. On the one hand, this is because the major contribution to productivity made by mechanization, automation, and mass production cannot be repeated over and over again. In addition, the living conditions of the majority of the population have already improved, and even if there are still a few people whose lives can be improved, it is not in the interest of the majority to improve the lives of the minority, and the new scientific and technological research mainly serves the majority of the population, while there is only a limited room for improvement in the lives of the majority of the population.
Is it possible to increase resources?
In fact, in the past, a lot of economic growth has come from an increase in the availability of natural resources, sometimes due to globalization, and sometimes due to the discovery of new natural resources, which made them cheaper (e.g., the discovery of new oil). When the world is able to open up new markets, the new markets may provide new natural resources, but now that most countries are already in the market, it is very difficult to open up new markets, either for increasing GDP or for increasing resources. As for the discovery of new resources, this is a one-off event. There have been very few low-cost discoveries of new natural resources in recent years, and even if new natural resources were likely to be discovered, the chances of them outstripping the increase in resource use by the population are too low. Critical resources are in fact limited, such as minerals and food-producing land. Although technology continues to advance, it only reduces the time it takes to consume them, and unless the rate of regeneration catches up with the rate of depletion, they will one day run out.
Why are financial policies unable to solve economic problems?
Growing for the sake of growing is the consciousness of cancer cells.
Governments have in fact been trying to sustain economic growth. In recent times, when new technological inventions have brought less and less productivity, since the 1980s, governments have relied mostly on financialization. Financialization means replacing industrial activities with financial transactions. Simply put, it allows the private sector to borrow money, so that richer financial resources can be used to stimulate growth in gross production.
We have seen several financial crises before, and the one in 2007 was caused by four major factors: high debt, global economic imbalances, over-financialization, and an overabundance of welfare checks. However, the world continued to increase government spending and keep interest rates low to inject capital into the market, believing that the increased investment in the past had stimulated economic growth and that the same approach would surely have the same effect. Unfortunately, the excess capital has pushed up asset prices, and even though there is growth on the books, there is no change in the economy in real terms. Low interest rates also keep weak business firms afloat, and the creative destruction that restores the economy's health is much more difficult to achieve when firms can rely on borrowing and therefore do not need to abandon unnecessary or failed investments. This is partly a result of the success of historical stimulus efforts, but also because there are few problems that policy can solve.
The drivers of growth in the global economy have weakened significantly, and neither traditional nor non-traditional economic policies have been effective in stimulating the economy. Sustainable growth depends on the real economy, not on financial policies.
To create a sustainable economy, we must reduce resource consumption.
The days of inexhaustible natural resources are over.
The unprecedented increase in the rate of human consumption of resources as the standard of living of the civilian population has risen is one of the underlying factors in the most difficult economic problems now prevailing in all countries. As the limited natural resources available dwindle and the population increases dramatically with recent economic growth, it is understandable that resources must become progressively more expensive, assuming that supply remains constant. As more and more resources are consumed by human beings for various activities, and as the price of resources rises, there may be no room for the so-called real economy to grow in the future.
The author has written his advice very clearly:
- People around the world must work together to lower living standards and reduce consumption to minimize unnecessary use of resources and reflect economic realities.
- Working careers must be extended in order to be productive in spite of the effects of childlessness and ageing.
- In the short term, the original savings will shrink and future generations will have to pay for the squandering of the previous generation, even shortening the life span of human beings.
In reality, there is no painless solution. Doesn't this change seem like a tall order?
Insights, with more questions
Although the author of this book has spent a lot of time criticizing the mistakes of the policies of various countries, when I was reading these criticisms of policies, in fact, one of the questions that I have been thinking about is: Where should the real goal of policies be placed? How can such a large organization as the government break away from the behavioral pattern of pursuing KPIs (in fact, this is not only related to the various problems caused by economic growth, such as the excessive pursuit of lowering the unemployment rate, which has also led to a decline in the unemployment rate in the past few years), but also to the fact that the government has been unable to achieve its goals.Bullshit jobs.What are the social phenomena mentioned in the report of the Panel on Economic Services (the Panel)?
Should the pursuit of "real economic growth" be the main economic goal of a government? If real economic growth is about "satisfying more people's basic needs", how many people's basic needs are still unmet, or how much room is there for meaningful growth of universal basic needs? The 19th century philosopher John Stewart Myers once said.
Wealth growth is not endless, and when it is over, it will be a fixed state.
The main problem that the authors focus on is that current policies ignore the costs of economic growth on the books. But I think the most valuable part of the book is the way it got me thinking about solutions. The real problem is that it is a common cause that all human beings who have devoted themselves to the pursuit of profit over the past hundred years must share, and my personal view is more pessimistic: I am afraid that it is not so much that there is a lack of politicians capable of proposing policies that are better than the short-term ones, but that the resistance to such policies will be too great to be feasible in the reality of the large number of democracies. In the existing global political system, even if a single strong man in a single country carries out reforms with his own hands, I am afraid that reducing the consumption of resources will only result in lower market prices, so that other countries may misuse the resources even more, so it is useless to blame a single government.
Unless a super leader emerges to help the world reach a successful consensus, it seems that we will have to wait until all of humanity recognizes the seriousness of the problem. Until that day, changing our expectations of unlimited economic growth and advocating for less wasteful use of resources may be something that a few of us can do. After all, as Myer once said:
The pursuit of happiness should seek to control desires rather than strive to fulfill them.
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