We Can’t Grow Forever – so What?

Two interrelated opinion pieces appear in today’s New York Times. The first is an essay by David Brooks about how the economic growth of the 21st century compares unfavorably to that of the heady 20th century. The second is the Editorial Board’s argument that data does not support the idea that automation is responsible for recent economic malaise.

Brooks’ piece resonated with me because I hold the opinion that, regardless of your position on regulations, taxes, the environment, or public policy, a nation simply cannot grow forever. Whether we are talking about population size, economic output, available resources, or territorial holdings, there is simply a fundamental limit to what is available on the Earth. I think we are starting to see these limits reflected in our growth path, as Brooks writes. Extractive industries provide a good case study: I don’t think we’d have deep-water drilling if shallow-water drilling remained lucrative, and I don’t think we’d have the economic case for fracking if the easy-to-reach resources were still as worthwhile to get. Similar principles are going to apply to any resource or population.

The notion of the Earth being finite seems to bother economists. If our population does not continuously grow, then our output doesn’t grow. The United States’ trajectory through the 20th century was predicated on the idea of continual growth, which spells trouble if we try to carry that path forward. This is where the editorial comes in: In order to succeed and provide for our citizens in the 21st century, we need new policies.

The United States’ economic policies over the last several decades have been basically Republican policies. (I want to explicitly draw a distinction between “Republican” policies – across-the-board tax cuts, cutting regulation, and increasing defense spending – and “conservative” policies – market-based solutions, revenue-neutral ideas, and the like – because they are very much not the same.) Somehow, the Republican party has managed to sell themselves to many Americans as the small-business-friendly, growth-promoting, income-increasing party that they are not, instead of the giant-multinational-conglomerate-favoring, uber-wealthy-CEO-catering party that they are. In a world where more and more people are gunning for fewer resources than they could have a half-century ago, those policies may be the exact opposite of what we need. So are we going to get the policy reforms we need under Republican leadership? Certainly not. My generation is going to inherit a world of rapidly rising income inequality (not to mention sea levels).  Because, I think people wanted to buy one thing when they elected Republicans last November, but they got a lemon.

The frustrating thing to me is that I believe the Democrats have it right, in terms of policy philosophy. Maintaining a strong economy in the future world is going to be about efficiency. We’re going to have to find new ways of going about our business so that we can make more with less. We’re going to have to find ways to incentivize building robust products that last a long time, instead of selling consumers on the idea of constant upgrades. We’re going to have to find efficient ways for society to reduce its overall costs while balancing individual needs, like all buying health insurance so we don’t pay more at the ER. We’re going to have to power our homes with home-grown renewable energy, not just because it’s good for the planet but because it’s going to be cheaper and more readily available in the long term. We’re going to have to go back to what we learned in elementary school: reduce, reuse, recycle!

And we’re going to have to figure out how to make economic growth out of that, as our population starts to shrink. That clearly requires policy changes. Blind cuts to regulations so that we can dump pollution in rivers won’t solve this problem; tax cuts that go mostly to wealthy corporate boardmembers won’t solve this problem; more nuanced approaches are needed. The solutions are likely carefully crafted, market-based plans involving a full portfolio of cuts, new regulations, and taxes.

Many of those will be conservative solutions.

(Probably, at this rate, ones put forward by the Democratic Party, like the ACA.)

A ray of sunshine here: At the state and local level, politicians are trying to solve problems. This involves recognizing what the problems are, and trying to implement a plan to address them. It also involves trying a new plan when the first one doesn’t work.

So, let’s watch carefully over the next few years: What works? What doesn’t?

And who put forward which ideas?

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