Can World Economy Keep Growing If U.S. Doesn’t?

Maybe businesses should hire consumers instead of just watching them. If more people can go back to work then consumer spending would go up and stay there awhile. Or has no one in the economic world considered this?

Unlike the federal government, whose spending creates money, businesses need a source of money before they spend.
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Federal money creation is the foundation upon which the economy is built, but mainstream economics wants to build the upper floors, and hope the foundation won’t be necessary.
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Thus, we see efforts to encourage business spending and bank lending (i.e. private sector debt), while doing everything possible to prevent federal debt — all while businesses and people go bankrupt, and the federal government never can.
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It is madness on a grand scale, that would be humorous, if it didn’t hurt all of us. The double dip is inevitable without federal deficit spending.

Rodger Malcolm Mitchell

Good Post. History agrees with you.

John Maynard Keynes, the most influential economist of the twentieth century, considered the day when society could focus on ends (happiness and well-being, for example) rather than means (economic growth and individual pursuit of profit).
He wrote, “The day is not far off when the economic problem will take the back seat where it belongs, and the arena of the heart and the head will be occupied or reoccupied, by our real problems – the problems of life and of human relations, of creation and behavior and religion.”
In the developed world, that day is upon us – we are past the point that additional material output will make us happier.
Our religion of growth (at any cost) is bankrupt and outmoded, and we need to recognize that a steady –state economy is both easier to maintain and healthier for our citizens, our government, and our environment.
See http://www.theoildrum.com/node/3941 for a speech by Herman Daly, which details the benefits and workings of a steady-state economy.

The notion of a steady-state economy began with the belief that economic growth had limits. Malthus predicted the inability of food production to keep pace with population growth. That was back in the 1700′s.
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Later, economists predicted we soon would reach the limits to natural resources, especially carbon-based energy. Then, we’ve had “happiness indexes,” based on the truth that well-being was more important than economic growth.
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All of these seem to rely on the physical idea that today’s technology will not improve, and on the moral idea that goodness is better than richness.
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For more than 200 years, food production has been at its theoretical limit, as are energy and all other natural resources, and overall, the world supposedly is nearing the limits of its ability to support population growth.
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Yet, somehow Armageddon has not arrived, and the reason is, we have no ability to predict the effects of technology and human brainpower. How many of us, fifty years ago, predicted the Internet, iphones, genetically altered seeds, home computers, plasma TVs and the potential for quantum computing?,
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Now, as always, we look at today’s technology, and decide further growth is unsustainable. But what is this thing called “growth,” we are told to fear? It’s easy to sneer at wealth and greed, and to speak for moral and social progress, but what does that really mean?
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For instance, had somehow a “steady-state” economy been instituted 100 years ago, what would we have had to forego today? Would all of us prefer Amish-style lives? Do we lack the ambition to see humanity populate the universe?
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Rodger Malcolm Mitchell

Read the speech.

“Steady-state” doesn’t mean things don’t change materially or technologically, it simply means that production does not outstrip the resources available for production. As technology and methods improve, industry can produce more with less of each resource.
Those of us who appreciate the advantages of a steady-state economy are not afraid of economic growth as measured by GDP, just aware of its vast shortcomings as an economic be-all-end-all.

. . . “it simply means that production does not outstrip the resources available for production.”

I agree with the sentiment, but see two problems:
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1. The point is trivial. Most people know we should not catch all the fish in the ocean, nor cut down all the trees, nor burn all the oil. But can we convince (for instance) China to adopt an overall “steady-state” theory? Doubtful. It’s too big a mouthful. We may have better results addressing each problem on an ad hoc basis.

2. We seldom know what resources are or will be available for production. Malthus thought our production of children outstripped our resources for feeding them.
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So the real problem is not convincing people we shouldn’t use up everything. Rather, the real problem is convincing people they really are using up some specific thing irreplaceable and vital to their own personal existence.
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Tell someone not to drive so much, and they may say, “In a few years, the scientists will have developed cars that don’t use gas, so why sacrifice driving today?”
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A possibly unnecessary sacrifice today is not a good selling point for any theory.

Rodger Malcolm Mitchell

It’s easy to dismiss the limits to growth notion without bothering to read up on it. Having read the 1972 report last week out of curiosity, I found that it doesn’t make any specific predictions, that it factors in technological advances, and that it’s ‘standard run’ model pretty much matches the observed data. (See Graham Turner’s comparison for CSIRO, 2008)

I’d argue that it is far more naive to argue that growth can go on forever.