Page 13 - MYM 2016

Afew years ago, we divided the world’s nations into fast growth and slow growth countries. We named some large countries that had strong economic growth the BRIC coun-
tries – Brazil, Russia, India and China. ey were experiencing high economic growth rates between ve and eight percent. e United States and most of Europe were experiencing one to two percent growth. Some Southern European countries were even experiencing negative growth rates. We called them the PIGS countries – Portugal, Italy, Greece, and Spain.
All this has changed. Growth has slowed down around the world. Much of the world’s past strong growth was due to China buying commodities, minerals and goods from around the world and pumping fresh money into many developing econ- omies. China became the world’s factory, producing and distributing tons of clothes, shoes, appliances, electronics from its factories. But China’s growth has slowed down substantially. China over nanced its growth: it built new cities without many people and new factories without su cient demand.
Brazil had impressive growth, but it has since slowed down considerably and problems are plagu- ing its Olympics. Some scandals have been partly to blame. Russia is currently a basket case with
the slump in oil revenue. India is puttering along. Prime Minister Shinzō Abe is working hard to get Japan past its 22 years of stagnation but it’s a hard uphill battle. Indonesia was doing well for a while but is now slowing down. Venezuela, once the fourth richest country in the world, is now a icted with rising hunger, crime and disorder.
e U.S. is one of the few countries doing well, if we de ne three percent growth as a good accom- plishment. Yet one of our leading economists, Robert J. Gordon of Northwestern University, is not optimistic. He points to several “headwinds:”
• the aging of the American population;
• the stagnation in educational achievement; • scal tightening to x public & private debt; • the rising cost of health care and energy;
• the pressures of globalization;
• growing income inequality & the debt burden.
“ MarketiNg for social chaNge capitalism produces
inherent cycles due to the discontinuous arrival of breakthrough new products and businesses.
Western Europe seems to be slowly improving economically but now must handle a huge in ow of migrants and refugees from Syria and other troubled areas. Both Belgium and France have experienced brutal terroristic attacks and this ter- rorist prospect is certain to dampen growth further.
e Obama administration did the right thing in using stimulus tools to re-energize the American and world economy, create a steady increase in the number of new jobs, and get the unemployment rate to about 5.5%. Yet the 2008-2011 Great Reces- sion le a lot of people poorer. ere is a growing undercurrent of disappointed and angry citizens who feel cheated by both government and busi- ness. is has contributed to the Brexit vote that the U.K. should leave the European Union and to the phenomenon of Donald Trump becoming the Republican candidate.
What will be the growth rate in the short run and the long run?
My guess is that the world GDP growth rate in the short and medium term will remain low. We will be operating in a new normal, which is more or less a stationary state.
For the long term, the prospects are better. e great economist Joseph Schumpeter pointed out that capitalism produces inherent cycles due to the discontinuous arrival of breakthrough new prod- ucts and businesses. We need to wait for the next big thing that all of us want to buy. In the past, it was computers, then the Internet, then tablets and nally the smartphone. Unfortunately, the Apple Watch, in spite of its ingenuity, will not give a suf- cient kick to our growth. Once the electric car
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