While there have been undoubted ebbs and flows, the last century has seen growth in GDP like never before. A paper from the UC Santa Barbara argues that this growth is due to a combination of the technologies of the Industrial Revolutions and the various economic and political freedoms we have enjoyed as democracy has spread.
Alas, however, the authors argue that those same advanced democracies may be in the midst of a long-run economic slowdown throughout the 21st century.
“Long-run slowdowns in growth in rich countries are inevitable for a bunch of reasons that we really don’t have control over,” the authors say. “Nobody can say for sure exactly what’s going to happen, but there’s this long-term pattern of declining growth that has been visible since the middle of the last century.”
Slowing down
Among the key factors in this slowdown is the aging of populations across the developed world, but the authors also cite factors such as the transition towards service-based economies and a slowdown in the rate of innovation. Issues such as climate change and Covid could also have a prolonged impact.
“Given that future economic costs of human-driven environmental challenges like climate change can be enormous, aggressive action today on effective solutions is crucial to limiting future economic declines,” the authors explain.
While we may have grown accustomed to periods of largely uninterrupted growth, the authors argue, therefore, that we may need to reassess our societies, especially as the social programs are largely founded on long-term economic growth.
Addicted to growth
The need for prolonged economic growth has been widely implicated in our current environmental situation, with many environmentalists arguing that we can’t solve our ecological challenges while continuing to pursue unfettered growth. We haven’t ever really stopped to consider the consequences of a slowdown in economic growth, however.
If we do enter a period of prolonged slowdown, the researchers believe the best way to tackle it would be via a so-called “guided civic revival,” which would involve a mixture of government participation and bottom-up civic forces.
These would work to decouple our wellbeing and social capital from economic growth, thus improving opportunities for young people, reducing inequality, and hopefully ensuring a return on any government spending.
“I think the most important thing to ask ourselves is how do we build social solidarity in a context where things feel zero-sum,” the authors explain. “Secondly, how do we adjust expectations?”
Social progress
Since the Industrial Revolution, it has been almost assumed that children will become better off than their parents, but that assumption is beginning to break down, with data suggesting less than half of young people today are making more than their parents did. There remains a general belief in this narrative, however, and this disconnect with reality can have significant consequences.
“There’s lots of evidence that a gap between expectation and reality can be a catalyst for political unrest, especially among middle- and upper-class youth,” the authors continue.
They also suggest that various solidarity-building exercises could help to create a shared identity while also allowing for diversity and reducing economic inequality. There are also clearly steps governments can take to improve the efficiency of public spending and minimize waste, while investment in areas such as infrastructure and R&D are also recommended.
These suggestions are by no means intended to be the final word but rather a starting point to kickstart a discussion about a future in which growth is much slower than we have become accustomed to. The authors hope that they may be accompanied by a rethink in how we assess and measure wellbeing away from things such as income and wealth and more towards subjective feelings of connectivity, security, health, meaning, and personal freedom.
“What does a successful, developed democracy look like amid long-run stagnation?” they conclude. “In the modern United States, nobody really knows because it hasn’t happened. The main goal of this paper is to start the conversation.”
