January 22nd, 2009


Dip or blip?

I think we can say with confidence that most of the rich world is now in recession. (Not the Socialist Worker's Paradise of Norway, of course.) But the question is: Is this a dip, from which we will return to the normal level of steady growth once the panic and confusion loses its grip? Or, on the contrary, was the boom of the previous eight years a blip, a fake growth based on lies and fantasy money?

A lot of important decisions - life decisions and day to day decisions - depend on what we think about the future. For a long time now, we have assumed that economic growth is the natural condition. Certainly this is true for developing countries - and I mean those that are actually developing - since they have large resources that are poorly used. Investment in roads, railways, power stations etc will give fairly rapid results in the form of increased productivity. The needs of the populace are physical and obvious: People want more and better food, more than one set of clothes, a telephone, a bike or a car. In the longer run, schools will help shift people from subsistence farming to high-productivity work.

In the rich world, things are different. People are growing old. There are no obvious new technologies to make them more productive, or even to keep them from growing less productive as they grow older. And the motivation for working harder is not so great when you already have more than you need, even if there is no end to your wants. Wants simply don't compel the way needs do. The baby boomers have "everything except happiness". They may be just as motivated to take some time off for self-actualization as they are to work on their career, now that their parents and uncles are dying and retirement looms.

So basically, I suspect that the era of growth in the western world is over. Much of the planet still needs to catch up. Some parts probably never will. But the time when money just grew like leaves on trees? I think it is over. I may be wrong, of course. It happens occasionally. Just tell me how.