Jeremy Grantham Looks At The Future Of America: "On The Road To Zero Growth"

Tyler Durden's picture

Jeremy Grantham's latest quarterly letter is out, in which he discusses, as the title suggests, the road to zero US growth. From the punchline:

With a little luck, U.S. GDP growth (even after an increasing squeeze from rising resource costs and environmental damage) should remain modestly positive, even out to 2030 and 2050, in the range of 1% at the high down to a few basis points at worst. Increasingly, the growth will be qualitative. Qualitatively, growth is likely to be limited to services as manufactured goods will bear the brunt of the rising input costs. It would certainly help a lot if considerable changes were made in how GDP is measured. It needs to be closer to what we all apparently think it is already: a reasonable measure of the utility of useful goods and services. The key issue will be how much unnecessary pain we inflict on ourselves by defending the status quo, mainly by denying the unpleasant parts of the puzzle and moving very slowly to address real problems. This, unfortunately, is our current mode. We need to move aggressively with capital – while we still have it – and brain power to completely re-tool energy, farming, and resource efficiency. We need to do all of this to buy time for our global population to gracefully decline. It can certainly be done.


  • The U.S. GDP growth rate that we have become accustomed to for over a hundred years – in excess of 3% a year – is not just hiding behind temporary setbacks. It is gone forever. Yet most business people (and the Fed) assume that economic growth will recover to its old rates.
  • Going forward, GDP growth (conventionally measured) for the U.S. is likely to be about only 1.4% a year, and adjusted growth about 0.9%.
  • Population growth that peaked in the U.S. at over 1.5% a year in the 1970s will bob along at less than half a percent. This is pretty much baked into the demographic pie. After adjusting for fewer hours worked per  person, man-hours worked annually are likely to be growing at only 0.2% a year.
  • Productivity in manufacturing has been high and is expected to stay high, but manufacturing is now only 9% of the U.S. economy, down from 24% in 1900 and 15% in 1990. It is on its way to only 5% by 2040 or so. There is a limit as to how much this small segment can add to total productivity.
  • Growth in service productivity in contrast is low and declining. Total productivity is calculated to be just 1.3% through 2030, if we use current accounting methods.
  • However, current accounting cannot accurately handle rising resource costs. Spending $150-$200 a barrel in offshore Brazil in the future to deliver the same barrel of oil that cost the Saudis $10 will result perversely in a huge increase in (Brazilian) GDP. In reality, rising resource costs should be counted as a squeeze on the balance of the economy, as they lower our total utility.
  • Measuring the non-resource balance of the economy produces the correct effect. The share of resource costs rose by an astonishing 4% of total GDP between 2002 and today. It thus reduced the growth of the non-resource part of GDP by fully 0.4% a year.
  • Resource costs have been rising, conservatively, at 7% a year since 2000. If this is maintained in a world growing at under 4% and a developed world at under 1.5% it is easy to see how the squeeze will intensify.
  • The price rise might even accelerate as cheap resources diminish. If resources increase their costs at 9% a year, the U.S. will reach a point where all of the growth generated by the economy is used up in simply obtaining enough resources to run the system. It would take just 11 years before the economic system would be in reverse! If, on the other hand, our resource productivity increases, or demand slows, cost increases may decelerate to 5% a year, giving us 31 years to get our act together. Of course, with extraordinary, innovative breakthroughs we might do even better, but we certainly shouldn’t count on that. (Bear in mind that we don’t even know precisely why the prices started to rise so sharply in 2000.) Excessive optimism and doing little could be extremely dangerous.
  • For a few years fracking will add helpfully to growth: my guess is that the benefit will peak at about 0.5% within fi ve years, but be modest over longer periods. The key concept here for understanding growth is to know when the maximum upward push will occur. (See Appendix A.)
  • Increasing climate damage, reflected mainly in food prices and flood damage, is going to increase. With any luck this will not be severe before 2030 (we allow for a 0.1% setback) but it is very likely to accelerate between 2030 and 2050. A great deal will depend on our responses.
  • The bottom line for U.S. real growth, according to our forecast, is 0.9% a year through 2030, decreasing to 0.4% from 2030 to 2050 (see table on Page 16). This is all done presuming no unexpected disasters, but also no heroics, just normal “muddling through.”
  • GDP measures must be improved so that they begin to measure output of real usefulness or utility. The current mish-mash of costs and of “goods” and “bads” produces poor and even damaging incentives.
  • Accurate measurements of growth must eventually include the full costs of running down our natural assets. True income (said Hicks) is meant to allow for sustained productive capacity, which our current measures clearly do not. If they had done so the developed countries might well have been in reverse for the last 20 years.
  • Investors should be wary of a Fed whose policy is premised on the idea that 3% growth for the U.S. is normal. Remember, it is led by a guy who couldn’t see a 1-in-1200-year housing bubble! Keeping rates down until productivity surges above its last 30-year average or until American fertility rates leap upwards could be a very long wait!
  • Some of the investment implications of this low growth outlook and the Bernanke optimism will be addressed next time (with luck!).

* * *

Full letter (pdf):


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JeremyWS's picture

Can always trust Jeremy's :)

Michaelwiseguy's picture

You can't have job creation in the USA because the factories that produce consumer products were removed the country.

The Money Math doesn't work due to Globalization and the Federal Reserve Corporation.

Zap Powerz's picture

Oh relax.  There is plenty of low wage, service industry job creation going on.  We always need more leaf blowers, hotel maids and dishwashers imported from South America!

And we will supplement their low wages by giving them free food (EBT cards), free health care (medicaid) and subsidized housing!  This will all be paid for with borrowed money that we will pay interest on forever more.

There is simply no way this can end badly.

Michaelwiseguy's picture

You can't have job creation in the USA because factories that produce consumer products were removed from the country.

The Money Math for Job Creation doesn't work due to Globalization and the Federal Reserve Corporation.

Globalization = American Wage Arbitrage = Lower Worker Pay

Federal Reserve Corporation = Private Company that Manufactures Paper Money and Sets its Value


P.S. I'm sorry I have to spell this out on a 6th grade level.


MachoMan's picture

You can build those factories here again...  after all, did the countries who got their manufacturing infrastructure destroyed in WW2 rebuild?  Life goes on...  [except, in this case, probably at a lower standard of living for americans]

francis_sawyer's picture

Zero Growth = zero readers for your newsletters Jeremy... (because when things grind to a standstill, people FINALLY want to look ahead & not behind)...

I'm not hatin' here ~ just telling you how it will be...

Ratscam's picture

3 and six zeros

Thanks to ZH for getting us involved, thinking, discussing and argueing.
ZH articles are great. The comments of the bloggers are hilarious, at times utterly stupid but mostly highly educating.
I learned so much. Thank you, thank you, thank you!

DosZap's picture


You can build those factories here again... after all, did the countries who got their manufacturing infrastructure destroyed in WW2 rebuild? Life goes on... [except, in this case, probably at a lower standard of living for americans]

Yeah, we could, but that is not the plan..............................face it, we have all been fenced in, and you are prisoners of the State.

All Risk No Reward's picture

Everyone needs to do their full research on Debt Money Tyranny..


I'm not yelling with the caps, I'm bull horning.

Society's debt isn't payable in total.  Period.  Look at the Debt Money Tyranny money flow PDF attached above to see exactly why.

The welath of the richest people on the planet IS OUR DEBT.  We can't pay it back UNLESS THE RICHEST PEOPLE ON THE PLANET USE THEIR MONEY TO PAY IT BACK.

God forbid a $20 gets burned in a house fire - then the debt is unpayable no matter what.

We need to stop obsessing over the wealth of criminals like Buffett, Gates, Rockefellers, etc...  because their money IS SOCIETY'S DEBTS THAT *YOU* GET TO PAY BACK WITH INTEREST!

Not because of reality, but because of a criminal, artificial debt based monetary constraint engineered to destroy nation states.  Think along the lines of Death Star 2.0 that destroys entire nations while keeping the wealth largely intact fore the "pennies on the looted dollar" plundering that will commence once the looting operation has run its course.

Since society doesn't have the money to pay back its debts, a steady state society will see its citizens bankrupted and asset stripped - one by one.

PS - refer to the linked PDF and note how wicked bailouts are - the criminal insiders keep all the cash and society gets saddled with the debt BUT NO MONEY TO PAY PRINCIPLE OR INTEREST.

PSS - The real terrorists finance your government and everything else big - including mega drug cartels and even al Qaeda to play the role as Emmanuell Goldstein in 1984...  their isn't enough threat in the world so the military industrial complex has to create its own in order to conforrm to their corporate mandate - maximize profits.

BTW, watch "The Corporation Full" on Youtube or Netflix.  It compares the corporate legal structure to the clinical definition of a psychopath.

My argument is that the people with the wealth and political clout to define the corporate legal structure DID SO IN THEIR OWN IMAGE.

They are soulless, profit making psychopaths - by any means necessary.  Those that pay attention understand law isn't about to get in their way.

Also note the "news" has no legal obligation to tell you the truth.  And they don't.

Other Netflix documentaries worth your time:

1. Taxi to the Dark Side
2. Black Money
3. A Film Unfinished followed by...
3.5. Empire in Africa (Try to define the similarities and differences between the Warsaw Ghetto and how Big Finance Capital runs the governments of African nations.  I see lots of similarities and trivial differences).
4. The American Experience: The Crash of 1929 (Pay attention to who says the crash was inflicted on "suckers")
5. Cocaine Cowboys (The Banksters knew where the drug money being kept and sent their puppet government to overthrow that government, steal the money and then take control of the drug trade).
6. The Panama Deception (make special note of the person who had been melted in the attack).
7. Plunder: The Crime of Our Time (note Kucinish crying out to end debt based money before Congress - THEY ALL KNOW!)
8. Frontline: The Warning (Non criminals were to be excommunicated)

If you want some fiction to drive the point home:

1. Rollerball (James Caan version - and no, this movie is not about Rollerball.  That's just how they packaged it in order to throw reality in your face, Muppets)
2. They Live (Are you glasses on?  Who are the demonic "aliens?"  Do you know any collaborators?)
3. Michael Clayton (motivated by debt, just doing his thing without thinking, corporation killing people, lying about it and pretending they were the source of life - the only thing that saved his life was getting off the treadmill and back to nature and reality. The ending was fake, but exposes why mega corporation MUST SEIZE AND CONTROL GOVERNMENTS AS PRIORITY #1).

D-Man's picture

That must be 6th grade from another country because it's certainly not 6th grade for the US government system!

GottaBKiddn's picture

Sorry Mr. Jeremy, "we" aren't doing this to "ourselves". It's being done to us. That's why there is nothing that we do that is going to improve or change it. This will not end well, got it?

stacking12321's picture

so ready to play the part of the victim,  you are.

hope you grow out of it.

the not so mighty maximiza's picture

"..gracefully decline.."

Yeah that happens all the time.

dwdollar's picture

LOL... yep...

Stick that one with "...beautiful deleveraging..."

Stock Tips Investment's picture

The economic crisis in Europe will have a negative effect on the U.S. economy in the short term, but may represent an opportunity in the medium and long term. The U.S. economy is very flexible and highly productive. And American companies have proved very successful agile to meet the needs of its customers. The level of investment in energy being viewed by U.S. and other performance you step outside Europe, can support, easily, a much larger expansion of the American economy.

economics9698's picture

Get rid of the NWA and a haircut on the debt and away we go.

stacking12321's picture

why you hatin' on the NWA?

i suppose you think the east coast rappers have a better solution to the debt problem?

QQQBall's picture

I get brown out in Socal. What energy is being referenced?

Quinvarius's picture

Zero growth would be an improvement over the last 40 years.

Banksters's picture



Humans may not exist in 18 years.

Joe Davola's picture

1-in-1200 year housing bubble  Talk about pulling shit out one's ass.

ZerOhead's picture

I don't know about that....

Anthropologists now suggest that the Neanderthals were wiped out by a 1-in-10,000 year cave bubble...

Mrmojorisin515's picture

All of these numbers assume the dollar is still the reserve currancy, thus keeping resources price increases in check..............

rosiescenario's picture

Certainly the market has priced this in.....

PUD's picture

Since all money is debt and growth equals more money then there can only be more growth if there is more debt.

Clearly that ain't gonna happen

There is nothing wrong with Zero growth. All things in life do not need to be measured in money units. Progress is not the same as "growth"

10 billion humans are 6 billion too many no matter how clever we think we are.

We have done nothing about climate change, every bio system on the planet is in decline and war is a perpetual endeavor now.


There is no hope. None

Zap Powerz's picture

Have some faith in Mother Nature brother.  Have faith in natural, irrevocable laws.  Its all going to work out just fine.  Of course, you and I may not be around to see it, but it will work out.

Mary Wilbur's picture

It's my understanding that the entire evolution of homo sapiens sapiens'  hIas taken place during an interglacial period of approximately 30,000 years. We cannot stop the dynamism of this planet. I have no idea what the future is going to bring except that it won't be anything like it has been (it never has) and I won't be here to experience it. It is next to impossible for the politicians and other elites who are in charge of this country to make effective policy about current problems. Climate change of such an enormous consequence is impossible to stop. The best we could possibly do is to try to adapt to it, with the realization that the extinction of the human race may very well be the end result. The Great Southeast Asian Tsunami of December 26, 2004 made it entirely clear to me in a way I had never internalized before, that we human beings are less than ants. Our self-love deceives us into believing we have importance. All we can do is try to survive, if possible, without harming others. Yet, that is as also a utopian dream. We hurt each other all the time.

SmallerGovNow2's picture

There is NO, ZERO, NADDA, manmade climate change, global warming, or whatever your political activist "scientists" (who were all caught red handed manipulating data to serve their cause) want to call it these days.  Midevil Warming Period?  Little Ice Age?  Ever heard of these?

Radical Marijuana's picture

I spent thousands of hours attempting to research human driven climate change issues. In the end, I felt like a dog twirling around chasing its own tail. There is almost NO source of information that one can trust! Half the data is missing, and the other half is unreliable.

Humans blamed for climate change

Even WORSE, the basic mainstream understanding of the Sun is almost certainly wrong! Take a look at enough of the Thunderbolts of Gods Web site, and the electric universe theory, and you will be convinced that the orthodox mainsteam theories of a gravity and atomic energy driven Sun are grossly inadequate to deal with the rush of new observations, made possible in the last 10 years, by technology applied to astronomy.

Thus, our models and theories with respect to the primary driver of everything else are woefully inadequate! All of the climate change theories were based on models, using data, that BOTH end up being way too unreliable. Therefore, as far as I can tell, the basic theories about global warming, and ESPECIALLY the human causes of that, are grossly deficient, so much so that nobody can rightly say. That includes those who deny that, as well as those who promote it!

The ONLY thing that I am SURE about, from direct observations, is that human societies are controlled by lies, backed up with violence, and that there is PRIMARILY a hidden agenda behind everything that the mass media and politicians tell us! My all time favourite statements about this topic, so far, come from various versions of Penn and Teller being Green.. However, I find that the links to that keep on breaking, and those shows transformed from their better former versions, ... but nevertheless,

I find the theories about human beings screwing around with weather control experiments and covert manipulations to be more plausible than the overall theories about the climate, etc., since, like I said, the basic ideas are based on half-assed, biased data, plugged into models that do not understand the prime mover of the whole process! Thus, I find it IMPOSSIBLE to trust any of the stuff we are told, including those who say "no" just as much as those who say "yes."

The bigger problem, in the context of this article, is that, IF the established systems finally can not grow, they will NOT sanely adapt, (although that sounds theoretically possible) ... instead, they will collapse into crazy choas.  The PROBLEM is that climate change is probably going to happen in similar ways. Those weather systems will keep on going back to the dynamic equilibria, EXCEPT, if they cross some unknowable threshold, that flip them into chaos, out of which a radically different system of weather patters could emerge!

One thing IS clear, from the study of long-term human history, and that is climate changes played a HUGE ROLE in the longer term rise and fall of civilizations. Therefore, the topic is extremely important, but the TRUTH IS WE ARE BEING MASSIVELY LIED TO, WHILE NOBODY REALLY KNOWS!

centerline's picture

Always the same key word - "Growth".  Yet no one stops to ask why or address the clear lack of sustainability.

Newsboy's picture

Seneca's Cliff Ahead!

Uh, brake or gas?

machineh's picture

'Growth in service productivity in contrast is low and declining'

... and is actually negative in government, the value-subtraction sector of the economy.

XitSam's picture

Zero growth is a best case scenario.

JustObserving's picture

Growth is an easy number to manipulate.

If real growth had been zero but I understate inflation by 3%, then, voila, you have 3% growth.

It is quite clear that we have been understating inflation for quite a few years (see Shadowstats - it claims inflation is understated by 6% to 8%).  So, conversely, we have been overstating growth.

If we get 0% real growth, we are doing better than during the last 5 years.


woggie's picture

the beast is on the gobble and all that matters is we're all headed for it's belly

Brit_Abroad's picture

Just somebody else who fails to join the dots. WTF !

Waste of time reading this junk.

grid-b-gone's picture

There is nothing wrong with zero growth. Physically, most of us do little growing after 18 yrs, and few show much growth mentally, socially, or emotionally beyond that age, either.

Why expect a country to exhibit high growth after 236 years of fantastic development?

Quit with the inside closet door tick marks, already. Coast.

The only problem is that we borrowed against future growth. The future is here, but there is little growth, so we are using our fiat to try to produce growth artificially.

Living on artificial growth is like riding a pool wave - action that gets you nowhere.  

ejmoosa's picture

Yet our growth has not stopped because of natural reasons.  Instead the heavy hand of the Federal government has crushed the economy. 


Those shackles will be thrown off, and growth will resume.

lunaticfringe's picture

I cannot imagine the infantile brain of the person that gave you a down arrow...heh. You are a visionary.Often, I have remarked on just how un evolved and static our population is. Bravo.

GernB's picture

There is one thing wrong with zero growth. We have an economy that is currently structured so it can only function if there is growth.

earleflorida's picture

ya know... as we all know today, that the real drag on the economy starts with energy:

start building 'Thorium Nuclear Power Plants', while simultaneously manufacturing transferable mobile modules throughout the country, period!

don't say it can't be done, for it was prototype'd quite successfully in the late  50's, 60's and early 70's in the good ole usa, but was mothballed for the plutonium breeder reactors. why you ask? too build out our nuclear weapons arsenal!

Thorium doesn't melt Up or Down,'s quite stable using light-water reactor-- while its cost efficiencies are minuscule to service and maintain.

that was ~50 years hence... time to move onward and forward.

Ps. since the mid-90's the DOE has done numerous test analysis --- it seems our stride in nuclear physics makes it abundantly clear that this should and must be the alternative to take having to do with the unusual seismic activities throughout the globe. remember... all it takes is one, lest we forget the still-hot 3Mile Reactor debacle-- America's Chernobyl ?


Winston Churchill's picture

The Seven Sisters. and the MIC might not be too happy with that.

Which is why WWIII is the more likely scenario.

Looks like we might all go out with a blaze of light.....

falak pema's picture

the nightmare of the Bush clique after what they've done to the world having "liberated" Irak and made USA top dog oil patch :

The seven Sisters of old end up as the Seven dwarfs of Snow White!...

Who changed the damn script on that?

Grantham...Grantham you shill! 

John Wilmot's picture

The threat to growth is not resource-depletion, it is economic interference by the State which prevents capital formation and investment. Inflationary monetary policy is first on the list of harmful interventions: depressing interest rates and pushing up consumer prices retards capital accumulation. Then, this monetary policy and every other economic intervention (there is not a single market/industry which is not in some way regulated, taxed, subsidized, and thereby distorted by the federal government) distorts the allocation of what capital does form, so that resources are directed to less productive enterprises than they otherwise would have been.

You know the New Deal era policy of destroying milk to raise prices for the benefit of dairy farmers? That is the essence of every kind of State intervention; in most cases the destruction of resources is only less blatant and obvious. Every intervention by the State destroys scarce resources for the transitory benefit of some special interest.

American Sucker's picture

"We can infinite growth on a finite world if we have the right regulatory regime!"

John Wilmot's picture

I'm sorry, what's your point sucker? Are you informing me that resource are scarce? Ah, yes, thanks for that, I didn't know. /sarc

Resources scarcity is the starting point for economics. If resources were not scarce there would be no need for economics. Economics is the science of using scarce means (resources) to achieve given ends (as determined by consumers). What quantity of resources exists in nature is irrelevant, as it is entirely outside of our control. The question is: how do we best use the resources that do exist? The answer is that resources are allocated to more productive uses by the market than by the State. It's precisely when resources are scarce (i.e. always), that we can't afford to let the State waste them.

This notion that resources are scarce, and therefore the State must intervene to conserve them, is a non sequitur. Ironically, many of the most prominent "peak-everythingers" today are the same people who, a few decades ago, were heralding the immanent arrival of a post-scarcity world, and calling for the abolition of capitalism as a consequence. Funny how the argument took a 180 degree turn (everything is superabundant to everything is almost gone), and yet the prescription (central economic planning by the State) remains the same? Funny how that works...Kind of like how the same people who were saying we need a world socialist government in 1970's to fight global cooling are now saying we need a world socialist government to fight global warming...or swine flu....or alien invasion...or whatever the crisis du jour.