Is This The Future Of World "Growth"? (Or The iPad vs Indoor Plumbing)

Tyler Durden's picture

Back on December 23, we presented one of the past year's most disturbing reports, the BCG's "Ending the Era of Ponzi Finance" which explained, quite succinctly, why the economy of the developed world, which is nothing but one big ponzi scheme, is approaching its inevitable end, in which existing principles will no longer be applicable nor available to kick the can down the road. The drivers for this are numerous (and all listed in the report), with soaring public and private debt only one of the main forces behind the coming collapse into a Keynesian singularity. Yet perhaps the biggest threat of all has nothing to do with the world's balance sheet, but its income statement, and specifically the category for Research and Development, or, as it is better known in refined economic circles, "productivity" - it is here that things are rapidly turning from bad to worse, and why the chart below (which we felt a need to emphasize, hence the repost) is probably the best summation of what the world has to look forward to, or, as the case may be, not.

Why is productivity important? Simple - without major reinvestments in growth, be it capitalized or expensed, which serve to promote the betterment of all mankind, and not just fatten the bottom line of some mega multinational corporations, and their shareholders, the world's glory days are sadly and certainly behind us. And with more and more spending allocated to basic welfare programs and debt interest satisfaction at both the public and private ledger, there is increasingly less capital available to promote productivity improvement or boost corporate capital expenditures (a topic long discussed on Zero Hedge, and now even picked up by Bill Gross).

As for productivity, this also goes back to a long discussed topic: namely not the quantity of a given nation's labor pool, but more importantly its quality. And with America rapidly becoming a workforce consisting of gerontocratic, part-time workers, one can give up on all hope for future step-wise productivity improvements. Sadly jobs are now, more than ever, a political ploy by those bounded by a 4 year career horizon to preserve their grasp on power, which means that ever more job quality will be sacrificed to preserve the illusion that America is keeping up with its "trendline" growth of 100-200K jobs added each month. Which is also why the chart above may in fact be an optimistic assessment of what truly awaits the world as it mean reverts to a long-term growth trendlline, somewhere below the 0.5% GDP grpwth per year area.

This is BCG's brief and concise assessment on the issue:

Just as important as the number of available people in an economy's workforce is the productivity of that workforce. Consistent increases in productivity have made possible the economic transformation of the developed world over the past 200 years and of emerging markets today. There are signs, however, that the rate of improvement in productivity is in decline. In a provocative paper, the renowned growth research Robert Gordon, of Northwestern University, makes a compelling case that growth in GDP per capita has been slowing since the middle of the twentieth century. He argues that "the rapid progress made over the last 250 years could well turn out to be a unique episode in human history."


Of the factor Gordon cites for this phenomenon, the most important is diminishing returns from innovation. In the 1920s, the Russian economic Nikolai Kondratiev identified a pattern of economic growth consisting of successive "long waves" of economic development, in which periods of rapid growth were interspersed with periods of slower growth and financial crisis before a new cycle of growth began. Later, the Austrian economist Joseph Schumpeter showed how these long waves were associated with major advances in basic innovation - for example, the steam engine, electricity, and the automobile.


According to Gordon, the problem today is not merely that the incremental productivity impact of the most recent wave of innovation, associated with information technology and communications, has diminished in recent decades. Rather, he argues that the space for truly fundamental innovations that result in step-change improvements in living standards is getting smaller and smaller. As he puts it, the invention of indoor plumbing was orders of magnitude more important than the invention of the iPad, Twitter, and Facebook.

But not to those companies' handful of shareholders, which is precisely what happens in a world in which sovereign growth and stability is a needed sacrifice and trade off to perpetuate the corporate model of earnings above all.

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LetThemEatRand's picture

Hmm.  Maybe this has something to do with why the government is buying ammo by the trainload while mindless sheep are told they need to give up their guns because someone might get hurt.   

vast-dom's picture

productivity? this is precisely why front running central banks for returns will only lead to ruin. investments for growth completely offset by ponzi malinvestements.

centerline's picture

Funny.  I love it when things put in the perspective of GDP and perpetual growth.  The latter is all I hear on the radio... growth, growth, growth.  Don't need to know much else except to stop and examine the basis of the system.  Forward motion is not always growth and growth is not always forward motion.  Growth is a ponzi.  Forward motion is progress.  Sheeple don't know the difference.

Michaelwiseguy's picture

I would prefer .001% growth max.

Growth should not be measured with dollar signs on a balance sheet. Who thought up that scam? Money isn't everything.

imapopulistnow's picture

Growth does not require greater consumption of energy and natural resources.  As an example, it can take the form of smart phones, cloud computing and wireless infrastructure that take the place (creatively destroy) VCRs, cable boxes, CD players, PCs, copper phone lines, brick and mortar retailers etc.

But productivity growth without economic growth equals fewer jobs - simple math.  Fewer jobs means higher unemplyment.  Higher unemployment means greater social costs as well as lower wages (that supply/demand thingy they taught us in school).

Hence we must either stop productivity growth - not a smart thing to do when in a global economy, or we must encourage economic growth sufficient to create jobs for full employment. 

If you are aware of any viable alternative approach, please advise.

imapopulistnow's picture

Regaring the "diminishing returns" of productivity thesis, I suggest there are forces at play that will counteract this. 

For example, today the R&D efforts are more global in nature, where as in the past each nation essentially duplicated the R&D efforts of other nations.  Thus R&D investments are more efficient. 

In the past, R&D was performed by about 1/5th of the global population (the developed world).  Today, R&D is being performed at ever greater levels by the BRICs and other developing nations such as Korea.

Further, look at wind energy, solar efficiency improvement and horizontal drilling and fracking as examples where energy costs are rapidly falling in some instances and where energy production is rapidly increasing in other instances thereby enabliing a greater percentage of the world's poulation to achieve above the poverty line living standards and lifespans.

Maybe we haven't invented something as benficial as the crapper, but we are advancing technology and globalizing economic growth which allows more people on this planet to be able to afford one.

imapopulistnow's picture

The slowdown in GDP growth in developed nations is primariily a function of demographics - aging populations that both make and consume less, and the disequalibriums associated with global economic integration that increases labor availability thus lowering developed nation job and wage levels.

China alone has a labor force that is double the size of that of the USA, Europe and Japan combined, with a wage rate that is orders of magnitude lower.  Hence jobs are flowing out of developed nations and into the rapidly developing, but still low cost nations of the world, particularly when these nations also manipulate their currencies in a way that further increases their competitive advantages.

AldousHuxley's picture

well US policy of calling $300k shack in California $1,000,000 by giving loans to idiots didn't do much for national productivity while other countries invested into education, infrastructure, and down right theft of industries and profits to go along with it.



Citxmech's picture

This is the meeting of Joeseph Tainter's thesis of decreasing marginal returns and Richard Duncan's Olduvai Gorge theory of declining energy per capita - right on schedule.

Better get your houses in order folks. . .

Bendromeda Strain's picture

You can't fairly make that statement without a nod to Professor Antal Fekete, who makes the monetary case to go along with these gentlemen.

Zone1's picture

BRICs don't do R&D because R&D does not include copying and reverse engineering.

tango's picture

Not only do BRICS not do R&D anymore, hardly anyone in the world does it except the US and Japan.  The history or patents reveals 1) an overwhelming dominance by the US  2) The decline of Europe, 3) the rise of Asia. Of course the reason is profits - companies have enough to heavily invest in R&D.  The last thing that happens under centrally planned economies is experimental research and product development. 

Stuck on Zero's picture

I think that what we're observing is a classical "Tainter Collapse."  Every facet of our aging society is getting more complex.  More and more time is wasted on corrupt laws, rules and regulations.  We're strangling productivity with needless overhead.  "Compliance" is the nemesis of innovation. 


OpenThePodBayDoorHAL's picture

I'm reading a history of WWI. The author says that at the turn of the century "a law-abiding English gentleman could live his entire life without being aware at all that the state even existed". No income taxes or prying government eyes. No regulations to speak of. Able to travel anywhere in the world without showing any documents of any kind to anyone. Able to invest and move money freely anywhere he wanted without reporting it to anyone. Able to send any goods anywhere without answering any questions.

Instead today we have this insatiable Beast taking over every aspect of economic and personal life. It's disgusting, depressing, and terrifying. Remind me again why Ron Paul was wrong?

ft65's picture

I think your comment regarding 19th century "English Gentleman" is bogus. The masses lived in grinding poverty and servitude; the few that reached old age were destined for the Workhouse. These peoples main freedom were crippling hard work and constant hunger.

English Gentlemen (rich and powerful) still exist, and their freedoms even greater aside minor administrative inconveniences as they sweep through the VIP lounge on their private jets to the Kaman Islands. The masses temporary freedom from the yoke of poverty disease and hunger was a blip. Nature can only be fooled for so long - welcome back to serfdom!

LawsofPhysics's picture

"Growth does not require greater consumption of energy and natural resources."  - LMFAO!!!  Are smart phones edible now?  Can the be manufactered out of thin air like bernanke bucks?  Bah ha ha ha ha ha ha ha!!

ball-and-chain's picture

Productivity has nothing to do with it.

This is all about the global Ponzi scheme.

Americans can't compete with cheap labor.

Anusocracy's picture

It has to do with cost of government, and what that cost entails: about 90% waste.

Every year, the Americans for Tax Reform Foundation and the Cost of Government Center calculate the Cost of Government Day. This is the day on which the average American has earned enough gross income to pay off his or her share of the spending and regulatory burdens imposed by government at the federal, state, and local levels.

In 2012, Cost of Government Day falls on July 15.  Working people must toil 197 days out of the year just to meet all costs imposed by government.  2012 marks the fourth consecutive year COGD has fallen in July.   From a different perspective, the cost of government makes up 54.0 percent of annual gross domestic product (GDP).
Hubbs's picture

Flush twice. It's a long way to the Federal Reserve Bank.

On a more constructive note, just spent a leisurely 54 minutes at Chris Martenson's site, the following discussion  is a reasonable, non hysterical summary for those of us who know we don't know the real dirt or even undertsand it to the level of the ZH afficiandoes, but at least don't have our heads in the sand.

Zaydac's picture

My favourite snip:


"The commodity market pricing is being set by the futures market. Somehow it appears, and the commodity guys all understand this while I do not, but somehow the guys trading paper get to set the prices for the guys actually trading the hard commodity or soft commodity. If at some point the paper traders take the markets to someplace where the actual supply of the commodity cannot go, we are going to have this gigantic disconnect."


Poor Grogman's picture

In our modern world one can play both sides simultaneously.
Both selling and buying at the same time if one wishes.
Gotta love that ponzi...

Jason T's picture

Oil Age.. 

Romans had plumbing, baths, ect.. the White House didn't have a bathtub until 1850!   My point is, civilization is prone to dark ages that can last a long time.

Without a new form of high energy flux density .. we go down into another dark age.  Once an adult, twice a child as the saying goes.  


francis_sawyer's picture

Paper age (see comment below)...

insanelysane's picture

Great topic!  I tell my kids the same thing.  

When Rome fell, the Romans were still alive, so what happened???

A modern example would be Haiti.  How can the Dominican Republic have a decent society whereas Haiti is complete chaos and the two countries are on the same small island?



Jason T's picture

North and South Korea... Gobment plays a role.. free'er the society, the better.  

Vampyroteuthis infernalis's picture

Read the book "Why Nations Fail". It sums it up well. More free inclusive societies produce wealthy while less free extractive societies drain wealth. The US is going from an inclusive to an extractive society as time passes.

Anusocracy's picture

A free society means protection from the dipshits that cause gain for themselves and suffering for all others.

GMadScientist's picture

One wasn't raped beyond recognition by Shitibank? :p

GMadScientist's picture

Yeah, but that was mostly Andrew Jackson's reluctance to bathe regularly. ;) 

MrTouchdown's picture

3D Printing?

The more  I look into it, the more I like it. Maybe this will cushion the blow.

Dr. Sandi's picture

Print me a rare Porterhouse steak with garlic mashed potatoes on the side.

And I don't want it tasting like plastic this time!


Anusocracy's picture

Dark Ages occur because man occasionally breeds himself into a state of idiocracy.

Evolution is not a one-way street.

billsykes's picture

Can't devalue the dollar and expect everyone to produce more GDP. 

Buckaroo Banzai's picture

When the bankers vacuum the entire wealth of the world into a black hole, is it any wonder that innovation grinds to a halt? The most elementary rules of economics tell us that without a surplus to deploy to fund innovation, progress is not possible.

hooligan2009's picture

its not a black is hookers, (er?) drugs, superhealth, gates communities and kitchens that cos 400,000 bucks, plus yachts...all we have to do is figure out how best to serve them ...\sarc off

Simplifiedfrisbee's picture

A lack of innovation caused by banking elites who master mined a voracious money vacuum according to economic theory. If innovation is strictly a money driven fanaticism, then righteously it shall implode. Let it be he who believes a half way truth a slave of lies.

tango's picture

Actually, the rate of technical innovation is steadily increasing in almost every scientific field.  Many ZHers forget that tomorrow will not be like today just as today is not like yesterday.   For the longest, Chris Martense played down the revolutionary role technology is has/will have in our lives. Lately, he has been more accomodating of the vast changes that are to come and how they will lead to sustainability.

Dr. Sandi's picture

Sustainability of the rather comfy Merkin lifestyle is iffy. The planet's resources are finite but the human ability to breed is apparently almost limitless. When the two meet, it seems to end in squalor.

Simplifiedfrisbee's picture

Sustain whos ability? Tell me these scientific fields are funded by the scientists themselves and I will tell you the funded have been liberated.

Citxmech's picture

The issue is that the cost of innovation is an order of magnitude greater than the results.  We fast approach a time when the cost outweighs any benefits.

ft65's picture

Inovation grinds to a halt. Feller, take a look at what the world was like 100 years ago. We have no problem with inovation, it's just that greed stopped progress for the masses in the west. It's back from whence we came - surfdom!

TheSilverJournal's picture

It's going to be a bit  worse than the chart shows...the projections don't go into negative territory.

Of course, that is if the same developed markets now are still considered the developed markets in a few years. As the current developed markets implode, Asia will boom.

francis_sawyer's picture

& remind me... The battle of Waterloo was when?...


 [Not to mention ~ The Opium Wars & the Federal Reseve Charter]... When did that Habsburg dynasty end again?...


You see... Someday WAAAAAY in the future... The 'few' who actually have the priviledge to learn how to read, will understand this period [the period during that curve 'bubble'] as corellating as the EXACT TIME that joo bankers wormed their way into the Monarchial structure of, what was, the Habsburg dynasty that had prevailed in Europe for over a half milennium...

The monarchs themselves were at a point that they were blowing their wealth at an alarming rate... Paper money changed all that [which they basically gave the jews the franchise to control]... All of these bubbles match perfectly:

- The final courts of the Bourbon's in France

- The battle of Waterloo [after which, Rothschild had control of the Bank of England]

- The Opium Wars [which allowed England to steal silver from China]

- The chartering of the Federal Reserve Bank [1913] in America

- & the final nail in the coffin ~ the start of WWI [which was a template for all future paper debt fueled wars, effectively ended the Habsburg dynasty, & introduced 'communism' to Soviet Russia & later ~ the ROW (which is why your life sucks right now & there is ZERO hope for growth because everything has been replaced by central planning that only benefits those in power)]...


For all who just think francis_sawyer is a puerile idiot, I breathlessly await your version of the story... To help you on your way I'll start you off on an idiot comment above... To wit: "Oil Age" [which received a bunch of 'up' arrows ~ but which is only a bullshit 'knee jerk' synthesis]... To try and match "oil" to the timeline of the chart is ridiculous... oil had been around for as long as anyone can remember... It had easily been used as weaponry in ancient times... To take it a step further, the only possible "tie in" of oil to the timeline would be the correlation to the INDUSTRIAL REVOLUTION, which, is also a joke because the Industrial Revolution basically required iron & steel [both of which had been developed over 2,500 years prior]...

Therefore, the more appropriate catalyst was PAPER [aka: 'joobux']... Debt Money Systems... The 'WIMPY' strategy... The idea that you would gladly pay next Wednesday for a hamburger today... The Chinese actually invented paper money many millenia before, but the USURY aspect of it began to flourish in EXACTLY the same timeframe [in Europe] as is represented on the graph... Jews [who mostly operated the scam & still do], mezmerized the lazy inbred spawn of long standing monarchial dynasties throughout Europe [Habsburg Dynasty/Holy Roman Empire] as a way to perpetuate their crumbling dynasties [where the lazy spawn were blowing their REAL wealth held in physical things like gold, silver, jewels, & estates on frivolous things & lavish lifestyles in the aftermath of the Renaissance period, & otherwise silly territorial skirmishes or pie in the sky expiditions around the globe to find riches]... They promised a HAMBURGER TODAY for the promise to pay next Wednesday... "We'll handle all the nasty little things like your gold [for a fee], you don't need to be bothered with that nonsense ~ just go back to your party"...

Now it is time to collapse that system (as, undoubtedly, it is untenable)... In the process, they have managed to steal all the gold...

The fact is... The Jews themselves are no more nasty or vile than the previous monarchs (or their families)... But in the end ~ it's all the same story... After the French Revolution, you had people like 'Robespierre' [who was arguably more of a tyrant than the previous monarchs]... In the end ~ they all end up at the guillotine...

Michaelwiseguy's picture

I always look forward to your writings Francis. You are one of the few scholars of this subject. It doesn't matter what race in histories timeline has the stranglehold on you neck and wallet, the game remains the same. I find it easy to tell them to fuck off when they call us names. 

francis_sawyer's picture

Thanks for your comment...


I'm not as much as a 'jew hater' as people who read my comments would come to believe...

Instead ~ I hate 'lies', 'deception', 'usury', & 'tyranny'... So ~ whoever decides to fulfill those roles at any given moment in history will naturally be my enemy... Candidates may apply (or choose not to apply) on a case by case basis... Jews, by and large, have adopted the role on this particular spin around the merry-go-round & have even succeeded in taking it to outrageous proportions* by virtue of making it 'systemic'... [There are, of course, individual exceptions, but they are but mere & insignificant hemp thread frays on a very thick rope]...

* & I guess that's why they call it "fractional reserve"...


as always [above]... cowardly JUNKS which are 'unaccompanied' by a competing synthesis...

AgAu_man's picture

Francis:  Using Lateral Thinking, what came to mind when reading your post, was that this is the human equivalent of what is called Species Invasion in the Plant and Animal Kingdoms.

I would like to believe that, using this model, i.e. the "Human Invasive Species" can be discussed and analyzed clinically, objectively and fairly -- whether it's about (a) your British ancestors colonizing North America and large parts of the world, (b) the Jews leveraging the latter and doing the same, as you suggest, or (c) America's Manifest Destiny ambitions trying to dominate the world. 

But, given the nature of human nature, and the PC-dominated times and litigation-dominated culture we live in, I rather suspect that this is next to impossible in the case of the Jews.  Where the very mention of the word "Jew(s)" by non-Jews/Goyem evokes a 'Pavlovian' response into an Amber Alert level.  Even on ZH, it seems.  Makes honest and productive dialog difficult, if excessive emotional content is raised and maintained -- whether by accident or design.

Just to get the dialog going, I'd like to float the the almost rhetorical question: If a plant or animal/human species -- once introduced to an otherwise stable ecosystem -- manages to Survive & Thrive with such extreme success, then what does that say about (1) the Invader's success attributes, vs. (2) the same attributes of the the Indigenous species?  Do you actively seek to eradicate or limit  the Invader's presence and effects, or let it run its natural course until a new dynamic and natural balance is reached?  I'll wager that if you're the so-called 'successful Invader', you don't want anything impeding your success, and if you're the 'loosing Indigenous' species, you want to limit or eradicate the Invader -- if possible. 

In the case of my garden, once some Invaders start dominating (in this zero-sum game), as "God", I can use my "force-majeure" powers to keep that Veggie/Weed ratio at whatever level I choose.  Unlike humans, my (Indigeous) garden plants are incapable of adapting & overcoming, and the (Invader) plants can't do anything but be true to their nature either, as both are locked in their Prime Directive:  Surve & Thrive.

Food for thought.

francis_sawyer's picture

To my knowledge, the plant & animal kingdoms do not suffer from having to deal with 'rhetoric' (in the form of written text and/or the resulting propaganda all the way to the point that the recitation of history itself becomes skewed to the point where the fulfillment of 'karma itself' becomes postponed)...

I would argue that this is yet another area that the jews (who represent less than 1% of the human population), have achieved predatory success...

Gardening wise (in the present moment), I liken their influence to be similar to the "stink bug" infestation that has occurred in the Mid-Atlantic regions over the past few years... In some cases, the stink bugs have eradicated entire crops... In other cases, they're just a nusiance (& they are almost impossible to eradicate once they've gained admission)... In EITHER case, the plants have not adapted & in most cases, the stink bugs continue to proliferate because of the crop abundance... IOW ~ they gorge themselves on your hard earned 'wealth' [crop harvest], while being little more than an annoyance to you...

In any case... In the discourse regarding the need for a gardener to INTERVENE (on behalf a your crops) in an invasion scenario... That's purely subjective... I happen to do small scale farming myself... So I am keen to take measures to thwart invasions as I see them (but only to the degree that the WORK that I put into growing things is not totally destroyed)... I could leave the crops to "figure it out for themselves" [which they would undoubtedly do, over time], but that is unlikely to occur within the time frame I require for an annual harvest...

Setting all metaphors aside... If readers here could toss aside the 'Pavlovian' response to seeing the word 'JEW' on a printed page [which isn't a NATURAL response ~ it is simply some kind of response process that has been drilled into their minds]... If they could do that, & instead, just try to look at things objectively... They might come to similar conclusions as francis_sawyer has [based simply on probability matrices]...