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The key issue will be how much unnecessary pain we in?ict on ourselves by defending the status quo, mainly by denying the unpleasant parts of the puzzle and moving very slowly to address real problems.

Summary

The U.S. GDP growth rate1 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.

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.

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.

Growth in service productivity in contrast is low and declining.

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.

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.

For a few years fracking will add helpfully to growth: my guess is that the bene?t will peak at about 0.5% within ?ve years, but be modest over longer periods.

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.