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Author: arrete Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 745961  
Subject: The Great Reversal Date: 10/8/2012 8:43 AM
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>> What we are witnessing in Europe -- and what may loom for the United States -- is the exhaustion of the modern social order. Since the early 1800s, industrial societies rested on a marriage of economic growth and political stability. Economic progress improved people's lives and anchored their loyalty to the state. Wars, depressions, revolutions and class conflicts interrupted the cycle. But over time, prosperity fostered stable democracies in the United States, Europe and parts of Asia. The present economic crisis might reverse this virtuous process. Slower economic expansion would feed political instability, and vice versa. This would be a historic and ominous break from the past.

It's this specter that hovers over the U.S. election and the entire developed world, though it need not come true. Modern economies -- especially the American -- possess great recuperative powers.
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Technological innovation, though faltering, will continue, Gordon writes. Think more driverless cars and new cancer drugs. But he argues that the effects on average American living standards will be muted. Less-skilled workers from lackluster schools will cut productivity and wage growth further. Greater inequality will steer some gains to the wealthy. Higher taxes to cover budget deficits and transfers to the elderly will squeeze take-home pay. Health insurance costs (which he does not mention) would do the same. Though not preordained, Gordon's prophecies suggest a long era of stunted economic growth.

Economic progress -- progress that people can feel and that feeds hope and optimism -- favors political stability. If progress shrinks or vanishes, stability may suffer. People lose faith and feel betrayed.
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What's happening in America is different in degree, but not in kind, from what's occurring in Europe. Stalled economic growth there is straining the political system's ability to meet all expectations. People take to the streets; extremist parties expand. To avoid Europe's fate, we should reduce people's claims on the system and strive for faster economic growth. That's the lesson. If we ignore it, history may slip into reverse. <<
http://www.washingtonpost.com/opinions/robert-j-samuelson-th...


I've been thinking something like this lately. The future of the US economy and many others is like a python that swallowed a moose. As the moose (baby boom, followed by a low birth rate) slowly moves down the digestive track, there will probably be some major tummy issues going on. The move from a high to a low birth rate is a one-time shock to the economic system, and it will take a while to sort out. It may that techonology, especially in the US, will ease the shock. But techology doesn't pay taxes (well, business taxes, but not also personal).

arrete
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