Life in the Rear-view Mirror

Declining GDP Will Become the Norm

With only a few minor exceptions, global GDP has increased steadily throughout my lifetime. However, I believe that's about to change. In the not too distant future, I foresee a world with declining GDP.

History teaches us that nothing lasts forever, and that we (North Americans) could be at the end of an era. We are depleting our natural resources at ever increasing rates, and unless we take corrective action now, sooner or later we will face a crisis. We don't know when that will occur. It could be within the next decade, but most probably within the next half century. Of course if we reduce current consumption rates, it could be much farther out.

As consumption drives GDP, when we start consuming less its growth rate will decrease and eventually turn negative, and could stay that way for a long time, until a new equilibrium is established, or some new, unforeseen discovery is made that will change the way people live. For example, Agriculture changed the way people lived more than ten thousand years ago; the Iron Age changed the way people lived more than three thousand years ago; and the industrial revolution changed the way people lived more than two hundred years ago. So, it's likely that a new age will begin that will change people's lives again.

What will it be like to live in a world with declining GDP?

I would imagine it would be like living in a permanent recession, where each year there will be less money to spend. However, it depends on how we get there. One possibility is that we take the voluntary path of slowly curtailing consumption, so we don't have to work as much, which might allow us to retain a more modest middleclass lifestyle.

The other possibility is that we continue to overconsume, and eventually hit the brick wall of resource limits, when the price of everything goes up. Then things would be a lot worse, and the middle class could disappear, leaving only the rich and the poor, as has been the case for most of recorded history, and not unlike what exists in the less developed countries of the world.

Cheap energy and sophisticated weaponry have allowed the industrialized world to live a life of privilege, by exploiting natural resources and the defenceless poor of the non-industrialized world. Of course, this is nothing new. Until about two centuries ago, when the U.S. came of age, the New World was exploited by the European powers. The weapons of the indigenous people were no match for the steel swords and guns of the Europeans. So, they were enslaved and their masters became rich beyond imagination.

There is no need for finger pointing: we are all guilty of the same offence. We don't think much about it, but when we do, it's clear that the lavish lifestyles we have enjoyed, as members of the privileged industrialized world, was not just a result of our hard work, but also of our collective use of the big stick.

We're all too busy keeping up our middleclass lifestyle to see how tilted the playing field has become. Who has time to ask, why are we so well off when others are so destitute? Clearly, the problem is their corrupt governments! However, seldom do we ask, why are they so corrupt, and who corrupted them? If we did, we would see that it all comes back to us: the ones with the big economic sticks and guns.

The case for consuming less so we can work less.

Before the industrial revolution, people toiled from dawn to dusk to eek out a decent living. Industrialization changed that. It made us very productive and so the working day was gradually reduced to eight hours, where it's been stuck for at least the last sixty years.

During my lifetime, productivity continued to increase without a corresponding decrease in working hours. Employers drew a line in the sand and a forty-hour workweek became sacrosanct. More was expected, but less was not an option. Overtime was encouraged, even though companies paid a premium for it, and was very common throughout my working life. It effectively increased the workday, which is what businesses wanted.

Why are we stuck at forty hours per week when we have chronically high unemployment, particularly among the young, who need work the most?

If ten percent of the population, who are able and willing to work, are unemployed, it represents a huge waste of human resources and an equally large economic loss for the country. Common sense suggests that it shouldn't be so, but it is! Reducing the workweek, or hours worked per day, would provide employment for all who want it. It's as simple as one plus one equals two: any child can understand it.

So why don't we have full employment?

Business moguls don't want full employment because they want to maintain wages as low as possible. They don't care about the loss to the economy and the individual; they care only about maximizing profits. To them, the higher the unemployment rate, the better because they can pick and choose the best people from a bigger pool. If unemployment was zero, they would have to train people coming straight out of school, and that would add to their cost. Therefore, unemployment rates are deliberately high because they favour employers.

Officially, we are told that zero unemployment causes inflation, and consequently, it needs to be avoided like the plague. However, in countries with low unemployment inflation rates are not any higher then in North America. Norway, Germany, and Japan are good examples. They have relatively low unemployment and no inflation. In fact they're more concerned about deflation.

If working hours had continued to decrease in locked step with increased productivity, we all might have been better off because we would have consumed less. As it happened, the increase in productivity, rather than giving us more leisure time, gave us more money to spend. And that's the reason why the powers that be don't want to shorten the workweek! Doing so would reduce consumption, which, in turn, would reduce government revenue and corporate profits.

Mother Earth wants us to spend less, but governments and corporations want us to spend more. Corporations are greedy and governments are myopic. The more I think about it, the more convinced I become that working fewer hours, for less money, is part of the solution for a sustainable future. It's the same principle for people who want to lose weight. If we want to eat less we have to buy less because once the food is in the house, it will get eaten. Generally, economic studies have shown that North Americans are not savers: the more they earn; the more they spend. The exception is the very wealthy: they hoard! Therefore, for most of us, working less and spending less is the better alternative.