John Mauldin writes a weekly newsletter that I read regularly. He believes in traditional (read “frozen”) capitalism. He recently wrote: “
We’re optimists by nature. The natural order of the world is growth. Trees tend to grow, and economies do, too. “ What he failed to mention is that “natural growth” is followed by maturation and death, but let me try to explain the way I see that traditional view of growth.
Basically, growth is based on population explosion or on a fast-growing segment of the planetary population that can consume. Up to this new millennium, there were about one-quarter of the world population that was producing “stuff” for the rest to consume. Today, it's about half the world that is producing. So while our producing tool has been booming, the client base is shrinking in percentage. This means that even with an exponential population growth that will soon reach the 10 billion mark, we will not only cause irreparable damage to the planet, but we'll still run out of people to sell “stuff” to.
The quantitative growth model that has begun by fueling the industrial revolution, is not only dangerous and threatening us like a house of card, but it's well passed its prime. It's now time for us to find a qualitative growth model that should allow humanity to keep making a living without having to bloat and kill the planet.
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2 comments:
Adam Smith, here I come! I respectfully disagree with this view. First, the population, despite what it seems, is not on an exponential curve and is already edging down, which would tend to support your views about consumption. But then, another natural order takes over: when too much goods are on the market, the prices go down, production is cut, companies go out of business, further reducing the means of demand. Ideally, there should then be a shift to produce foodstuff, which in turn become cheaper.
The problem is that synchronization is not immediate (man is not perfect - only women are)and the transition can be painful.
Adam Smith was (and is) right, he was talking about tangible goods and services. The bankers messed up the process by "inventing" intangibles and off-off balance sheet products that they themselves did not understand.
Keep well and stay away from municipal bonds.
Bill
Well, there must be room with disagreement, and to your credit, I agree with what you wrote about banks and the Munis!
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