"Secular Stagnation: The Importance Of Economic Growth"!

851 words - 3 pages

INTRODUCTION TO MACROECONOMICS
Tom Assouline 1442477 Christian Krelling Monday, November 24, 2014 !!
One thing falls, everything else falls apart "Secular stagnation: The importance of economic growth"!!
Economic growth is the increase in the market value of the goods and services produced
by an economy over time. It is measured as the percent rate of increase in real gross domestic
product, or real GDP. Of more importance is the growth of the ratio of GDP to population, which
is also called per capita income. GDP growth caused only by increases in inputs such as capital,
population or territory is called extensive growth. So when per capita income stays at relatively
high levels, the percentage of savings is likely to start exceeding the percentage of longer-term
investments in, for example, infrastructure and education, that are necessary to sustain future
economic growth and this is what we call a secular stagnation. Economic growth comes to a
stand-still. According to Shirish Pandit (Program Director, ESMT Customised Solutions),
"Secular stagnation is a condition of negligible or no economic growth in a market-based
economy".
An economic nightmare with an ugly name is how Clive Crook describes secular
stagnation in his article on the subject. He has all the reason to see it that way. Over the last
century humans have been very successful in the innovation sector. Some of the biggest
Invention have been created over the last century which is actually a very small amount of time
if we look at everything that has been done so far. Thanks to the invention of electricity, we went
from a fireplace to heat up our home to central heating, electric lightbulb everywhere,
refrigerator to keep us from grocery shopping everyday. Electricity liberated women and made it
possible for them to have time to work. Transportation depended entirely on the urban horse we
can now travel overseas at 80% of the speed of light thanks to airplanes. Americas demographic
were up high thanks to the birth of the baby boomers in the middle of the 19th century for
example. Infrastructure has made unbelievable changes during that time and the vertical city, like
!1MACROECONOMICS ESSAY

INTRODUCTION TO MACROECONOMICS
Robert Gordon would call it, was possible. Underground water and sewer pipe were created.
According to Robert Gordon, in the first half of the 20th century, the improvement of life
expectancy was three times faster than it was in the second half. What have we done since? will
we be able to match what was done during that time?
Chances are we wont because economic growth is now negative. The problem is secular
stagnation. Our population is not investing as much as they were in the last...

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