April 19, 2013
Is Economic Implosion Inevitable?
The last three centuries have been a period of unprecedented economic growth. The world's GDP doubled in the 18th century, increased six times in the 19th and then shot up 40 times in the 20th. Understandably, the public now considers growth to be the natural state of economy, while periods of recession are viewed as temporary aberrations. Unfortunately, the recent recession is qualitatively different. Consider the basic economic equation: Size of economy (GDP) = Individual productivity x Working age population x Employment rate The economic expansion in recent centuries was due to two factors: a) exponential population growth that followed advances in public sanitation and medical science; b) technological revolutions in industry and agriculture which have drastically increased individual productivity. Occasionally, one-time events, such as a burst of speculative bubble or rising commodity prices, could produce a sudden drop in the employment rate and plunge economy into recession....(Read Full Article)