Stages of economic growth

The growth curve that nations have tended to exhibit when following the pattern described in the last page seems to separate into three, or sometimes four, sections:  take-off, sustained growth, stagnation (where growth slows down considerably or even stops), and then either a progressive decline or a return to sustained growth.

Take-off requires removing the barriers to growth that shackle most undeveloped nations.  The prolonged growth period generally requires most of the ten conditions to be dealt with, or at least significantly improved.  But it’s not enough to just have these things at one point in time; you also have to work to maintain them over the long haul, and to keep working on the more stubborn impediments to growth, otherwise the system slows down and eventually begins to collapse.  Maintaining a high level of growth over a prolonged period (more than one generation) requires a lot of effort by the government and politicians and the populace as a whole, because you have to not only keep an eye on what’s breaking down but also be willing to change how you do things in order to deal with changing circumstances.  This inevitably generates resistance from those who have a vested interest in the status quo at any particular time, which is why it’s so difficult to keep things running smoothly.

The alternative, though, is (eventually) stagnation, decline, or catastrophic collapse.  Each problem that goes unaddressed drags at the economy, like driving with the parking brake on.  It takes more and more energy to maintain what was once an effortless cruising speed, and it takes longer and longer to speed up again after a slowdown.

This is the part of the curve that the American economy appears to be moving towards.  There is a real possibility – not a certainty, given the historical record of American resilience, but still a significant danger – that the US economy is going to become permanently stalled at a very low rate of growth, or even start to decline over the long term, if we don’t get serious about addressing some (and preferably all) of our issues.

 

Next page:  The economy in the Interlock

Previous page:  Fundamentals of economic growth

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