Bloomberg: There’s No Such Thing as an Economic Miracle

The story of the tortoise and the hare has inherent moral lessons for kids. Perhaps what is less talked about is its application to corporate growth and macro-economics.

Denmark, described as “gloriously boring” in its economic growth (averaging some 1.9% annually), is one of the wealthiest and best governed countries today. And it got there without going into hyperdrive. Oh, and it’s also one of the happiest countrie

In the pursuit of growth, we are often enamoured by stories of heroic bets, mega-investments and lofty ambitions matched only by a line-up of glittering personalities. The small, the mundane and the boring hold no premium in our estimation. Yet if you believe Robert Gordon – an economist at Northwestern University and the author of a book called The Rise and Fall of American Growth – global economic stagnation is just about on our doorstep and isn’t going away for a while. He highlights 4 headwinds that contribute to this pessimistic view of things:

1. Inequality – Over the last 35 years, a high fraction of our economic progress has been siphoned in to the incomes of the top one percent of the income distribution. There’s plenty of innovation. But the fact is that not everybody is sharing in the fruits of that innovation
2. A slowing in the pace of improvement of educational attainment – something particularly true for American young men who are not able, through their education, to contribute to highly productive occupations which was a substantial source of economic growth throughout most of the 20th century
3. Demographics – very simply the aging population. The retirement of the Baby Boom generation means that millions and millions of people are making a transition from working and creating income to not working and being dependent on welfare
4. Fiscal – social welfare becomes increasingly burdened and eventually runs out of money. That can be fixed only by raising taxes or cutting benefits to those in the over 65 age group. And that raising of taxes or cutting of benefits will reduce further what we call the disposable income, the income that people actually have to use for consuming what they want

Makes sense doesn’t it? So, in light of the fact that we are not going to see any improvement in global economic growth, in this short article, Tyler Cowen made me reflect on the benefits of a “slow and steady” strategy in the pursuit of growth in an age of stagnation. Yes, close to the tortoise. Slow and steady isn’t bad, and as long as organisations avoid the following, there is a fairly low chance of losing the race in the long run, no matter how slow progress goes:

1. Avoid major catastrophes for long periods of time – bad policies, poorly judged investments, mismanagement, ignoring realities are a few of the usual suspects leading up this path. We spend as much time avoiding missteps as we do trying to peer over the hill of tomorrow
2. One major catastrophe leaves you with many other multiple challenges – in his example of Latin America,  stagnation “left much of the region with weaker infrastructure, poor educational systems and a more dysfunctional politics. All of this made rapid catch-up harder in the 20th century.”

To read the entire article, go to http://bv.ms/2aN9w7S