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Conclusion
What should the present analysis lead to? Obviously this could lead to support for unsustainable consumption policies to continue to promote GDP growth and/or unsustainable population growth. If we assume the Historical Average Multiple of 2.1 times (Figure 6) will continue to apply in the future then, to achieve the world real GDP growth forecast by the OECD of 2.9%, the world’s population would need to grow by approximately 1.3% per annum (compared with current medium forecasts of 0.7%), resulting in a world population of 13.3 billion by 2060. This would be approximately double today’s population or an additional 3.7 billion more people by 2060 than what is the UN medium growth forecast for that year.
Figure 6: UN historical and forecast Low, Mid and High population ('000) scenarios and projected population growth using the Historical Average Multiple to reach OECD GDP forecasts (purple line)
Source: UN Population Division and OECD world real GDP growth forecasts
In contrast, this paper concludes that government and institutional policies focusing on consumption that leads to GDP growth and avoiding recessions is no longer appropriate. This is because historical links between world real GDP growth and world population growth show that developed countries are likely to enter and stay in recessions within the next decade.
If our governments or institutions are taking fiscal and monetary decisions to exit or avoid recessions that we know are going to become commonplace, we should rightly ask them to change their focus.
In this context, we suggest that alternative tools to measure economic wellbeing be developed, and we focus on making products more efficient and effective. This could shift the economic focus to reduce waste, particularly in food, water and energy. As an example, the UK government recently estimated that between 30% and 50% of all food grown worldwide may be lost or wasted before it even reaches the end consumer[41]. That is an astounding lack of efficiency.
The main objective of this paper is not to provide solutions but instead to focus on acknowledging the problem we have in regards to our current macroeconomic thinking. Once this happens, the next step is to identify solutions. We welcome any feedback and suggested solutions for our next paper.
[1] BBC, New York Times, Guardian, Oxford Dictionaries
[2] US Department of Commerce Economics & Statistics Administration (http://www.esa.doc.gov/about-economic-indicators)
[3] European Commission (http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/National_accounts_%E2%80%93_GDP)
[4] OECD Economic Outlook 2012 p.214
[5] http://www.colorado.edu/Economics/courses/econ2020/section7/section7.html.
[6] IMF World Economic Outlook October 2012 page 190
[7] BBC (http://www.bbc.co.uk/news/business-13200758)
[8] Mismeasuring Our Lives: Why GDP Doesn’t Add Up Joseph E. Stiglitz, Amartya Sen and Jean-Paul Fitoussi
[9] Simon Kuznets. "How To Judge Quality". The New Republic, October 20, 1962
[10] Note the OECD World statistics are taken using the sum of GDP for 34 OECD and 8 non-OECD countries.
[11] OECD Statistics (http://stats.oecd.org/Index.aspx?DatasetCode=SNA_TABLE1)
[12] United States Federal Reserve System Purposes & Functions
[13] CNN - US Economic Stimulus Act 2008 (http://edition.cnn.com/2008/POLITICS/02/13/bush.stimulus/)
[14] Australian Tax Office (http://www.ato.gov.au/corporate/content.aspx?doc=/content/00178930.htm&page=1)
[15] BBC (http://news.bbc.co.uk/2/hi/asia-pacific/8065525.stm)
[16] BBC (http://news.bbc.co.uk/2/hi/asia-pacific/8065525.stm)
[17] Forbes (http://www.forbes.com/2008/11/09/china-stimulus-economy-biz-cx_pm_1109notes.html)
[18] US Federal Reserve Chairman Ben Bernanke November 20th, 2012 (http://www.federalreserve.gov/newsevents/speech/bernanke20121120a.htm)
[19] IMF World Economic Outlook October 2012 page 28
[20] IMF World Economic Outlook October 2012 Exec Sum xix
[21] IMF World Economic Outlook October 2012 p.173
[22] The Economist January 19th 2013 page 6
[23] The Economist February 2nd 2013 page 11
[24] The Economist February 2nd 2013 page 11
[25] Bloomberg News (http://www.bloomberg.com/news/2013-03-14/eu-eases-budget-rigor-as-recession-bites-jobless-rate-climbs.html)
[26] BBC (http://www.bbc.co.uk/news/business-22079217)
[27] US Federal Reserve System – Purposes and Function p.18 (http://www.federalreserve.gov/pf/pdf/pf_2.pdf)
[28] OECD Economic Policy Papers No. 3 Nov 2012
[29] IMF World Economic Outlook October 2012
[30] US Federal Reserve System – Purposes and Functions p.18
[31] Beyond GDP (http://www.beyond-gdp.eu/key_quotes.html)
[32] In 2005 USD
[33] OECD Economic Policy Papers No. 3 Nov 2012 p.31
[34] Note the OECD World average forecast GDP is taken using the sum of GDP for 34 OECD and 8 non-OECD countries.
[35] IMF World Economic Outlook October 2012 Exec Sum xvii
[36] OECD Economic Policy Papers No. 3 Nov 2012 p.13
[37] OECD Economic Policy Papers No. 3 Nov 2012 p.9
[38] ibid
[39] Pew Research (http://www.pewsocialtrends.org/2011/10/12/in-a-down-economy-fewer-births/) / Time Magazine (http://business.time.com/2012/12/04/birth-rate-plunges-during-recession/)
[40] Time Magazine (http://business.time.com/2012/12/04/birth-rate-plunges-during-recession/)
[41] BSR – U.K Government Office of Science, “The Future of Food and Farming: Challenges and Choices for Global Sustainability,” January 2011
Posted by Huw Birrell at 11:51
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