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In the January 15, 2017 Opinion section of the New York Times, Ruchir Sharma, identified as “chief global strategist at Morgan Stanley Investment Management,” wrote an article entitled “Why Trump Can’t Make it 1981 Again.”

population and productivity

Does Capitalism Equals Unsustainable Growth?—Ken Wolf

Sharma’s article questions whether Trump can grow the economy as much as he promised, even though it had grown by at a rate of 3.5 percent during the years when Ronald Reagan was president. Trump has promised growth rates as high as 6 percent.

The reason for Sharma question was what he called the “well-known and undisputed but widely ignored population and productivity formula” used to predict economic growth. This formula states that “the potential growth rate of an economy is roughly determined—and limited—by the sum of two factors: population and productivity.” To grow a capitalist economy we must both add more workers and increase the output per worker. To do this we need a steady growth in population.

During the 1980s population and productivity were each growing at a rate of about 1.7 percent, yielding a growth rate for the economy of about 3.5 percent. “In recent years,” Sharma noted, “America’s population and productivity growth have fallen to around .75 percent each, generously measured, so potential growth is roughly 1.5 percent, less than half the rate of the Reagan era.”

Since the President can affect only the rate of productivity in a reasonably minor way, the American economy is not likely to grow by 3.5 percent or more during the coming years.

Just as Reagan was not primarily responsible for the population growth of the 1980s, Obama is not responsible for fewer babies during his term of office. And Donald Trump will not be able to do much to change the birth rate during his term. And since the President can affect only the rate of productivity in a reasonably minor way, the American economy is not likely to grow by 3.5 percent or more during the coming years.

Sharma is unequivocal: “In the last 1000 years, no economy has ever broken free of the limits imposed by population growth.” He points out that before the great age of capitalism in the late 19th century, economic growth was less than half a percent, and that it was only after World War II and the baby boom that it began to grow toward 4 percent.

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That boom is now a thing of the past and, given the crowded condition of the planet, it seems unlikely that Capitalism can do much to increase the growth rate.

And that is the fatal weakness in our capitalist system. It has always relied on growth to keep it strong—growth in the amount of resources, the number of people to both produce and consume, and growth in industrial and finance capital. Without growth capitalism will die, but with the sort of growth Mr. Trump hopes for, the planet (or at least our species) may die. That is, of course, if our penchant for violence doesn’t get us first.

What a dilemma! Way back in 1976 a letter writer said in the Long Beach Independent that “Economists need to be reminded regularly that the idea of growth for its own sake is precisely the philosophy of the cancer cell.”


Maybe President Trump and his advisors should think about that bit of political and medical wisdom, both when planning their economic stimulus and when they consider withdrawing the United States from the Paris Climate Agreement established in late 2015.

Ken Wolf