Does a growing economy mean the economy is becoming less efficient?
It's a kook movie made by folks who combine conspiracy quackery with repackaged socialism. If you're into socialist theory, read Marx or some other intellectual socialist. That said, growth and efficiency are not the same thing. If I'm running a lemonade stand, I can grow by hiring more people at $X/hr or increase efficiency by purchasing an electric juicer and hiring fewer people. Growth and efficiency can occur independently of each other.  For instance, if an economy consists of one inefficient business and then a second more efficient business opens to compete agains the first the overall efficiency increases while the economy grows. New industries tend to be inefficient at the beginning (since initiation is more important than optimisation) and then become more efficient over time.  Agriculture is an amazingly efficient business if you consider how many people now produce the amount of food we consume in comparison to only 100 years ago. Plus, efficiency is not only about producing extra widgets.  You could produce the same number of widgets for lower cost.  Outsourcing to China (taking advantage of their lower cost of production) increases the efficiency of the US economy, but also increases the efficiency of the Chinese economy (since extra work is created producing more things).  Lower costs in the US lead to increased investment in other production.  Increased production in China leads to the rising wages there. Growth can be achieved in both places for very different reasons. So, no, growth doesn't have to come about through less efficiency. A growing economy should become more efficient because of increased opportunity for division of labor: specialization. External regulation or monetary policy external to the free market can cause parts of the economy to grow in response to said regulations.  This creates inefficiencies that are wrung out of the economy after the policies reverse.  A couple of examples: Tinkering with the economy causes the inefficiencies.
I don't understand your question. What the article is talking about is a bit more than circulating money indiscriminately. It is saying that by circulating more of it to rich and less to the poor will result in less growth overall, which I think we can all agree is a bad thing. "The U.S. economy has grown at just under 3% a year after inflation over the past 50 years. (Some of this occurred to ""private"" companies that are not listed on the stock market, or before they were listed.) The stock market returns averaged 7.14% a year, ""gross,"" but when you subtract the 4.67% inflation, the ""net"" number is 2.47% a year. That gain corresponds closely to the ""just under 3% a year"" GDP growth during that time." that was not the argument posited, and it would be superfluous if it were. it does nothing to challenge hanauers argument, as hanauer acknowledges this tenet which further informs his broader view that this phenomenon results in the absence of economic growth. The President, Democrat or Republican, has very little effect on the growth or performance of an economy. The Federal Reserve has the largest impact, followed by Congress. Interestingly, if US government spending was not frozen in 2010, the US would have grown closer to the historical average of 3%. Government spending, which is controlled by Congress, brought down GDP growth. OMG. A recession is coming.  Wait...hasn't that been a true statement since forever? No shit a recession is coming. That's like saying a thunderstorm is coming. This is a natural part of economics. Recessions are a necessary part of growth, almost like growing pains. Now the real question is 'when will the recession happen.' However nobody truly knows that, so it's better to spend your efforts making sure you're prepared for when a recession occurs as opposed to worrying about when that will happen. we have massive numbers of people out of work and our infrastructure is crumbling.  We put people to work just like we did in the 30's; our infrastructure gets fixed and so does our economy.  I totally agree that for an economy to grow we have to make more stuff.  We're not making the stuff now because people cannot afford to purchase it.  If given funds, people would purchase stuff, and stuff would get made.  This got us out of them great depression and has kept Scandinavia strong, and even got Iceland out of it's terrible brush with Libertarianism.  Brazil is becoming a first world powerhouse by this sort of redistribution.  Redistributing money down the ladder has the benefit of working.    Austerity leads to Greece.  And Spain. And Portugal. And Ireland.  But not Germany, because they deficit-spent their way out of their recession. "Wealth is not distributed equally in any economy.  And, even if it were, differentiation between people would lead to different interests being expressed in different ways. As people either attempt to earn more (to improve their situation) or different people express those interests in different ways (saving money to go on a skiing holiday, or to put a downpayment on a house) people invite new products and services to be created to satisfy those demands. In addition, there is the problem of uncertainty.  People save money today to cope with uncertainty tomorrow (healthcare, pensions, education, etc.). Those savings don't remain idle, but are lent to others who believe that they can make a return through investing in new businesses or ideas. The point being that any dynamic economy will experience change in the amount of goods available to the people within that economy. From an economic perspective ""growth"" is just another permutation.  From a political perspective, ""growth"" implies that people are getting wealthier.  If that growth is asymmetrically distributed (e.g. the poor don't experience it and the middle classes don't feel they get enough of it) then that is a problem for politicians. The emerging markets of the world are trying to raise millions of people out of poverty.  Growth is a way of measuring how quickly they are achieving that end. Growth, in and of itself, is meaningless.  There are some people who believe that ""we"" (as some proxy of society) have enough stuff and growth is unnecessary but that implies that everyone is satisfied.  For as long as some people wish to have more wealth/stuff, and have the means to achieve this, there will be growth. And for as long as there is uncertainty growth will vary." "I'm not defending Faber, but from an statistical point your logic is terrible.  It's a lot easier to go from 2 to 4 than it is from 200 to 400 - so any undeveloped third-world country should be growing a **lot** faster than places with existing stable economies.  And to put ""fastest growing"" into context, it's 8.5%, which isn't even as big as I was expecting considering the US is growing at 3% and has a much larger base value." No, it doesn't.  That would be true if somehow incomes were conserved, but they aren't.  What's much more likely is that income growth becomes muted in the first world with the vast majority of income growth happening in developing economies.  So, it doesn't require losing income, but it will mean constrained income growth in developed countries. "The answer to your question depends on what you mean when you say ""growth"".  If you mean a literal increase in the aggregate market capitalization of companies, across the entire market, then, no, this sort of growth is not possible without concomitant economic growth.  The reason why is that the market capitalization of each company is proportional to its gross revenue, and the sum of all revenue from selling ""final goods"" (i.e., things purchased and used by consumers) is, apart from a few technicalities, the definition of GDP.  The exact multiplier might fluctuate up or down depending on investors' expectations about how sales will grow or decline going forward, but in a zero-growth economy this multiplier should be stable over the long run.  It might, however, still fluctuate over the short term, but more about that in a minute.   Note that all of this applies to aggregate growth across all firms.  Individual firms can still grow, of course, but as they must do this by gaining market share from other companies such growth would be balanced by a decline for some other firm.  Also, I've assumed zero net exports (that's one of the ""technicalities"" I mentioned above) because obviously you could have export-driven growth even if the domestic economy were stationary. However, often when people talk about ""growth"" in the market, what they really mean is ""return"".  That is, how much does your investment earn for you.  This isn't really the same thing as growth, but people often think of it that way, particularly in the saving phase of their investing career, when they are reinvesting their returns, and therefore their account balances are growing.  It is possible to have a positive return, averaged across the market, even in a stationary economy.  The reason why is that there are really only two things a firm can do with its net profits.  One possibility is that it could invest it in growing the business.  However, there is not much point in doing that in a stationary economy because by assumption no increase in aggregate consumption (and therefore, in the long run, aggregate production) are possible.  Therefore, firms are left with only the second option, which is to pay them out to investors as dividends.  Those dividends provide a return that is independent of economic growth. Would the stock market still be a good investment in such an economy?  Yes.  Well, sort of.  The rate of return from firms' dividend payouts will depend on investors' demand (in aggregate) for returns on their investments.  Stock prices will rise or fall, causing returns to respectively fall or rise, to find that level.  If your personal desire for returns is lower than the average across the investing public, then the stock market would look like a good investment.  If your desired return is higher than the average, then it will look like a poor investment.  The marginal investor will, of course be indifferent.  The practical upshot of this is that the people who invest in the stock market in this scenario will be precisely the ones for whom the stock market is a good investment, given their personal propensity to save and desire for returns, and so forth. Finally, you mentioned that in your scenario the GDP stagnation is due to declining population.  I am less certain what this means for investment, but my first thought is that you would have a large retired population selling its investments to fund late-life consumption, and you would have a comparatively small (relative to history) working population buying those assets.  This would lead to low asset prices, and therefore high rates of return.  However, that's assuming that retirees need to sell assets to fund their retirement consumption.  If the absolute returns on retirees' assets are large enough to fund their retirement consumption then you would wind up with relatively few sellers, resulting in high prices and therefore relatively low rates of return.  It's not obvious to me which effect would dominate, and so it's hard to say whether or not the resulting returns would look attractive to the working-age population." Today’s up and coming tech companies are taking value from the existing companies so I believe there can be a net loss.  Also, efficiency gains are going to a smaller portion of the population, and if they don’t increase their spending to make up for the decrease in the spending of those who are falling behind, then that might cause a decrease in economic activity.    Of course, there are a lot more up and coming people in the word too, so they could very well outnumber those in the US/Western Europe regions. Some innovations increase productivity quite a bit. So in the long run, innovations is a main driver or economical growth. And innovation is fueled by, indeed, debt.  The straight curve in the video, the economical growth, should not be a straight line, but a upwardly curved one. It cannot go down because innovations in productivity are not lost (I challenge you for an example contradicting this.  Normally, every upward cycle should create an extra increase in productivity. The government also plays a role in stimulating innovation.  I loved this video btw. You do know that since the shale gas boom started the cost of energy declined significantly, don't you? Your theory is a bit simplistic and had more than a few holes.   GDP growth is not that contingent on energy prices. How do you factor in increasing fuel efficiency in your theory? While there could be other factors, the chart at the top made me not want to read the article... it's a gain of less than 0.1% in a year in a growing economy.    Keep this up and they'll be screwed by 2040. "Check out Irwin Schiff's ""How an Economy Grows and Why it Doesn't"".  It explains how economy's work using a comic format, explaining investment, savings, banking, gov't, taxation,etc, although you may need to be at least 10 to understand some of the concepts. :)"