The slow growth era: deal with it!

Interesting piece by Neil Irwin in the NYT a week or so ago, examining the pattern of slow global growth that the world seems to have entered more than a decade ago, and now can't seem to get out of.  As Irwin suggests, nobody has all the answers here;  if they did, it might be possible to fix it.  However, it seems to me that there are a number of worthwhile observations that can be made, only some of which Irwin talks about.

•  An aging population.  It's surely no coincidence that the developed economies with the most intractable low-growth problems are those with the slowest population growth, and hence the most rapidly aging population.  Globally, that means Japan; within Europe, Italy. It's chronically difficult to stimulate an economy full of senior citizens, who are way past the spend-and-accumulate part of their life cycle. Thanks to immigration, both the US and Canada (and to some extent the UK) have somewhat faster population growth than the rest of the developed world, so it's no surprise that they are generally better able to sustain at least moderate growth.

•  Inequality. Sustained economic growth ultimately depends on rising demand, and that in turn depends mainly on consumption, which accounts for over 60 percent of GDP in most developed economies (and 70 percent in the US).  As China is discovering, you can't sustain investment-led growth indefinitely, Rich people have a lower propensity to consume than poorer people, so as income inequality grows, consumption tends to stagnate, and eventually so does GDP as a whole. There's a limit to how much economic activity can be generated by building bigger and bigger yachts for the Larry Ellisons and Roman Abramoviches of the world. 

• Measurement problems. For all the angst over slow growth that Irwin describes, there's no real sense of outright economic decline in the developed world. No visitor to Tokyo, Milan, London or New York is likely to see evidence of rapidly rising poverty. Traditional forms of employment (resources, manufacturing) seem to have given way to a highly service-oriented economic base in a relatively seamless way. This may suggest that the notoriously hard-to-measure services sector is being somehow underestimated in compiling GDP estimates.

• History. It's worth considering that the rapid growth seen globally from the late 1940s to the start of the current millennium may be an anomaly.  In general, economic growth in the long term must inevitably be dictated to a large degree by the growth in the labour force,   Periodic positive shocks can provide boosts to productivity from time to time -- the Industrial Revolution, the spread of electrical power, the information revolution -- but such shocks lose their potency in relatively short order. If we are now in an era of slowing global population growth, and if the major impacts of the information revolution are now behind us, then slow growth might be what we have to live with for the foreseeable future. 

These factors are of course inter-related, particularly in today's globalized economy.  Conventional economic policy measures seem unlikely to offer a way out -- and as the limited impact of ultra-easy monetary policy shows, unconventional steps also seem to have limited value.  Boosting consumption is probably the best way to break the logjam, but that would require raising taxes on the wealthy in order to reduce inequality, and there's little evidence that mainstream politicians are ready to do that.  Economic stagnation gives rise to all sorts of problems (arguably including both Brexit and Donald Trump), but the political will to address the issue seems to be woefully lacking.