By Craig Wilson
This post The Low-Growth Trap appeared first on Daily Reckoning.
The Organization for Economic Cooperation and Development (OECD) published its latest report warning that the world economy, since the global financial crisis, is stuck. After nearly a decade since the beginning of the crisis the implications of a flatlined economy could have sweeping implications, regardless of individual economic positions.
Established in 1961, the OECD has been a marquee forum for measuring economic productivity throughout the world and offers data for global flows of trade and investment.
The OECD described its latest outlook, which screened the health of the 2017 economy, as “better, but not good enough.”
It wasn’t all gloom. The report did offer that it anticipated GDP growth in the year ahead. However, it forewarned that:
“While the pick-up is welcome, it would still leave global growth below past norms and below the pace needed to escape fully from the low-growth trap.”
The OECD authors note, “A comprehensive and collective policy response is needed to durably exit the global low-growth trap, manage risks and help ensure that the benefits of technological progress and globalisation are more broadly shared.”
That view on a long-term basis indicates that the ongoing response by global economies is only perpetuating a financial imbalance.
The Low Growth Trap and Inequality
Inequality continues to be a core theme both in the United States and around the world.
The message of division has resounded with populist narratives and connected with disenfranchised populations that view the real recovery as waning, or virtually non-existent.
The OECD Outlook for 2017 further enforced the low growth trap, highlighting, “Policy uncertainty remains high, trust in government has diminished, wage growth is still weak, inequality persists, and imbalances and vulnerabilities remain in financial markets.”
Economist and best-selling author of The Road to Ruin, Jim Rickards reports that the economy will continue to face growing risks with a surge in technological efficiency that replaces the need for manual-human labor.
Rickards’ reminds that we’ve experienced radical transformations before but that economic efficiency may lead to more drastic eliminations in both blue-collar jobs and highly skilled white-collar positions than ever before.
The economist warns that shifts are already being seen and notes that, “This has led to enormous income inequality as fewer and fewer experts reap all of the economic rewards of society, while most people suffer stagnant incomes, or worse.”
His analysis provides that not only are jobs being lost, but new positions are not being recreated. Even when positions are repurposed, the income gap for new positions are often very low paying an exacerbate economic conditions further.
The latest reporting by the National Bureau of Economic Research (NBER) reveals something much deeper for the divide in the low-growth economy.
Covering the dynamics in the economy even before the financial crisis the NBER found that:
“The average pretax income of the bottom 50 percent of US adults has stagnated since 1980, while the share of income of US adults in the bottom half of the distribution collapsed from 20 percent in 1980 to 12 percent …read more
Source:: Daily Reckoning feed
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