Wednesday, June 1, 2011


There is a limit to which we can grow. Our bodies grow for a certain time period and our minds grow for a certain time period - both at varying rates. Companies do not grow endlessly. Only 5 of the current 30 Dow Jones Index companies existed in one form or another prior to 1950.
However, it has been assumed that countries will grow endlessly. Refer 'Terminal Growth'.

Japan is a fantastic example of a Country which has been 'de-growing'. Demographics and saturation play crucial roles towards the real growth of any region/ country. The concept of a country growing endlessly was addressed by me earlier, but now I want to question the growth of developed economies.
If immigration into industrialized countries is reducing and if these industrialized countries are quite saturated in terms of their infrastructure and demand for goods, can we expect them to grow as they did 20 years ago?
An acquaintance-ish friend from France explained to me that France has enough electricity and transportation systems whereas India and Indians still suffer from an energy deficit. Adding to this, if income disparities are increasing in developed countries where the relatively poor people have stopped demanding goods with the same tenacity as earlier, surely their country's growth will suffer.
The story about how global growth will be propelled by developing economies' needs to become more prosperous is known so I will not get into that.

However, the possibility that developed countries' growth will suffer isn't bad at all. The GDP of a country reducing is not concomitant with the prosperity of its peoples reducing. Steps taken by responsible fiduciaries would allow disparities to reduce.

The point behind this post was just to question the need for positive GDP growth. Another takeaway from this is, if currently owed debt is believed to be sustainable based on a fallacious GDP growth trajectory, where are those countries heading?

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