We are not just at the point of changing financial cycles when growth replaces growth, but in a situation where the very model of the functioning of the economy
To summarize all of the above, let’s take a broad look at the components of the current economic paradigm and those phenomena that reflect its crisis state, and also hint at the features of the future that should come as a result of the global economy’s transition, perhaps already in 2020-2030 years
Incentives without growth
The growth rate of the world economy after the peak of the financial crisis of 2008 dropped significantly. This is particularly noticeable in the example of emerging markets, where growth has declined from approximately 7% in 2010 to 4% on average recently. GDP growth of the “main engine” of world economic growth — China — at the peak of the “BRICS boom” in mid-2007 reached almost 15%, now does not exceed 7%, and the government is required to take intensive enough measures to keep it in this area.
In the same period of time, Russia’s average GDP growth first halved against pre-crisis times, and then completely moved into a protracted recession phase. The economy of Brazil, another member of the BRICS club, demonstrates a little less difficulty, and only the economy of India seems to be still growing fairly intensively.
Global global economic growth has slowed from 5% in 2003-2007 to less than 3% at present. The US economy can not achieve growth rates of about 3%, considered typical for its healthy state: the Fed expects US GDP growth in 2016 at 1.8%. At the same time, which is especially surprising, taking into account the “HYIP” in the field of innovations, the growth rates of labor productivity are also declining in the USA, in China, and in other countries. From 1995 to 2005, the average growth rate of labor productivity in the United States was 2.2% per year, from 2005 to 2015, only 0.9%. The growth of labor productivity in China fell below 4% per year, although it remained steadily above 6% before the peak of the crisis and exceeded 10% in 2006.
How could this happen with the active stimulation of the world economy, as a result of which the world seems to have fallen into the liquidity trap with negative rates already in a number of economies? Obviously, we are not just at the point — how much a sufficiently serious period of time can be called a point — a change of financial and economic cycles, when a fall is replaced by growth as a result of excessive investment or investment in the wrong objects (or both), but in that situation when the very model of the functioning of the economy should change.
Something similar happened during the formation of the gold standard at the end of the nineteenth century, during its abolition during the Great Depression and with the appearance of the Bretton Woods system after World War II, then with the fall of Bretton Woods and the appearance of floating currencies in the early 1970s and finally, now in the course of the Great Recession and overcoming its consequences. By confluence — confluence? — the circumstances between these reference points in history took about 35 years or more. If you look a little closer, each of these events generated a number of related or following trends from it in the monetary and financial, technological, social and even areas of economic theory, as well as in the system of relations between society and business itself.
The change of large economic cycles today, in all likelihood, has been significantly slowed down by an unprecedented stimulating policy, primarily of the largest central banks of the world. The purpose of this stimulating policy is to support the traditional growth driver — credit — and to give the opportunity to more or less smoothly carry out the necessary deleveraging in those segments where it is needed.
Have you managed to achieve these goals by now? The answer to this question is different for different segments of the economy and for individual countries. Nevertheless, the general result is as follows: total in developed economies, the private sector debt by the end of 2014 compared with the pre-crisis year of 2007 decreased from 158% to 156% of GDP, in other words, almost did not change. But public debt increased from 69% to 104% of GDP. According to McKinsey, at the beginning of the century, cumulative debt in all countries of the world with accessible statistics was 246% of their total GDP, or $ 87 trillion, in the middle of 2014 — 286% of GDP, or $ 199 trillion of constant 2013 dollars. If the growth rate of non-state debt, other than corporate, after the crisis fell almost three times (corporate debt continued to grow due to record low cost of services), then the growth rate of public debt increased by about 40%, almost half.
The state took on a significant part of the debt burden of developed countries. At the same time, capital began to redeploy from a re-invested housing sector to other sectors: corporate, where large corporations, sitting on mountains of liquidity, engaged in M & A deals, in other words, on the stock market. At the same time, the share of household savings was increased: from barely 1% before the crisis to about 5% today. At the same time, their revenues were not restored quickly enough (out of almost 15 million jobs created in the USA after the crisis, 13 million accounted for less profitable vacancies in the services sector), and property stratification, which retards economic growth due to the suppression of final demand, only increased: the Gini USA index in 2007 was at the level of 0.38, now it has exceeded 0.4.
In addition, it would be strange to expect that consumers who have experienced crises