About The Author
D. R. Prescott has written a novel, a collection of short stories, a nonfiction book, a collection of essays, planetarium show/display scripts, two family histories, technical articles and business plans as well as written for and edited several newsletters.
Awards and published work include Writers' Journal, Long Story Short, Taj Mahal Review literary journal, The Orange County Register, Writer's Digest, and Writing.com and four books among other challenges.
As a former aerospace executive and planetarium program director, Prescott currently writes and explores life in Orange, California.
"Sentience can be annoying."-DRP Abt. 1990
Since 2008, Prescott has been a regular contributor of
essays and short stories to
The Taj Mahal Review Literary Journal
Alpha Centauri and Beyond Radio Interview of Prescott
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O R D E R T O D A Y !
GDP? I have questions.
By D. R. Prescott
The economy is a mystery to many of us laypeople who are trying to make it out of one day into the next. We are happy to let the economic experts and politicians deal with it. The economic landslide of 2008 caught many unaware with painful results. We hear that the economy is improving which got me looking at some numbers that are readily available from the U. S. Government. Wading through the numbers, out pops a term, Gross Domestic Product (GDP.) I have questions!
Back in the dim past about 50 years ago, some high school economics that I had managed not to discard over the years tickled my memory. Those memories coupled by a sense of unease about how my children and grandchildren will fair in the future led me to think about Gross Domestic Product and what it means to them. Okay, I admit, I should get a life but stick with me and see if you come away with similar anxieties that I have.
First, let’s define GDP. It is the sum of private consumption plus gross investment plus government consumption plus exports minus imports or, in equation form:
GDP = PC + GI + GC + E – I
PC = Private Consumption
GI = Gross Investment
GC = Government Consumption
E = Exports
I = Imports
So far, there is nothing too scary mathematically, just simple addition and subtraction once you know the numbers. You can readily get the numbers from the government which I did. Figure 1 shows how GDP has grown over time. Each dot on the chart represents the total real GDP for a year. What is “real” GDP? That is simply the actual GDP numbers adjusted for inflation so that you can compare them to other things that are hard numbers not affected my monetary inflation.
Looking back to 1930, we can readily see that GDP has increased steadily over the last eighty years. There have been flat or down years too but the overall trend has been upward at an increasing rate with some recession wobbles along the way. The Great Depression and World War II are major blips in the early years of the data. One can rationalize what fueled the trend line bending upward in GDP ranging from the military-industrial complex rise in the 50’s, the space program of the 60’s, computing and communication technology culminating in the dot.com flurry in the 90’s and the banking schemes that led to the near collapse of the system by 2008. Current government forecasts suggest that the economy is going to recover and continue seeing an inexorable rise in GDP. That brings a lot of questions to mind; the biggest is what will be the spark to keep the productivity engine running? Can GDP keep increasing for the foreseeable future? Those are worrisome questions.
What caused GDP to increase decade after decade? I will suggest that people are the answer, more precisely, the number of people alive at any given moment. Take a look at Figure 2. Since 1950, we have gone from 149 million people living, working and playing in the United States to over 300 million in 2008, a twofold increase in just 58 years while GDP has increased over six times during the same period. The relationship of GDP to people is affected by more than just people; it has been influenced by technology, productivity and workplace improvements, among other things.
Time to look a little deeper... How close does population relate to GDP? There is over a 99% correlation. (That is what the R2 = 0.9977 means.) Figure 3 illustrates this relationship with U.S. Real GDP (vertical axis) versus U.S. Population (horizontal axis.)
I guess there is nothing very startling about that when you look at the GDP equation. The more people consume (government or private), the greater the amount produced to satisfy that demand. Hence, likely greater gross investment in things and more exports to other countries which brings up the question, how does the rest of the world relate to our GDP? As Figure 4 illustrates, there is a very close relationship between the number of people on the planet and our economy too. We don’t live in a vacuum isolated from the rest of the world.
All of this makes sense to me. To have consumption, you have to have people consuming and producing goods and services as well as people investing in growing operations. However, there seems to be more to it.
Here’s the situation as I see it from a pure layman’s point of view. To keep GDP increasing for the foreseeable future, people must produce more so that more people consume more and more investors invest more into the system. By 2050, the U.S. Census Bureau projects that world population will increase from today’s 6.7 billion people to over 9.3 billion people and that is at dramatically lower growth rates than we have experienced during the last 100 years. So, in the next 40 years, what will keep GDP increasing? There is no physical reason that GDP should always be increasing. Obviously, the answer is more people but there must be things like what drove GDP up during the last 60 years.
Upon reflection, there are several disturbing issues here:
1. The things that made GDP grow during the last 70 years include: starting with
WWII, the Cold War, the Space Race to the Moon, rise of computer and
communication technologies in the 70’s and 80’s, the dot.com revolution of the
90’s, the financing bubble that burst in 2008 and then, seemingly inevitable wars
including Korea, Viet Nam, The Gulf War, Afghanistan and Iraq.
Questions: Where are the technologies akin to our past history that will push GDP
upward? Are wars necessary to keep the world’s economies working
or is there another way? Have most of the new industries developed
from new technologies reach maturity phase with less growth
2. How many people that the Earth can hold is a huge issue. That is called “carrying
capacity” and there have been many estimates that boil down to a range
of low and high estimates made by experts. These expert, best estimates range
from a low median of 2.1 billion to high median of 4.95 billion people that the
Earth can sustain. The range is due to how pessimistic or optimistic
the assumptions were about technology and other factors used in the expert
estimates. Hang on a minute, in Figure 4, world population is over 6.7 billion
in 2008 and projected to reach nearly twice the high median carrying capacity
Question: Did somebody forget to push the panic button?
3. Heretofore frozen Arctic water ways are becoming an increasingly big issue.
As the ice melts, countries who border the Arctic region are already
squabbling, until now diplomatically, about resource rights and dominion
over what used to be a barren wasteland. Conversely, agricultural areas,
where the world’s foods are harvested, are being plummeted by drought,
increasingly intense storms and infestations brought about by the changing
climate as species of plant, animal and insects compete for resources.
Question: Will climate change help or hinder GDP?
4. Energy is a prime mover in the economy as well as a necessity for civilization
to survive. Oil has been the heavy lifter providing well over 80% of our needs
for energy. There is much talk about the need to produce cleaner energy to
minimize our dependence on oil (particularly from foreign sources) and
mitigate greenhouse gas production. From 1995 to 2004, less than 1%
of energy was from alternative fuels like wind, solar power or others.
Hydroelectric and nuclear picked up the difference. Oil is still king.
Remember, the population is projected to increase nearly 40% by 2050.
That means 40% more energy will likely be needed, exacerbating the problem
of reducing our reliance on oil and perhaps increasing the quantity
produced today even though the proportion of carbon-based energy might
decrease if alternatives can be brought on board fast enough. Energy used per
person in the United States has been increasing over time too. Further, in ten
years, from 1995-2004, energy of all types consumed per person went up 22%.
Left unabated, there will likely be increasing demand for energy because more
people are using more energy.
Questions: Will we be able to convert enough energy production to clean
sources to actually reduce the proportion of oil produced energy
significantly? Or, will oil remain the major energy source for
decades to come buoying up GDP?
5. On Earth, solar energy is available every day. Solar energy is available 24/7 off
the Earth. Energy is not as big of a problem as sustainable living space. Most experts
agree that there is a definite limit to how many people the Earth can sustain
interminably. Most concede that we may have already exceeded Earth’s
capacity. If the human race is to continue to grow and prosper, another
solution is needed. Besides our planet, a number of people might say that
we might have to colonize the Moon or Mars. There are a number of problems
with that solution including living in one third or less gravity (see my previous
blog: Gravity Is Important) and the fact that as fast as the human population
is expected to grow in the next 40 years and beyond, there just isn’t enough
livable space on Mars or the Moon in any practical sense in the next four
Questions: Have we already lived through "the best of times" using what we
wanted at will? Will our descendants say that their ancestors doomed
them to misery or even extinction? Or, will they say of us that
“thoughtful people did thoughtful things to ensure that humanity
survives?” (See my nonfiction book, IS THERE TIME?)
6. Reflected in world GDP numbers are results of a 400-year renaissance where
science and technology have made it possible for the first time to positively or
negatively affect the Earth. As awareness grows, it is now a matter of some
choice. We are also at a point where we are exploring frontiers that offer
endless opportunities as well as challenges. Also, for the first time, a life form
is capable of purposefully traveling to other planets and expanding into space
which may be a desirable answer to our overpopulation problems.
Questions: Can we afford to squander what we have gained because of
inaction or deliberate political inertia? Will we look back on the space
program and realize that we should have been more aggressive
in establishing ourselves as a space faring species?
While those are annoying questions, there are other big questions too.
Big Question: Can humanity continue increasing our numbers with abandon just to keep GDP increasing?
Answer: Not unless we do something very differently, very quickly.
Big Question: Is humanity’s ride reaching an apex and getting ready to tumble into the abyss?
Answer: We can only hope not and press hard for positive solutions.
Big Question: Is there time to pull back from the precipice?
Answer: I hope so.
GDP? I still have questions, more questions!
© Copyright 2010 D. R. Prescott (donprescott at Writing.Com).
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