This is a story of the status-quo, one where the current tends continue into the future. This story offers an interpretation of those trends that is distinctly pessimistic from the perspective of an individual’s well-being, happiness, and standard of living.
I’m writing this partly in the spirit of the book I’m reading now, The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War, which considers economic progress from a circumspect perspective of an individual’s material existence. It dolls out a great praise for our past growth, but offers few encouraging words for the future.
Another part of my motivation might be Halloween.
Global Inequality Becomes National Inequality
Capital flight plagues the high-income nations of the world, both from high net-worth individuals and corporations. International trade entanglements meant to keep capital flowing freely seriously impede government’s ability to enact legislation to stem the tide. Stock markets become increasingly global, bringing the fruits of corporate profits into a common, global, network through which they are distributed. As attempts to repatriate capital are experimentally found to do more harm than good, policy retreats away from such efforts.
A sort of international convergence happens in the wealth distribution. Today’s severely unequal wealth distribution of international inequality becomes tomorrow’s wealth distribution for individuals within a single nation. This is a fitting end-game of globalization. In the extreme version of this idea, all nations will have the same level of GDP per-capita. Within a single nation, however, income will vary as widely as national per-capita income has historically done.
There are a few alternatives and refinements of this view. There is no good reason to ignore the dividend that comes with better-developed institutions, making the constant per-capita GDP assumption wrong. As long as this holds, relatively poorer nations will have a different internal income distribution than the relatively richer nations. This is because exports industries will have distorting effects.
Health Care and Education Eat the Economy
Mandatory expenses grow at a rate so high that it severely injures the rest of the economy and the well-being of most citizens. People’s average purchasing power still increases, but median purchasing power continues to undergo modest declines. The median purchasing power post-education and post-health care costs decline precipitously.
Even among this trend, outcomes from heath care and education actually decline. Quality becomes increasingly scarce in these areas, which helps to drive up the prices as people become increasingly desperate to receive care, and to position themselves within the increasingly exclusive employment market. Many nations that used to have nationalized health care engage in partial privatization of health care, because the costs become impossible for the government to manage, and the privatization allows a greater stratification in services, which offers a mechanism better able to absorb the veracious growth of the sector.
The USA Indulges in Continuous Interventionism
Let me offer two scenarios for the future, with the note that they are completely mutually exclusive.
- US spending on military declines substantially from modern levels of 3% to 5% of GDP
- The US directly meddles in the affairs of other nations to an appalling degree
In a slight suspension of disbelief, I will assume that the first option becomes reality throughout the rest of the 21st century. This has tremendous consequences for the entire world. As an example, take the current state of Iraq for a vision of what the war machine can produce. Although the war was long-lasting, we were able to sustain it among shifting budgets and a 2nd war at the same time. That commitment did not go much longer than a decade, with US in complete withdrawal after that. The 21st century presents us with over 10 opportunities to engage in similar adventurism. Not only that, but a vastly larger number of minor skirmishes can be accomplished, like air strikes in regions undergoing transition.
Assuming this is continued for the rest of the century, we might as well assume that roughly half of the nations on Earth are exposed to direct US military action, while a smaller number have their political system directly replaced by the US. This reshapes a large amount of the global political system. It does provide greater stability… of a sort.
Climate Change Happens
I will take a moderate position here, and assume that temperature only rises 3.5 C by the end of the century. This is actually probably somewhat optimistic actually.
Considering that warming is not even distributed, we see incredible changes to the extreme latitudes, making them much more biologically active. Tropical regions become extremely unpleasant, and have much of their ecosystems disrupted. Economic growth in those same regions mitigates the worst case scenarios for human impacts, but imposes an additional cost. People there rise out of abject poverty to be confronted with a new form of working-poor life, with access to modern institutions like finance and education, but simultaneous cost increases still make a basic living a struggle.
I’ll leave it at this for now. As I get further along in the book, I hope to do some updates to this train of thought.