Sunday, December 04, 2005
DOES 1 1/2% GROWTH MATTER
Since devolution the Scottish economy has grown by 1% annually while the UK averages 2 1/2%. So what does 1 1/2%, equivalent to under 4 day's pay matter?
Firstly growth is a continuing process. Each year's failure adds to the last. Secondly it is a compound function.To double a value you only have to apply a steady rate growth totaling approxiamately 72% (this is known as the rule of 72. Thus to double Scotland's GNP at 1% will take 72 years, the UK at 2 1/2% takes 29 years. However China, at 10% takes 7 years & Ireland at 7%, 10 years. This means that by the time it takes Scotland to double Ireland's GNP will have doubled & doubled & doubled & doubled & doubled & doubled & doubled again. Except that long before that happens the last person in Scotland under 50 will have moved out.
It need not be this way. We know how to achieve growth because we have the Irish example. We need lower business taxes & less regulation, particularly in the housebuilding sector. That is virtually all Ireland has done.
Ultimately the driver of growth is technological innovation. Scotland has a very good history of this but 95% of innovation is adopting technology from other nations. I am going to be sufficiently politically incorrect here as to mention modern nuclear power stations, GM medicines & GM foods as industries we are allowing to pass us by to satisfy an anti-technology lobby which makes it quite clear they will never be satisfied. In the end the technology we develop has done & will do more to help humanity than all the decisions at G8.
For centuries Britain maintained an average growth rate of 2% which was unprecedented in the 1790s & mediocre by the 1970s. Since then the picture of world growth has been more complicated - some Asian countries have continuous growth rates of up to 10% as have some post-Soviet states, while some western countries, particularly those who have adopted so-called Green policies, have fallen back. Singapore, however managed a very successful greening programme in an overcrowded country without opposing technology or losing growth. World growth now seems to be about 5% & we can expect it to at least maintain that level. Moore's Law is the observed fact that for decades computer capacity per pound has doubled every 18 months & should continue for the foreseable future. As computers power an ever growing part of the economy we can expect high growth to continue to be possible.
There are those who say that growth cannot continue because we face environmental & resource collapse. No. High-tech is, virtually by definition, more resource efficient. There is a delightful line in Back to the Future II where Marty suggests landing their (flying) car on the villain's vehicle. Doc Brown says "That is a 1950s saloon & this is a state of the art DeLorean - they'de go through us like tissue paper". Other modern products tend to be similarly lightweight.
Anyway we are not going to run out of resources. With the exception of oil minerals rarely get destroyed they only get moved around. The definition of an ore is anything from which the mineral can be cost effectively extracted. This is a moving target since, as technology improves, extraction get easier & there are now some waste dumps being mined. Oil is a special case because what we want is usually not the hydrocarbon but the energy stored therein. Conventional oil production has been regularly forecast to peak since 1855 & while someday it will prove right there are estimated to be 14,000 billion barrels (500 years supply) of shale oil, more expensive but not impossible to process. Beyond that Professor Bernard Cohen has calculated that there is enough uranium dissolved in seawater to keep our current economy running for 4.5 billion years.
"See what free men can do" said Burt Rhutan when launching Spaceship One. There are no limits to growth, within this universe & to what will be achieved. We should be a full part of it.
(originally written for publication but not taken)
Firstly growth is a continuing process. Each year's failure adds to the last. Secondly it is a compound function.To double a value you only have to apply a steady rate growth totaling approxiamately 72% (this is known as the rule of 72. Thus to double Scotland's GNP at 1% will take 72 years, the UK at 2 1/2% takes 29 years. However China, at 10% takes 7 years & Ireland at 7%, 10 years. This means that by the time it takes Scotland to double Ireland's GNP will have doubled & doubled & doubled & doubled & doubled & doubled & doubled again. Except that long before that happens the last person in Scotland under 50 will have moved out.
It need not be this way. We know how to achieve growth because we have the Irish example. We need lower business taxes & less regulation, particularly in the housebuilding sector. That is virtually all Ireland has done.
Ultimately the driver of growth is technological innovation. Scotland has a very good history of this but 95% of innovation is adopting technology from other nations. I am going to be sufficiently politically incorrect here as to mention modern nuclear power stations, GM medicines & GM foods as industries we are allowing to pass us by to satisfy an anti-technology lobby which makes it quite clear they will never be satisfied. In the end the technology we develop has done & will do more to help humanity than all the decisions at G8.
For centuries Britain maintained an average growth rate of 2% which was unprecedented in the 1790s & mediocre by the 1970s. Since then the picture of world growth has been more complicated - some Asian countries have continuous growth rates of up to 10% as have some post-Soviet states, while some western countries, particularly those who have adopted so-called Green policies, have fallen back. Singapore, however managed a very successful greening programme in an overcrowded country without opposing technology or losing growth. World growth now seems to be about 5% & we can expect it to at least maintain that level. Moore's Law is the observed fact that for decades computer capacity per pound has doubled every 18 months & should continue for the foreseable future. As computers power an ever growing part of the economy we can expect high growth to continue to be possible.
There are those who say that growth cannot continue because we face environmental & resource collapse. No. High-tech is, virtually by definition, more resource efficient. There is a delightful line in Back to the Future II where Marty suggests landing their (flying) car on the villain's vehicle. Doc Brown says "That is a 1950s saloon & this is a state of the art DeLorean - they'de go through us like tissue paper". Other modern products tend to be similarly lightweight.
Anyway we are not going to run out of resources. With the exception of oil minerals rarely get destroyed they only get moved around. The definition of an ore is anything from which the mineral can be cost effectively extracted. This is a moving target since, as technology improves, extraction get easier & there are now some waste dumps being mined. Oil is a special case because what we want is usually not the hydrocarbon but the energy stored therein. Conventional oil production has been regularly forecast to peak since 1855 & while someday it will prove right there are estimated to be 14,000 billion barrels (500 years supply) of shale oil, more expensive but not impossible to process. Beyond that Professor Bernard Cohen has calculated that there is enough uranium dissolved in seawater to keep our current economy running for 4.5 billion years.
"See what free men can do" said Burt Rhutan when launching Spaceship One. There are no limits to growth, within this universe & to what will be achieved. We should be a full part of it.
(originally written for publication but not taken)
