'Extreme Money' Author Das: Global Standards of Living Will Keep Shrinking

Friday, 15 Mar 2013 11:55 AM

By John Morgan

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Global standards of living are bound to diminish because traditional growth drivers — increasing population, affordable resources, new markets and innovation — are vanishing.

Satyajit Das, a former banker and author of “Extreme Money,” wrote in a MarketWatch commentary that the epochal shift would be marked by lower growth requiring a downward adjustment in expectations in much of the world.

While human population expands in poorer nations, in more affluent nations it is shrinking, with birth rates falling below replacement levels, he noted.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

Meanwhile, sustainable resources are being stretched to the breaking point.

“[I]t will be increasingly difficult to feed a world that is rapidly approaching 10 billion people. To do so, food production will need to increase by 60 percent to 100 percent by 2050,” Das noted

On the energy front, Das said the quality of the world’s oil resources is falling, requiring a shift to more difficult and expensive sources such as bio-fuel. He estimated the bio-fuel necessary to fill a 25-gallon auto tank “requires an amount of corn that could feed a single person for a year.”

And do not count on technological advances to come to the rescue either, according to Das’ analysis.

He cited a National Bureau of Economic Research paper that concluded the computer revolution is creating only short-lived productivity benefits.

Many new products and productivity measures reduce the number of workers needed. While the creators of these initiatives capture large benefits, employment and income levels are not significantly boosted, limiting the benefit to the wider economy.

However, Cass Sunstein, a professor at Harvard Law School and former administrator of the White House Office of Information and Regulatory Affairs, offered a more optimistic view, noting that relieving regulatory obstacles would be a means to boosting world economic growth.

For instance, Sunstein noted, Europe is the leading trading partner with the United States, with more than $600 billion annually in trade.

“An effort to align regulatory requirements could greatly increase that figure and thus boost gross domestic product on both sides. And if the rapidly growing Asian markets become more open to American producers, the long-term economic benefits would probably be extraordinary,” Sunstein wrote.

Zhu Min, deputy managing director of the International Monetary Fund, noted emerging nations have grown faster than advanced economies in recent years.

Min said developing nations now account for an increasing share of global economic input and are making a larger contribution to world trade growth, Indian news site ZeeBiz.com reported.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

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