A reader has written to me that the Principle of Least Effort may very well be true — as being the kingpin of my theory (see yesterday’s posting) — but governments can easily take decisions to increase economic growth.
My reply is that decisions are not part of the physical system of the world economy. It’s what actually happens that counts. The world economy has certainly grown since the Second World War but, more recently, even China has found that its annual growth in exports has been declining. Economists call this a recession or a depression as though this is to be expected every now and again.
Real economic depressions only occurred in the agricultural era when local or regional droughts occurred. In industrial times, recessions occurred — such as the Great Depression in England from 1873 to 1896 — only when banks had been giving out too much credit and activity was stimulated prematurely for too long.
Much the same has happened world-wide in the last two years for the same reason. The Third World can’t be stimulated into economic growth unless its component countries can innovate new high-value products of their own based on basic scientific research. Otherwise, they can’t break into the dominant ring of high-value world trade in the last 50 years by a dozen or so advanced and developing countries.
World trade is so complicated that that no-one can possibly say whether the present recession will continue — or whether it might recede or grow. Newly upon us, it needs few more years yet before we will know.