Wednesday, January 17, 2007

Exponential Growth

Just read a great article by Dr. Albert Bartlett on Arithemetic, Population and Energy. The main take-away is one that I'd learned a long time ago, but definitely needed a refresher.

Dr. Bartlett shows that if you want to figure out how long something takes to double, divide 70 by the annual growth rate and you'll get the number of years until you're doubled. An example of this is to consider inflation. At an average of 3% annual inflation, it will only take 23.3 years for all prices to double. Another example that Dr. Bartlett uses is population growth. At a nominal growth rate of 1.3%, the earth's population will double to 12 billion people in 53.86 years. The natural conclusion is that we'll need double the infrastructure that we have now in order to support the population in 53.86 years.

I did a few calculations of my own. In 53.86 years, given an average inflation rate of 3%, everything will cost 4 times more than it does now. Will wages follow this trend?

Fortunately, according to the US Census bureau the population growth of the US is 1.1% and is expected to drop to .54% between 2040 and 2050 with a final population projection of 392 million by 2050. Taking into account economic globalization and the fact that the global growth rate is higher than the US growth rate, it's readily apparent to me that the US isn't going to remain at the top of the heap forever in terms of resource utilization. This is causing a shift that's been apparent for many years where we see the manufacturing jobs leaving to other countries where they are cheaper. The consequence is that there is a greater and greater emphasis on education in the United States.

Interestingly, this all leads me to predict that eventually all manufacturing will come back to the US and that we'll be a global manufacturing superpower. Why? Consider that as the US population growth declines and levels off, our emphasis leans more and more towards being educated and using our minds to create things. Over time, the US will take the lead in lean process automation to the degree that we can manufacture things far cheaper than even the cheapest labor because we'll be able to do it without labor. Other countries will follow suit of course, but as long as we have an intelligent and informed workforce, the lead we gain while other countries lap up our manufacturing jobs, will enable us to permanently stay one step ahead of the rest of the world.

1 comment:

Anonymous said...

Currently, Germany and Japan have exports>imports.
- they have better educated population, currently

You'll find these numbers interesting:

It seems -I'm no expert- all trends for education in the US are down - and spending on education is at all time high - I don't get this paradox.

(side note: How educated is our President.)

I suspect home life of the kids is a very big factor - and I think over half of the kids are being raised by single mothers - seems the kids are on their own - good luck.

Currently, US companies see employees as liabilities - NOT assets. Look at Generally Accepted Accounting principles - GAAP - and look at any balance sheet or income statement for any US business. US Global company execs. seem to always take the easy road - cut costs. (note exceptions in Germany and Japan - not the only ones, there are others) In US we even give tax breaks to HELP companies move mfg jobs overseas. I can't imagine Mfg jobs coming back here as long as we allow company execs. to do what ever they want. Consider the accounting situation of US corporations this last decade.

well, enough ranting. thanks for thoughtful writing.
Brandon Fouts