"Profound decline"

In yesterday's post I posited that Western countries were going through a period of profound decline. It was assumed as the basis of the argument, but then challenged on Twitter for which I'm grateful.

This blog is more personal diary than public forum, so I thought it worth revisiting for myself why I make this assumption. I also tend to limit posts to 10-20 minutes, so by nature there are a lot of abstractions and generalizations.

And I do accept the possible bias that I'm just becoming a grumpy old man. But since that is career death for a VC, I hope to staunch that personal decline as long as possible.

For one, growth rates since about 1970 have been disappointing. You can really just google "Great Stagnation" (Tyler Cowen) and go down the rabbit hole. A lot of wealth created today is extractive, a "reallocation of rents to shareholders in a decelerating economy." A lot of wealth created even in the second half of the 20th century was broad economic growth. Our average large companies are 0lder than they used to be. More of our smaller companies fail. Our investment-to-GDP ratio is about half of what it used to be. The excitement about the internet hides a lot of this, but the gig economy has broadly been a failure. Maybe the creator economy won't be.

Explanations for the great stagnation abound. We've de-industrialized much of the West, sacrificing our middle classes to shareholder profits. Offshoring was a big neoliberal gamble and it turns out that we are having a hard time compensating for those jobs. On the flipside we have an economy dominated everywhere by regulatory capture: from copyrights and IP to land usage and construction, from professional licensing to generic pharmaceuticals, our economic is rigged to benefit incumbents and their rentier-owners.

As an aside, this level of analysis is shared by hard left and hard right: Piketty and Thiel. I believe this is also the basis for the success of Trump and blue realignment with the GOP.

The economic stagnation we are witnessing, however difficult, may be politically solvable. But it is compounded by one notable other factor: fertility. Because our birth rates are settling below replacement, we are living in dramatically aging societies. This is most visible in Europe, where the shortfall in workers is already becoming a crisis e.g. in Germany. Fewer kids also mean lower productivity, more stratified societies and more inequality - and less economic dynamism. There's a lot more to say about the consequences of "sexual liberation" but let's leave it here. Perhaps more concerning, kids make you hopeful and future-oriented, while broadly childless societies are more atomized and prone to pessimism and despair. At best, an aging society will be more prone to political stalemate and sclerosis.

And that sclerosis is visible in many governments in the West. The US has trouble just passing a budget. Government sprawl and the fair analysis of the "deep state" mean that pretty much any significant attempt at action or reform is hampered at every step. The democratic process, captured by moneyed interests and a polarized media, has devolved to theatrics. Nothing much big is getting done. The bureaucracy is largely managing itself. For a non-US example, look at the European Union.

So we have economic stagnation and political sclerosis. My final point then is culture. And what are seeing here, at least in mainstream culture, is the endless remix of Marvel and DC, of pop singers that are virtually indistinguishable from the decade or two before them, of yet another not-quite reinvention of a genre of sci-fi or fantasy. And the main theme is dystopian, ironic, decadent. This is true across literature and movies, music and poetry. Of course there are exceptions and this is very broad strokes. But it is noticeable. In fact the conversations we have within culture isn't really changing. We are rehashing the same debates of 60 years ago in some sort of continuous deadlock.

So what about tech and the greatest invention of the last 50 years, the internet? Well, I'm frankly well past my allotted 20 minutes and so I'll do a Part II that looks at tech and its role in our decline, hopefully tomorrow.