The air passing over an airplanes wings and general body form are what create the lift to get it off the ground. In theory with a strong enough wind, the airplane does not need to be going anywhere to get its lift. Point into the wind and up it will: like a kite on a hill.
Historically most economies were not in complete stasis. If they were agricultural societies, and land had become plentiful, population would begin to rise until it overshoot its mark and began (sometimes slowly) a phase of population decline. This rising and receding wave of history we have discussed in terms of Jack Goldstone’s work, and Peter Turchin's work. David Hackett Fischer has a (slightly dated in the context of our modern cycle) a good primer on the subject.
However, with the start of the agricultural and industrial revolutions - maybe you could call them the revolution in fossil fuels - this slow oscillating pattern came to an end, or at least was mostly buried, by a spluttering surges of discovery and technical progress.
Within this new economic pattern, if you are not growing, you are collapsing. Like the shark moving through water to keep oxygenated water passing over its gills: if you stop, you suffocate. There is of course the bump and grind, stop and start of trying to match your current production to an unknown future need. This causes some up and downs within the normal (~4-1/2 year) inventory cycle. There are increasing heights to these ups and downs so that you you also have longer 9 year and 18 year multiples of the cycle. But many of these oscillations, even on their most downward trend are not very far below the negative trend. Our current GNP has been declining, but it is not as if it declined the 10% that matches even our fudged unemployment rates. In theory we are not even in a decline at the moment.
My current speculation is that to have an expansionary industrial revolutionary economy, you must set up a certain portion of your economy toward a permanent expansion. Obvious examples would be construction, and real estate activities. Longer term, and probably less effected, be R&D spending and product engineering.
When an economy goes on the skids beyond a certain portion, the “permanent expansion” forces collapse well beyond the actual level of collapse, as future expansion plans are put on hold.
If you presume then there is a merit to this point, what is “that growth point” at which our economy loses its lift and comes to earth hard?
Gavyn Davies, Financial Times, 15 June 2011 hat tip NC
The paper they are siting is:The recent slowdown in the US economy raises the question of whether the growth of output may have dropped below the so-called “stall speed”. This is the growth rate at which a healthy expansion can no longer be maintained, after which the economic engine misfires and the US heads back towards recession.One stylized “fact” about the US economy is that a rise of about 0.5 percentage points in the unemployment rate represents a sort of tipping point. This is often sufficient to trigger a downward spiral, so even such a small rise in the jobless total may not reverse itself, but instead eventually causes a much bigger rise, of at least 2 percentage points in the unemployment rate.The Fed study suggests that the stall speed for US output growth might be around 2 per cent...
Forecasting Recessions Using Stall Speeds (pdf)
Jeremy J. Nalewalk, Federal Reserve Board, 10 May 2011
It offers an interesting point of prognostication in its abstract:
This paper presents evidence that the economic stall speed concept has some empirical content, and can be moderately useful in forecasting recessions. Specifically, output tends to transition to a slow-growth phase at the end of expansions before falling into a recession, and the paper designs Markov-switching models that behave in that way. While the switching models using output growth alone produce a considerable number of false positive recession signals, adding the slope of the yield curve, the percent change in housing starts, and the change in the unemployment rate to the model reduces false positives and improves recession forecasting. The switching model is particularly good at forecasting at long horizons, outperforming Blue Chip consensus forecasts.