Guru watch: The road to zero growth

Legendary investor and bubble expert Jeremy Grantham warns that global economic growth is in a long-term down trend.

Legendary investor and bubble expert Jeremy Grantham is in a gloomy mood. "We are on the road to zero growth," he warns in his latest letter for his fund management group, GMO. When we finally recover from the credit crunch, "most business people... expect a recovery back to America's century-old 3.4% a year growth trend". But they "should not hold their breath". American growth is in a long-term downtrend. Expect it to average 0.9% a year until around 2030, and 0.4% from 2030-2050. For the rest of the developed world, shave about 0.5% off these figures.

It's a question of population and productivity trends the two main elements of growth. They are both heading in the wrong direction. The working-age population in the US was growing at 1.5% a year in 2000; by 2025, the figure will be 0.2%. As countries become richer, workers work fewer hours. And the rise in the female participation in the labour force peaked in 2000.

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