between economic theory and real-world economic conditions, and reminded readers that economics is still a social science, despite whatever loftier ambitions its practitioners may have. Nonetheless, when it comes to the specific question of what drives economic growth in the long term, one can still offer rigorous predictions by focusing on just two forces.
Now consider what has actually happened. Growth in the United States, the United Kingdom, Japan, China, and India has come close to what we predicted. But the same cannot be said for the eurozone, Brazil, and Russia, whose poor performance must reflect weak productivity, given that our predictions had already accounted for demographic trends.
It is also worth noting that the US and the UK registered growth close to the level we predicted despite their weak productivity gains, owing to the rapid increase in employment in both countries. But with the unemployment rate having reached near-historic lows, and with public policy turning against immigration, it will be mathematically impossible to achieve the same level of employment growth in the decade ahead. For overall growth to continue, productivity must improve.
Meanwhile, unless Brazil and Russia reduce their dependence on the commodity-price cycle, they will only ever experience strong growth during price spikes. With or without reform, Russia is already heading for another disappointing decade as a result of its demographics. Brazil, on the other hand, could register growth close to what we originally predicted if it could implement difficult social and health reforms. But that is a big “if.
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