We'll come back to that in a minute. Zombies are becoming harder to carry. Why? When an economy is growing, it can afford more zombies. That's why government spending as a percent of GDP rose from 3% to 40% during the 20th century; we had more money to spend.
But now growth has slowed. A few months ago, your Rogue Economist was almost alone in the world when he suggested that this slowdown may not be caused by the current financial crisis. It may not be temporary, he said. Instead, the days of high growth may be behind us.
Now we've got company. Professor Robert J. Gordon, writing in the Wall Street Journal:
Since then, there have been substantial refinements, but the basic components of modern life are the same as they were 50 years ago.
We drive automobiles. We live in houses with thermostats. We talk on the telephone. We watch TV and listen to the radio. We now have computers in our houses, but the internet does not seem to have made much difference to the material side of our lives. It is more like a 2-way television, a rich source of entertainment and useful communication device, but not much more.
Nothing much really new has come along in the last 30 years. We eat the same food. We wear the same clothes. We drive the same cars (though they are much more likely to have been made overseas). We even listen to the same rock and roll groups that were performing in the '60s.
So, where will the next breakthrough come from? Fracking...biotech...
Google's driverless cars? Not likely, says Gordon.
Even if we assume that innovation produces a cornucopia of wonders beyond my expectations, the economy still faces formidable headwinds. The retirement of the baby boomers and the continuing exodus of prime-age males from the labor force, sometimes called the "missing fifth," are reducing hours worked per member of the population. American educational attainment continues to slide ever-downward in the international league tables, due to cost inflation at our universities, $1 trillion in student loans, abysmal test scores and large numbers of high-school dropouts.
But the machines were all in place by 1950. And the growth spurt began to slow down in the '70s. Since then, growth rates have declined, by fits and starts, to where they are now.
Is there a new breakthrough on the horizon? Will we figure out how to use even more energy to produce even higher standards of living? Who knows? But very low rates of GDP growth are the rule, not the exception. For tens of thousands of years mankind probably advanced little if at all.
That's why the move to wind power is a move 'back to the future.' We've had windmills for hundreds of years. But if it made sense to use wind turbines to generate electricity, there would be no need to subsidize the wind power industry. It could produce the juice and make a profit at it.
On the other hand, if it can't produce electricity at a competitive price, it is like an auto company that can't make cars at a profit...or a bank that needs federal bailouts to stay in business.
Imagine a company that makes widgets. It 'invests' $100 worth of labor, materials and overhead in order to make $90 worth of widgets. The world is $10 poorer. Ten dollars worth of resources has been lost.
Now, you can imagine what would happen next. The company should go broke. But the local politicians might announce a plan to 'save jobs' by giving the outfit a subsidy. Then, the zombie business could go right along losing money...making people poorer...almost indefinitely.
Wind powered electricity has been making people poorer ever since it was invented by Charles Brush 125 years ago. It has never been able to compete with electricity generated from fossil fuels. Still, that hasn't stopped people from trying. Especially after Congress voted to give the industry subsidies in 1992.
When entrepreneurs have their own money on the line, they learn quickly. But when it is other peoples' money that keeps them going, ignorance is bliss. They are happy zombies, generating power - at a real loss - from the fickle winds...and making the world poorer as a result.
Phil Gramm, former US senator from the Lone Star state, tells us that it costs $52.48 worth of government subsidies for every million watt hours of electricity the windmills put out. This is much more than nuclear power, which gets only $3.10. Natural gas gets only 63 cents.
And if the subsidies to the wind zombies continue for another year, we'll be out another $12 billion.
Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.