Warren Buffett’s surprising forecast for the American economy

The genius investor hits an optimistic note in a time of dire fiscal predictions.

Warren Buffett’s surprising forecast for the American economy


Despite the gloomy forecasts of some fiscal analysts in recent years, Warren Buffett predicts Americans will enjoy economic prosperity for generations to come.

In an editorial for Time, Buffett outlines an argument for why he believes annual GDP growth of 2 percent, the rough average of recent years, will “work wonders” for the American public over the long term. (Most recently, the New York Federal Reserve estimated in December 2017 that the U.S. GDP in the fourth quarter was about 3.98 percent.) The reason has to do with population growth relative to GDP. 


For example, 2 percent annual GDP growth should be alarming if population growth were to outpace it, say, at 3 percent. But given that the U.S. population will likely increase by about .8 percent annually, according to the birth and immigration rates in Buffett's projection, we can expect GDP per capita to increase by 1.2 percent annually. 

"In 25 years—a single generation—1.2% annual growth boosts our current $59,000 of GDP per capita to $79,000. This $20,000 increase guarantees a far better life for our children," Buffett wrote

Buffett, who was born in 1930, goes on to illustrate how virtually all modern Americans have access to luxuries—entertainment, medicine, education—that even the richest Americans didn't have a century ago. 


This massive increase in standard of living was the result of innovation and productivity, Buffett wrote. But it came at a cost.

"To all this good news there is, of course, an important offset: in our 241 years, the progress that I’ve described has disrupted and displaced almost all of our country’s labor force," Buffett wrote. "If that level of upheaval had been foreseen—which it clearly wasn’t—strong worker opposition would surely have formed and possibly doomed innovation. How, Americans would have asked, could all these unemployed farmers find work?"

Here, Buffett seems to be drawing an implicit connection to modern Americans' fear of losing jobs to automation.

Source: edweek.org 

Buffett goes on to suggest that disruption is what allows standards of living to improve drastically over time.

"We know today that the staggering productivity gains in farming were a blessing. They freed nearly 80% of the nation’s workforce to redeploy their efforts into new industries that have changed our way of life.

You can describe these developments as productivity gains or disruptions. Whatever the label, they explain why we now have our amazing $59,000 of GDP per capita."

Still, disruptions in industry and labor have left large swaths of the American workforce in relative stagnation, Buffett argues:

"The market system, however, has also left many people hopelessly behind, particularly as it has become ever more specialized. These devastating side effects can be ameliorated: a rich family takes care of all its children, not just those with talents valued by the marketplace.

In the years of growth that certainly lie ahead, I have no doubt that America can both deliver riches to many and a decent life to all. We must not settle for less."

 

A landslide is imminent and so is its tsunami

An open letter predicts that a massive wall of rock is about to plunge into Barry Arm Fjord in Alaska.

Image source: Christian Zimmerman/USGS/Big Think
Surprising Science
  • A remote area visited by tourists and cruises, and home to fishing villages, is about to be visited by a devastating tsunami.
  • A wall of rock exposed by a receding glacier is about crash into the waters below.
  • Glaciers hold such areas together — and when they're gone, bad stuff can be left behind.

The Barry Glacier gives its name to Alaska's Barry Arm Fjord, and a new open letter forecasts trouble ahead.

Thanks to global warming, the glacier has been retreating, so far removing two-thirds of its support for a steep mile-long slope, or scarp, containing perhaps 500 million cubic meters of material. (Think the Hoover Dam times several hundred.) The slope has been moving slowly since 1957, but scientists say it's become an avalanche waiting to happen, maybe within the next year, and likely within 20. When it does come crashing down into the fjord, it could set in motion a frightening tsunami overwhelming the fjord's normally peaceful waters .

"It could happen anytime, but the risk just goes way up as this glacier recedes," says hydrologist Anna Liljedahl of Woods Hole, one of the signatories to the letter.

The Barry Arm Fjord

Camping on the fjord's Black Sand Beach

Image source: Matt Zimmerman

The Barry Arm Fjord is a stretch of water between the Harriman Fjord and the Port Wills Fjord, located at the northwest corner of the well-known Prince William Sound. It's a beautiful area, home to a few hundred people supporting the local fishing industry, and it's also a popular destination for tourists — its Black Sand Beach is one of Alaska's most scenic — and cruise ships.

Not Alaska’s first watery rodeo, but likely the biggest

Image source: whrc.org

There have been at least two similar events in the state's recent history, though not on such a massive scale. On July 9, 1958, an earthquake nearby caused 40 million cubic yards of rock to suddenly slide 2,000 feet down into Lituya Bay, producing a tsunami whose peak waves reportedly reached 1,720 feet in height. By the time the wall of water reached the mouth of the bay, it was still 75 feet high. At Taan Fjord in 2015, a landslide caused a tsunami that crested at 600 feet. Both of these events thankfully occurred in sparsely populated areas, so few fatalities occurred.

The Barry Arm event will be larger than either of these by far.

"This is an enormous slope — the mass that could fail weighs over a billion tonnes," said geologist Dave Petley, speaking to Earther. "The internal structure of that rock mass, which will determine whether it collapses, is very complex. At the moment we don't know enough about it to be able to forecast its future behavior."

Outside of Alaska, on the west coast of Greenland, a landslide-produced tsunami towered 300 feet high, obliterating a fishing village in its path.

What the letter predicts for Barry Arm Fjord

Moving slowly at first...

Image source: whrc.org

"The effects would be especially severe near where the landslide enters the water at the head of Barry Arm. Additionally, areas of shallow water, or low-lying land near the shore, would be in danger even further from the source. A minor failure may not produce significant impacts beyond the inner parts of the fiord, while a complete failure could be destructive throughout Barry Arm, Harriman Fiord, and parts of Port Wells. Our initial results show complex impacts further from the landslide than Barry Arm, with over 30 foot waves in some distant bays, including Whittier."

The discovery of the impeding landslide began with an observation by the sister of geologist Hig Higman of Ground Truth, an organization in Seldovia, Alaska. Artist Valisa Higman was vacationing in the area and sent her brother some photos of worrying fractures she noticed in the slope, taken while she was on a boat cruising the fjord.

Higman confirmed his sister's hunch via available satellite imagery and, digging deeper, found that between 2009 and 2015 the slope had moved 600 feet downhill, leaving a prominent scar.

Ohio State's Chunli Dai unearthed a connection between the movement and the receding of the Barry Glacier. Comparison of the Barry Arm slope with other similar areas, combined with computer modeling of the possible resulting tsunamis, led to the publication of the group's letter.

While the full group of signatories from 14 organizations and institutions has only been working on the situation for a month, the implications were immediately clear. The signers include experts from Ohio State University, the University of Southern California, and the Anchorage and Fairbanks campuses of the University of Alaska.

Once informed of the open letter's contents, the Alaska's Department of Natural Resources immediately released a warning that "an increasingly likely landslide could generate a wave with devastating effects on fishermen and recreationalists."

How do you prepare for something like this?

Image source: whrc.org

The obvious question is what can be done to prepare for the landslide and tsunami? For one thing, there's more to understand about the upcoming event, and the researchers lay out their plan in the letter:

"To inform and refine hazard mitigation efforts, we would like to pursue several lines of investigation: Detect changes in the slope that might forewarn of a landslide, better understand what could trigger a landslide, and refine tsunami model projections. By mapping the landslide and nearby terrain, both above and below sea level, we can more accurately determine the basic physical dimensions of the landslide. This can be paired with GPS and seismic measurements made over time to see how the slope responds to changes in the glacier and to events like rainstorms and earthquakes. Field and satellite data can support near-real time hazard monitoring, while computer models of landslide and tsunami scenarios can help identify specific places that are most at risk."

In the letter, the authors reached out to those living in and visiting the area, asking, "What specific questions are most important to you?" and "What could be done to reduce the danger to people who want to visit or work in Barry Arm?" They also invited locals to let them know about any changes, including even small rock-falls and landslides.

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