Musings on a flat world

It all started when I saw this graph, a plot of the FTSE 100 over the last 30 years. 

FTSE over the last 30 years (from Yahoo Finance)

FTSE over the last 30 years (from Yahoo Finance)

The odd thing about this to me is that at about the year 2000 it peaked. Yes, prices have gone up and down over the years, yes, it has been a rocky decade in many ways but fundamentally for over 10 years the FTSE 100 has been flat. And this is not an outlier, you can see the same pattern in the Dow Jones and many other measures economic success.  Things have been flat in Western Economies for about the last 10 years. Now I'm not an economist and I know this is not the whole picture because other measures such as GDP per capita have still been rising, but to me this is very striking. Measures that we had previously assumed would rise consistently just are not and I do not believe that this will change at any point in the near future. 

So what is happening? If I had to stick my neck out I'd say that 10 years ago we started to hit the point where the world simply did not have enough resources. Economic growth previously was limited by human endevour and how much we could achieve. Given a year, we could only make so much progress as companies and populations. Maybe a bit more in one year, maybe a bit less, but over time we had fairly constant growth. 

But things are different now, human endevour is no longer the limit, the resources we need as human beings to survive and develop are the limit. We have reached the point where the limits of the earth are the limits on our growth as a species. Oil prices have been steadily increasing over the last 10 years after being fairly constant (baring the sudden spike in the 1970's). Food prices in the UK were at their lowest in the early 2000's and have been on a steady increase since then. 

And it is not just the economic measures that are being hit. Just today looking at the front page of the BBC website their were two articles on how things have peaked in the last few years and which are no decreasing, US educational achievement and car use in the UK.

The world has changed over the last 10 years in many ways, but the biggest change has not yet been spotted in the mainstream. Some of our fundamental assumptions about the way economies work, how our pensions will be paid for, and how we should invest money are now completely different. And there is no going back, the worlds population and the rapidly growing middle class in developing countries mean that resources are now a fundamental constraint on our futures. The good times are over and the sooner it is recognised, the sooner we can deal with the problems that our new future will pose. 


As a post script to this I thought it might be worth noting that right now, my assumption is that I will not retire. I have two pieces of logic for this. Firstly the rising costs and decreasing growth per capita in the world mean that pensions are going to get much smaller than they are at the minute. Secondly, I work in a white collar office based job. Okay, so my brain and body will degrade with age, but fundamentally I will be able to continue doing some aspects of my job until well after my retirement. But for blue collar workers, it's just not the same. They will not be able to continue hard, physical work until well into old age. They will have to get a pension and it is the white collar workers who will have to support this.