# Why we can’t grow our way out of this (Part 2 of 2)
Date: 2025-08-16
Previous Part: https://disrael.github.io/blogs/raw/why-we-can-t-grow-our-way-out-of-this.part1.md

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Second our economy is mostly geared towards mitigating problems — not solving them. For instance there is a lot of money to be made in defense or mitigating cancer, but very little money to be made in world peace or completely curing cancer. Sadly as much money as green tech would make there might be even more money to be made in allowing climate change to happen and mitigating its effects.

So in the 1940s period of the “Great Compression” that Krugman cites from a paper by Claudia Goldin (who is a wonderful economist and was the first woman to win the “Nobel” prize for economics solo in 2023 but that’s too little too late for that prize breaking from financialization crap and Goldin should have refused the award) and Robert Margo, the United States truly had transformative technology. Hitler was defeated with the biggest industrial boom in U.S. history. The country was furthest from fraud that can be imagined.

![US Years of Life Expectancy — stalled out and 4 or 5 years below France and Italy and 6 years below Japan](https://disrael.github.io/blogs/assets/why-we-can-t-grow-our-way-out-of-this-4359c0ca18.png)
*US Years of Life Expectancy — stalled out and 4 or 5 years below France and Italy and 6 years below Japan*

![Annual hours worked has actually been increasing for over a decade in the US](https://disrael.github.io/blogs/assets/why-we-can-t-grow-our-way-out-of-this-e01b197471.png)
*Annual hours worked has actually been increasing for over a decade in the US*

So the landscape for avoiding fraud in the 1980s was bleak. The post WWII manufacturing advantage was over, there was no real new transformative technology, and even fear of Communism, one of the main drivers for avoiding fraud and impoverishing poor people, had ended.

In that bleak landscape from where could economic progress come? There weren’t a lot of options but international trade, which Krugman writes about in a [December 1980 paper](https://www.aeaweb.org/aer/top20/70.5.950-959.pdf), was a possibility. International trade could and did break America free of its unimaginative and highly unionized industries. In so doing it also, as Krugman explains about suppressing unions in Understanding Inequality, helped change the power balance towards CEOs and bankers.

What Krugman doesn’t explain is that the “free” trade and “free” market bipartisan fraud decision is still being taken over and over. Its latest incarnation is unfettered AI which will again bolster the economy in a predatory fraudulent way.

AI is basically free trade except that it uses robots instead of cheap foreign labor. And AI is all set to again help change or keep the power balance towards CEOs and bankers.

And Google AI is happy to spout exactly the same propaganda that was used to push free trade:

> The assertion that AI’s primary purpose is to eliminate human labor is a perspective held by some, but it doesn’t encompass the full range of AI’s impacts and potential. While AI and automation can displace workers in certain roles, particularly those involving repetitive or routine tasks, AI is also seen as a tool for creating new opportunities, augmenting human capabilities, and boosting productivity across various industries.

Its not that AI can’t do exactly as Google AI claims. For instance, AI applied to long term biotech research could definitely create new opportunities. The same was true of increased trade between nations; it didn’t have to be purely about race to the bottom foreign environmentally unfriendly and near slave labor — it just was.

“Growth” as currently implemented is just digging the hole deeper instead of benefitting more than a small subset of American society. But [Krugman’s substack](https://paulkrugman.substack.com/p/how-should-we-think-about-the-economics) still presents the opposite opinion:

> Erik Brynjolfsson

> Exactly, because what happens is, at first you have to reskill your workforce, put a lot of time into training and people on their own have to figure things out. You build new business processes, even new products and services, new organizations. Like what we were talking about that Paul David found with the electricity. All of that is creating what I would call “an intangible asset,” but that’s another thing that’s not measured in our economy, a lot of these intangible assets. So you see a lot of effort but no measurable output. In other words, productivity goes down. More input, no output. Later, you start harvesting those gains. Now you’re like, “Okay, we’ve got these things set up. Our workers are re-skilled. We’ve got new business processes. We’ve invented some new products.” And now you’re harvesting that stuff. And now productivity is actually unusually high because again, you’re not counting the intangibles. So at first it’s down and then it’s up. So it’s a J-shaped curve.

Still stubbornly and fraudulently comparing technology like free trade (its shipping and supply chains are tech based), the internet, and AI to real transformations like electricity. Not really blaming the director of the Digital Economy Lab at the Stanford Institute for Human-Centered AI for pushing this propaganda but Krugman should know better than to ram this down people’s throats without counterpoint.

Nor was history ever backing up the expected J-shaped curve gains of unregulated technology. Unregulated full-rigged ships in the Age of Discovery led to colonization and the transatlantic slave trade. Unregulated coal and oil use led to climate change. Unregulated pharmaceuticals are so dangerous that hardly any society ever allowed them. Even electricity is highly regulated and failure to regulate energy companies gets you Enron.

However, there is a class of technologies like atomic weapons that clearly must be highly regulated from the beginning. If Artificial General Intelligence (AGI) is near term possible it’s obviously that class. If AGI is not near term possible then you need regulation to prevent predatory financialization IE fraud. Either way without regulation there cannot be any J-shaped productivity gains and best case trillions are being wasted.

But the argument for deregulated growth is always just wait for it — those benefits are coming.

> It’s only just now, 25–30 years later that we’re beginning to have digital commerce surpass traditional commerce in lots of areas, but you’re also seeing the cloud infrastructure.

Just how does Erik Brynjolfsson imagine fully monopolized digital commerce surpassing traditional commerce as a good thing? Even if it were a good thing, despite all signs to the contrary, how is Brynjolfsson measuring the opportunity costs of spending that money elsewhere? Without digital commerce would we have solved climate change or cancer? Could we be living 6 years longer like the Japanese?

Just as in the 1980s the 2025 landscape for avoiding fraud based growth is bleak and just as all bets back then were on “free” trade, all bets now are on “free” AI. Instead of free market lunatic Reagan, we now have just plain lunatic Trump.

The difference is that in 2025 America’s appetite for further inequality is low. We simply cannot any longer afford this style of “growth”.