World-System (1960-2100) Venezuela Growth Forecast

Venezuela is in the news right now for a number of reasons, mainly that the Trump Administration appears to be preparing an invasion. For the future, the VE20 model produces a rather wide range of overall growth forecasts (98% Bootstrap Prediction Interval on VE1) from exponential growth to collapse. 

The VE20 BAU Model is stable and will reach Steady State Economy sometime after 2100. For exponential growth or collapse to occur, the model would have to be destabilized, which might happen as a result of invasions or other external interference. An argument can be made that the approach Steady State Economy is part of the explanation for the ongoing  crises.

You can run the VE20 BAU model here and explore alternative futures.

Notes

Data are taken from the World Development Indicators (WDI). All variables are in standard scores. The methodology used to create forecasts is similar to the one used by the Atlanta Federal Reserves GDPNow app. Prediction intervals are generated using a Bootstrap algorithm in the R programming language (see the Boiler Plate).

You can run the VE20 Model here.

Measurement Model

The VE1 state variable is an overall weighting of all the indicators, VE2 is an Unemployment-GDP Controller and VE3 is an Environmental-Human Development vs. Emissions-Energy controller. The time plots are presented below.

VE20 BAU System Matrix

For the BAU model [147.6 < AIC = 167.2 < 182.8].

VE20 BAU Model Step-Ahead Predictions

The VE20 BAU model does a fairly good job of tracking the historical state variables except for turning points and during crisis periods, of which there are many.

 

World-System (1960-2100): Is the EU Heading for a Steady State?

 

Google AI says no!

Based on the available information, it's not accurate to say the EU is definitively heading for a steady-state economy in the sense of a non-growing economy with stable population and consumption. While there's a strong emphasis on sustainable development and a shift away from a purely growth-focused model, current policies still project and even aim for economic growth within the EU. 

Here's a breakdown of the EU's approach to the economy and how it relates to the concept of a steady-state economy:

EU economic outlook and growth

• Subdued Growth: The eurozone's economic outlook for 2025 and 2026 is projected to be slow, with expected growth rates of 1% and 0.9% respectively, according to Deloitte. The European Commission forecasts slightly higher growth for the EU as a whole, at 1.1% in 2025 and 1.5% in 2026.
• Factors Affecting Growth: Uncertainty from trade policy and geopolitical conditions are key challenges impacting business sentiment and investment.
• Growth Drivers: Less restrictive monetary policies, increased public spending (including NextGen EU Funds and defense investments), stable labor markets, robust income growth, and lower interest rates are expected to support economic activity and consumer spending. 

Shift towards sustainable development

• 2030 Agenda for Sustainable Development: The EU is committed to implementing the 2030 Agenda and its 17 Sustainable Development Goals (SDGs), both within the EU and globally.
• European Green Deal: This is a key initiative aiming to make the EU climate-neutral by 2050, promoting a modern, resource-efficient, and competitive economy, according to Eurofound. It emphasizes decoupling economic growth from resource use.
• Circular Economy Action Plan: This plan aims to transition to a fully circular economy by 2050, reducing pressure on natural resources and creating sustainable growth and jobs. It includes measures for sustainable product design, waste reduction, improved recycling systems, and fostering innovation in circular business models. 

Connecting to the "Steady State Economy" concept

• Focus on decoupling growth from resource use: The EU's policies, particularly within the framework of the European Green Deal and the circular economy, emphasize decoupling economic growth from resource consumption and environmental impact, according to the European Parliament. This aligns with some principles of a steady-state economy, which seeks to minimize the environmental footprint.
• Promoting sustainable practices: The EU is implementing regulations and incentives to encourage sustainable production and consumption patterns, including stricter rules on product design, waste management, and resource efficiency. These actions are aimed at improving well-being within planetary boundaries.
• Not abandoning growth entirely: While aiming for more responsible growth, the EU is not advocating for a complete cessation of economic growth, but rather a shift towards a more sustainable model. This is distinct from a traditional "steady-state economy" which implies constant levels of capital and population. 

In conclusion, the EU is working towards a more sustainable and resource-efficient economy, actively implementing policies to decouple economic growth from environmental impact and promoting circular economy principles. However, it is not accurately characterized as heading for a steady-state economy in the classic sense of a non-growing economy. Instead, the EU aims to achieve economic growth within ecological limits and in a socially just manner. 

Has Germany Become a Steady State Economy?

 

The IMF (here) among other commentators (here) think that the German economy is in trouble. The conclusions are based on the assumption of Unlimited Economic Growth. What if the techno-optimist assumption is wrong? What if growth cannot continue forever and our macro-TechnoSocial systems must become Steady State Economies? Is there any evidence that any economies are already reaching Steady State and what are the implications, good or bad, if they are? HINT: from the graph above, the Deutsch Empire (DE) has been in a steady state since 2010. I'll explain all this in a future post.

If you want to experiment yourself with the DEL20 systems model, you run it on line and experiment with coefficients here. Notice that the two error correcting controllers in the Measurement Matrix are (EF-GDP), the Ecological Footprint compared to aggregate production and (N-CO2), population minus CO2 emissions. In other words, environmental constraints are creating the steady state in Germany not economic policy failures.

You can implement the current Neoliberal policy measures creating unlimited economic growth. Just change one coefficient in the System Matrix from F[1,1] = 0.95349473 to F[1,1] = 1.04, a not unreasonable four percent growth rate. What happens to the Ecological footprint and to CO2 emissions?

Notes

Data taken from the World Development Indicators (WDI). All variables are in standard scores. The methodology used to create forecasts is similar to the one used by the Atlanta Federal Reserves GDPNow app. Prediction intervals are generated using a Bootstrap algorithm in the R programming language.

You can run the DEL20 BAU Model here.

World-System (1980-2100) Six Futures for France

The New York Times (here) is reporting that the recent collapse of the French government will "...further burden its weak economy" and have ripple effects across Europe. The analysis, however, might be confusing cause and effect. Weakness in the European Union (EU) economies, to include France, might be creating the observed political instability. What I want to explore, starting with France, is whether we are observing the emergence of Steady State Economies in the EU, and that this should not be confused with "weakness". Business commentators and economists, at least in the US, seem convinced that economies can grow forever or, at least, for the foreseeable future. For example, the DICE model (a neoclassical integrated assessment model) grows forever unless a limit is put on technological change. So, it is no surprise that the FR20 (France Twentieth Century model, the dashed blue line marked FR) driven by the US Economy grows forever (dashed red line marked US in the graphic above). Unfortunately, for neoclassical economic theory, this is not the best description of the current French economy using the Akaike Information Criterion (AIC).

Three other models, the Random Walk (RW, dashed blue), the Business As Usual (BAU, black line) and the EU model (right beneath it) are probably what classical economists would identify as the Steady State Economy. Growth reaches an asymptote around 2100. Finally, the FR20 model is driven into collapse mode by the World System (dotted green line).

If you prefer central tendencies in your forecasts, then you probably would conclude that the Steady State Economy is the most likely future. If you are a techno-optimist, you will probably prefer the US-driven future. If you are a Degrowth advocate, you will probably prefer the FR or the W scenario.

Without committing myself to some unknowable future, it seems clear to me that the steady-state and collapse scenarios will not be accepted without resistance. Demonstrators will take to the streets, governments will fall, right-wing political groups will grow in appeal and we will enter a period of chaos. Maybe this is why the Infinite-growth scenario is so appealing.

Notes

FR1 is the dominant state variable of the FR20 system with data taken from the World Development Indicators (WDI). The methodology used to create forecasts is similar to the one used by the Atlanta Federal Reserves GDPNow app. Prediction intervals are generated using a Bootstrap algorithm in the R programming language.

The FR1 state variable was created from the following weighted indicators (the first row of the Measurement Matrix) and explain 98% of the variation. 

The first six indicators in standard scores are taken from the World Development Indicators (WDI). KOF = KOF Index of Globalization, EF = Ecological Footprint, HDI = Human Development Index. The second two components: FR2=(CO2+EF-KOF) and FR3 = (LU-L-N-HDI) describe environmental and Unemployment Error Correction Controllers (ECCs).

You can run the FRL20-BAU model here.