Plenty of studies indicate that everything will go downhill from here.
The Congressional Budget Office changed it's long term GDP growth rate from 3% to 1.9%. Those Americans who were 65 years old in 2010 will receive net benefits of more than $300 billion, while those unborn will pay almost $400 billion to cover these costs in the future. Every age cohort around the world clamors to be called the "lost generation," with the latest report stating that Italians born in 1970 will pay 50% more in taxes while receiving half the benefits of those born in 1952. Youth unemployment brings the fear of an unexperienced working class trying to support an older world, while staying in school increases student debt levels that are becoming more difficult to pay back. Throw in climate change and government budget issues, and it becomes difficult to see any hope of overcoming our problems.
Should we just give up now? Go live with our parents while throwing away any hope for future prosperity?
No. Here's why.
Innovation
Many claim that innovation is dead. Economist Tyler Cowen calls it the "Great Stagnation": Over the last century or so we were fortunate to reap the easy rewards of things like abundant land, cheap fuel, and educating a relatively uneducated population, but now there isn't much left to dramatically power productivity. However, this may all be a lack a patience to see what relatively recent innovations, such as the Internet, will allow.
As The Economist writes, "Roughly a century lapsed between the first commercial deployments of James Watt's steam engine and steam's peak contribution to British growth." It simply might take some time to incorporate all the possibilities of new technology into our lives. For example, computers still operate on coding written in text that deters many from programming for themselves, but image recognition, voice recognition, and increased bandwidth and processing power could allow much more accesible forms of programming to help everyday people automate and create programs.
One example The Economist cites is automated cars:
In 2004 the Defence Advanced Research Projects Agency (DARPA), a branch of America's Department of Defence, set up a race for driverless cars that promised $1 million to the team whose vehicle finished the 240km (150-mile) route fastest. Not one of the robotic entrants completed the course. In August 2012 Google (GOOG 0.42%) announced that its fleet of autonomous vehicles had completed some half a million kilometres of accident-free test runs.
Add in Google's Glass project that turns humans into a light form of the Terminator -- an extremely efficient and productive cyborg -- and there is hope to believe that computers are just beginning to drive growth. And this growth will be key in covering the expenses of an older, stormier, debt-ridden world.
Resilience
Humans, over our short time, have faced much worse prospects than debt and low growth. About 70,000 years ago, a super volcano erupted, ejecting 2,800 times more material than Mount St. Helens and supposedly leaving the reproductive human population at about 1,000 individuals. In more recent history, plagues, famines, and world wars have all appeared to doom us. But we found ways around these problems.
The stability of the Eurozone has been in question since 2009, but those in charge at the European Central Bank and International Monetary Fund have been able to create emergency loans for troubled countries, working with sovereign leaders to affect policy and, in Greece, even drastically renegotiating debt with 50% losses for private creditors without tearing apart the economic union. Avoiding a poor outcome is in most of the world's interests, and so far Europe has been pretty successful, even in tough economic conditions.
Take even company-specific problems that seemed intractable. Apple (AAPL 2.15%) was losing $1 billion a year and seeing double-digit sales declines when Steve Jobs returned in 1997. Now, it makes more than $1 billion in profit per week and still sells more than $2 billion per quarter in iPods -- a product which came out in 2001.
Or look at Sirius XM (SIRI +0.00%). Once trading for a few nickels in the depths of the recession, it had reportedly hired advisors to prepare it for bankruptcy, as it had more than $3 billion in debt. Before a large portion of its debt came due, however, Liberty Media (LMCA +0.00%) invested more than $500 million for a 40% stake in the company. Now, Liberty Media owns more than 50% of the satellite radio provider, and Sirius produced free cash flow in excess of $700 million last year. Space junk turned into heavenly profit.
Making the best of it
While there is plenty to worry about today, there has always been plenty to worry about. Humans, thankfully, are an intelligent species that can handle plenty of hardship, although they may complain along the way. The only option we have is to make the best of the time we live in and try to improve our circumstances as much as we can. Labeling a generation "lost" does no good, unless it inspires people to find solutions.
