(Foreword: We have asked Tom Osenton to contribute a blog to Kotler on Growth because of his scholarship and provocative strategic insights on economic growth. We were very impressed by his book The Death of Demand, 2004, FT Prentice Hall. He traces the historic decline of U.S. consumer decline and challenges us to find a way to live in a permanently low growth economy. Tom is leading strategist for The Customer Share Group in Chicago. Milton Kotler)
“Let me start by stating what should be the obvious: Growth in perpetuity is not possible. Neither JELL-O nor the U.S. Economy will grow at historical rates ever again – and there are good reasons why.
We experienced growth’s four-point “perfect storm” after WWII – (1) explosion in population in a very short period of time (78 mil. Boomers in 18 years); (2) the creation of a middle class with disposable income; (3) the introduction of dozens of new product categories that the middle class consumed, largely for the first time ever; and (4) the advent of the greatest mass marketing tool in history – broadcast TV. The confluence of these events were a one-phenomenon uniquely timed to created the greatest economic expansion in history and will never, ever be duplicated again.
And the proof is in the numbers: the rate of GDP growth has been in consistent decline since the 1960s. From a 4.44% average for the 1960s to a 1.85% average for the first ten years of the 2000s. The notion of 3 or 4 percent growth is a fantasy that will never ever be achieved on a sustained basis. We have over-marketed, over consumed, and have been over-enabled by credit beyond our actual means to get to a point where we have actually hastened saturation. We have over 50 million more registered motor vehicles than licensed drivers in the United States. Think about that.
What we have is a “ONE PERCENT ECONOMY”- about the same rate as population growth. And we can’t simply cheerlead our way to 4% growth on a sustained basis. That is not only naïve, but mathematically improbable unless we: (1) Open the U.S. borders and allow 10 million new consumers (approx. 3.3% plus the current organic population growth) into the country every year; or (2) create new products and services that are accretive to the existing economy – that is, added to and not cannibalizing – existing consumption (Creative Destruction).
So what are we to do about wanting desperately to shoot a 65 at the local links, even though we are not Tiger Woods? We will likely continue to delude ourselves into thinking sustained GDP growth – unseen since the 1960s – is possible because the “growth-in-perpetuity” lie requires it? But the “make-it-up-in-volume” strategy won’t work – it certainly didn’t for General Motors. Rather, we need to adjust our expectations and use our big brains to figure out how to make a ONE PERCENT ECONOMY work. Frankly, we have no other choice. We have hit a wall. Our economy is mature and we are in stage one denial.
Corporations already experienced this difficult mind shift after the 1980s when business managers kept predicting double-digit sales growth, simply because that’s what they experienced in the 1960s and 1970s. But the rate of that sales growth faded, yet we adjusted by focusing on cost-cutting, and earnings rates soared. Sadly, rather than proactively seeking ways to make a ONE PERCENT ECONOMY work, we waste time calling for a return to 4% GDP growth like somehow it slipped our minds.
No – the sky is not falling – but the good old growth days are long over. Get used to it.”
TOM OSENTON
Author, The Death of Demand