Though I’m in overall agreement with this model and its underlying dynamics, I think he is a ignoring the second part of the equation: Demographics. As Western populations age, their consumption patterns slows, further aggravating the overcapacity problem.
There are only three ways outs (in decreasing rosiness) that I can see:
- Technological breakthrough: As the microprocessor drove the Reagan recovery and the Internet Clinton’s, a new technological breakthrough will drive productivity and consumption and restore growth.
- Rise of Asian Consumerism: Aging Western consumers are replaced by younger Asian and African ones driving up the demand curve and restoring growth
- World War III: a major world war manages to destroy significant production capacity all around the world. (This is not an unlikely scenario: as the Great Depression gave rise to Fascism and Communism, a prolonged economic downturn coupled with Islamic Jihadist can yield the same result)
None of these scenarios bode well for environmentalist: it is clear that, as a race, we need to expand or wither. We Simply cannot stand still.
For the sake of everyone, I'm rooting for #1.