Slower growth and higher inflation are the hallmarks of a post-Covid world

A HOT spurt of global growth is generating breathless headlines. India is on pace to be "the world's fastest growing large economy", and France is posting its "strongest growth in 52 years". US President Joe Biden cites the latest quarterly growth data as evidence that the US economy is growing "faster than China's" for the first time in 2 decades and is "finally building an American economy for the 21st century".

Alas, 2021 looked so good only because so many economies contracted sharply the year before. This bounceback blip says nothing about the 21st century. The question is how fast economies can grow after the pandemic, once base effects fade and stimulus recedes. Trends in demographics and productivity suggest the global economy is likely to grow even more slowly in the 2020s than it did last decade.

A brief history shows why. After the World War II, the baby boom nearly doubled global population growth to 2 per cent, a historic high. Productivity growth tripled to around 2 per cent, boosted by new technologies and a massive investment boom. With more workers, each producing more, global gross domestic product (GDP) growth also doubled to an unprecedented level, close to 4 per cent. The postwar miracle was in full swing by the 1950s.