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Is the US nearing its ‘potential GDP’? And what might that mean for a circular economy?

Closing in on what economists believe to be its full productive capacity, questions are being asked about the direction of the United States’ economy, and with the subject of idle capacity featuring significantly in the conversation, the circular economy approach may soon be a part of the agenda.

Hidden beneath the daily social media- driven bedlam that has dominated US politics during the first two months of this year is the fact that the country may be about to reach a pivotal economic juncture. If its economy grows by just 2.5% in 2017, then its gross domestic product will have reached what various economists, and the Congressional Budget Office, estimate to be the US’ full economic potential.

In an era where promising economic growth and job creation have been critical to winning elections around the world, the implications of reaching potential GDP are still unclear.

Potential GDP is the limit that economists identify when an economy has reached near full productivity, where close to everybody who wants a job has one, and where offices and factories are working at full pelt.

The current US administration has to either “try to run the economy a little hot”, or accept, “the low-growth world as an immutable fact of life”, according to Neil Irwin writing in the NYT’s The Upshot.


Future technologies and innovation could, of course, disrupt perceptions of growth potential. However, at the core of this discussion is a debate about idle capacity, Irwin uses statistics on the productive capabilities of US factories and vacant office space to make his argument.

Growth Within

An alternative vision of idle capacity and growth is gradually beginning to be articulated, at least in Europe, with the publication of Growth Within by the Ellen MacArthur Foundation in June 2015, and the follow- up investment-focused Achieving Growth Within released by SystemIQ last month.

More effective exploitation of materials, energy and the services they enable could yield a net annual economic benefit of EUR 1.8tr for the EU by 2030, according to Growth Within. Unlocking that opportunity involves tapping into fundamental idle capacity within the economy. The research identified several examples including that European cars are parked, on average, more than 90% of the time, office spaces are unoccupied 30-50% of the day during working hours, and nearly one-third of all food is wasted across the value chain.

There isn’t a direct plug-and-play application that transfers the opportunities in the EU across to the US. However, there’s almost no question that idle assets exist on the other side of the Atlantic, and new business models, which by their cyclical nature also tend to be more localised, could lead to the creation of a new kind of growth, prosperity and potentially jobs.

A new vision of prosperity for the US?

Unpredictability is a continuing factor in a global economic context where a number of economists are still warning of imminent recession. Moreover, there are many who have convincingly argued that over-emphasising growth, while other measures of prosperity suffer, including living standards and environmental degradation,  is hardly a strong long-term strategy. Accompanying the economic and GDP benefits uncovered in Growth Within, the research suggested that a regenerative approach to the economy could also reduce CO2 emissions by 48% by 2030, compared to the ‘development as usual scenario’, and that the average household could be up to EUR 3000 better off.

Now the US economy may also be heading towards a juncture, where embracing fundamentally different underlying economic mechanisms would make sense.

There will be a number of factors in play for the US economy in 2017, and seeking economic prosperity that additionally preserves materials and energy, and reduces negative environmental costs externalised by the existing linear economy- could be one significant theme.

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The Author

Seb Egerton-Read

Seb Egerton-Read

Seb writes daily content for Circulate across the full spectrum of the website's topics. Previously he has spent five years as a freelance writer for a number of websites and blogs. You can e-mail Seb at seb[at]

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