How Compounding Shapes the Global Economy
A Quick Recap: From Techno-Feudalism to the Growth Dilemma
In the blog “The Brutal Truth About Techno-Feudalism,” we explored how power in today’s economy is increasingly concentrated at the top — a system that financial expert Chris Markowski and others describe as “techno-feudalism.”
This next part looks deeper into why economies slow down, why debt keeps rising, and how the math of compounding quietly reshapes global power.
While it’s easy to blame politics or technology for economic stagnation, the truth is more mathematical than emotional. The forces that govern global wealth are often invisible but predictable — if you know what to look for.
The Growth Illusion
We’re taught to believe that economies grow in a straight, steady line — a comforting illusion that doesn’t hold up in reality. Economic growth is nonlinear, following what statisticians call an S-curve: rapid acceleration, then slowing maturity, and eventually stagnation.
In the early phases of industrialization, when people are buying cars, homes, and consumer goods for the first time, growth surges. But once those basic needs are met, the market naturally plateaus.
As Chris Markowski quipped on The Watchdog on Wall Street, “Once you’ve got a two-car garage, do you really need five?”
That’s the essence of the S-curve. Once an economy is saturated — whether it’s cars, smartphones, or streaming subscriptions — growth must come from innovation, efficiency, or new frontiers, not consumption alone.
The problem? Mature economies like the U.S. and much of Europe are already near the top of that curve.
Compounding: The Quiet Force That Shapes Nations
In finance, compounding is often celebrated as the key to wealth. But on a global scale, it can quietly reorder the balance of power.
Nassim Nicholas Taleb often emphasizes that small differences in growth rates, when compounded over decades, create massive long-term shifts that most policymakers miss.
According to the International Monetary Fund (IMF, 2025), China’s share of global GDP (adjusted for purchasing power parity) has grown from about 11% in 2007 to almost 20% today. The US’s share, on the other hand, has dropped from about 19% to 15%.
This didn’t happen all at once or because of a revolution; it happened slowly over time. A small advantage in annual growth, kept up for years, has quietly moved the center of the world’s economy to the east.
Yet, many economic forecasts still ignore compounding’s nonlinear nature, assuming the future will mirror the past. That’s why policy projections often miss turning points: they don’t take into account how small growth gaps can add up to huge differences over time.
Debt and the Growth Trap
Here’s where the math turns dangerous. Debt is easy to manage when growth is strong — because expanding income covers the cost of borrowing. But when growth slows, debt becomes a drag rather than a tool.
The U.S. government now spends over $1.2 trillion per year just on interest payments — more than the entire defense or education budgets.
Even modest interest rate increases can rattle financial markets, pressure consumers, and weaken entire industries built on cheap credit.
Taleb has a fitting phrase for this: “One only lends to the rich.” When wealthy nations borrow heavily, they implicitly promise to grow fast enough to service their debts. But what happens when they can’t?
If you’re already at the top of the S-curve — with a saturated consumer base and sluggish productivity — it becomes nearly impossible to grow fast enough to keep debt sustainable.
That’s the growth trap: when borrowing becomes a habit, not a strategy.
Investor Lessons from the S-Curve Economy
For investors, the lesson is clear — and it’s less about timing the market than understanding the math behind it.
- Prioritize efficiency over expansion. Companies that cut waste and automate smartly will outperform those that chase empty growth.
- Favor innovation that reduces costs. True progress creates value by doing more with less, not by inflating valuations.
- Avoid excessive leverage. Debt-heavy corporations and governments face disproportionate risk in low-growth environments.
- Think long-term. As Markowski often emphasizes, success in investing comes from patience, not panic. Compounding rewards consistency.
- Diversify globally. Some economies are still in the early stages of their S-curve. Exposure to those markets can offset domestic stagnation.
This kind of thinking — realistic, math-driven, and risk-aware — is what Markowski calls “dealing with the terrain.” You can’t control the map, but you can navigate smarter.
Conclusion: The Math Doesn’t Lie
Economies don’t fall apart all at once; they build up over time into either a crisis or strength, depending on how they handle debt and growth. The math that isn’t obvious behind compounding and S-curves explains why some countries grow and others stay the same.
This truth helps investors, policymakers, and regular people focus on long-term fundamentals instead of short-term political noise.
Chris Markowski’s podcast reminds us that the harsh truth about our economy isn’t based on ideology; it’s based on math.
And that math is always right.
