Political Cynic wonders…
Finance & economics | First-world problems
Headline :How the West fell out of love with economic growth
Sub-headline : A serious, slow-burning malaise
This Reader has to wonder, first, at the headline, that reads as if not defined by the refined Jane Austen, one of the measures of sophisticated Oxbridridger taste, but with an exhumation of Barbara Cartland, tinctured in Neo-Liberal apologetics. And a diagnosis of the ‘West’s slow burning malaise. This marriage of literary kitsch and sobering economic doom, only encourages doubt and or provokes derision? Not forgetting that the idea/notion of ‘The West’ as a political entity dates, most recently, from the Old Cold War.
The first paragraph offers:
This year has been a good one for the West. The alliance has surprised observers with its united front against Russian aggression. As authoritarian China suffers one of its weakest periods of growth since Chairman Mao, the American economy roars along. A wave of populism across rich countries, which began in 2016 with Brexit and the election of Donald Trump, looks as if it may have crested.
A selection of highlights of the ‘Corporatist Minds’ of The Economist scribblers:
Celebration America’s Proxy War in Ukraine, weak growth in China, America’s economy roars on, A wave of populism across rich countries… looks as if it may have crested…
What follows, is screeching Neo-Liberal hysterics, featuring the threat of ‘fast-ageing populations’ which focuses on the ‘benefits’ of a Social Security, in the once enlightened Western Nation States.
Yet away from the world’s attention, rich democracies face a profound, slow-burning problem: weak economic growth. In the year before covid-19, advanced economies’ gdp grew by less than 2%. High-frequency measures suggest that rich-world productivity, the ultimate source of improved living standards, is at best stagnant and may be declining. Official forecasts suggest that by 2027 per-person gdp growth in the median rich country will be less than 1.5% a year. Some places, such as Canada and Switzerland, will see numbers closer to zero.
Perhaps rich countries are destined for weak growth. Many have fast-ageing populations. Once labour markets are opened to women, and university education democratised, important sources of growth are exhausted. Much low-hanging technological fruit, such as proper sanitation, cars and the internet, has been plucked. This growth problem is surmountable, however. Policymakers could make it easier to trade across borders, giving globalisation a boost. They could reform planning to make it possible to build, reducing outrageous housing costs. They could welcome migrants to replace retiring workers. All these reforms would raise the growth rate.
The utterly failed Neo-Liberal Project and its highfalutin ‘Globalism’, and its enlightened ‘Supply Chains’ are subject to the self-forgetting of the writers, for this publication. In thrall to the 19th Century’s Bagehot , impersonated in the political present by Adrian Wooldridge, and his hymnal to political conformity ‘The Aristocracy of Talent: How Meritocracy Made the Modern World’ offers …
The Reader has still to confront the remaining 1,297 words! What rhetorical strategy might she adopt, in the face of this self-serving rhetorical avalanche? like the intelligent gardener, a careful weeding, and/or pruning’ offers a way forward? A selection sentences from each paragraph aid The Reader in her exploration.
Unfortunately, economic growth has fallen out of fashion.
Modern politicians are less likely to extol the benefits of free markets than their predecessors, for instance.
Politicians such as Lyndon Johnson, Margaret Thatcher and Ronald Reagan offered policies based on a coherent theory of the relationship between the individual and the state.
Apathy towards growth is not merely rhetorical. Britain hints at a wider loss of zeal. In the 1970s the average budget contained tax reforms worth 2% of gdp.
Our analysis of data from the World Bank suggests that progress has slowed still further in recent years, and may even have reversed (see chart 2)
Governments have also become less friendly to new construction, whether of housing or infrastructure. Governments are spending a lot more on welfare, such as pensions and, in particular, health care.
This is likely to reflect tougher land-use policies and more powerful nimbys.
Politicians prefer splurging the proceeds of what growth exists.
Politics is increasingly an arms race, with promises of more money for health care and social protection. “Thirty or 40 years ago it was taken for granted that the elderly were not good candidates for organ transplantation, dialysis or advanced surgical procedures,” writes Daniel Callahan, an ethicist.
The above is about the drain of resources of Modern Medicine are wasted on ‘the elderly’!
People may see spending on health care and pensions as self-evidently good. But it comes with downsides.
Perfectly fit older people drop out of work to receive a pension. Funding this requires higher taxes or cuts elsewhere. Since the early 1980s government spending across the oecd on research and development, as a share of gdp, has fallen by about a third.
We have previously estimated that Uncle Sam is on the hook for liabilities worth more than six times America’s gdp.
No one cheers when a company goes bankrupt or someone falls into poverty. But the bail-out state makes economies less adaptable, ultimately constraining growth by preventing resources shifting from unproductive to productive uses.
Why has the West turned away from growth?
Yet Western populations have been ageing for decades, including during the reformist 1980s and 1990s
The above ‘ the reformist 1980s and 1990s’ i.e. the decades of the rise of The Neo-Liberal Swindle.
In 1936 Franklin Roosevelt, speaking about opponents to his New Deal, felt comfortable enough to “welcome” his opponents’ hatred. Now the aggrieved have more ways to complain. As a result, policymakers have greater incentive to limit the number of people who lose out, resulting in what Ben Ansell of Oxford University calls “countrywide decision by committee”.
FDR’s New Deal, and ‘Ben Ansell of Oxford University calls “countrywide decision by committee”… Isn’t that the very definition of the Democratic process?
The Reader has to quell her doubt, or should it be named cynicism, at the final paragraph, of this rambling exercise in bloated polemic. A ‘new direction’ is as unclear to The Economist’s committee of scribblers, as it is to The Reader.
Quite what would push the West in a new direction is unclear. There is no sign of a shift just yet, beyond the misguided attempts of Mr Trump and Ms Truss. Would another financial crisis do the job? Will a change have to wait until the baby-boomers are no longer around? Whatever the answer, until growth speeds up Western policymakers must hope their enemies continue to blunder.