Thinking Out Loud

One of the right-wing themes that’s getting a lot of play—if not payola—is the idea that the Europeans are lagging behind us in economic growth because of their socialist or at least social democratic policies. I’m not competent nor particularly interested in determining if lower pension payments would have resulted in another point of GDP in Oslo—for all I know that could be the case—but I would like to raise a few niggling points whose generality will not endanger my amateur standing:

1. As Alan Greenspan remarked in a speech last year, economic growth results from increases in population and increases in efficiency. Since the population of the United States is still growing, other things being equal, one would expect its economy to grow more rapidly than a region without much population growth. The Europeans, especially the Germans, are also still dealing with the aftermath of the Cold War—absorbing East Germany was and is an enormous and expensive task.

2. GDP is merely a figure of merit. A serious assessment of relative wealth has to go beyond such aggregate measures, especially since we know of large and significant factors that make it unreliable. The inefficiency of American medicine, for example, increases its dollar value and contributes to a larger GDP, but it is hard to think that America is wealthier because its medicine is grossly overpriced. Hedonic accounting and other perfectly reasonable adjustments also distort comparative judgments—better computers are obviously worth more, but they aren’t worth more to very many people. I doubt if there is a value neutral way of measuring wealth. By my values, however, it is at least unclear that we do as well as the Europeans or that we’re even catching up.

3. Despite huge tax breaks for the rich, the economy of the United States has not grown very much over the last four years by any measure. We may have benefited in earlier periods of our history from relatively large disparities of wealth and income because huge pools of capital, however acquired, were useful in periods of weed-like growth. It doesn’t follow, however, that limitless private aggrandizement will benefit anybody but the rentiers now. To use a distinction I encountered most recently in Geerat Vermeij’s book, we’re apparently moving from an economic world in which effectiveness is critical to one in which the important thing is efficiency. In the U.S., the big, sloppy dinosaurs are in political charge, but the future, one guesses, belongs to the sleek, clever mammals. Our love of the gigantic seems an ever more pointless exercise—recreational elephantiasis.

4. As even the most confirmed Tory should understand, political stability is worth something. If, as I keep maintaining, the great fact of the age is a demographic transition that spells the end of explosive growth, it will be increasingly difficult to maintain or increase disparities of wealth and income by conventional political means. As they used to say in Pravda, it is not accidental that the old economy conservatives promote one-party government, irrational forms of religion, official oppression, aggressive nationalism, and cultural paranoia. There’s no guarantee that these shifts will suffice, however. It’s not that I think spears are being sharpened for Republican heads. Granted the traditions of the country, a violently rightist populism that would appall even the traditional conservatives is the more likely threat, not only to this country but to the world at large. A political economy that sacrifices a couple of percentage points of largely meaningless growth in the interest of national amity may be the rational choice in comparison to the divisive policies of the “At Least We Ain’t Niggers” party.