Bloomberg Writer: 'Economic Growth Isn't Everything'

Observers can be excused for thinking that the politicial establishment is preparing the battlespace to convince us plebes that progress and economic growth are overrated. (That's sort of odd for people who call themselves "progressives," but making sense is not their strong suit.)

How interesting, for example, that Northwestern University economist Robert Gordon's book, The Rise and Fall of American Growth, was released on January 12, even though, as Bloomberg writer Noah Smith notes, Gordon "has been going around for several years making ... (the) case (that) ... the golden days of growth are over." Just in time for the arrival of a more visibly weak economy, Gordon's premise has been getting wildly disproportionate press attention. Smith goes further in his "Economic Growth Isn't Everything" column, referring to "the illusion of stagnation" (i.e., don't believe those weak stats, even if they go negative; everything is really fine), while reminding us of the supposedly marvelous things government has done and supposedly can still do for us.

Those who doubt where Smith is coming from should peruse his odious 2014 column, "Austrian Economists, 9/11 Truthers and Brain Worms." Therein, he claimed that the principles of the Austrian school of economics, the kind that, unlike Keynesianism, have worked when tried, "are so directly contradicted by data that the belief system practically screens itself for people who are out of touch with reality."

Smith pretends to set himself up as a contrarian, but he ends up essentially discrediting the idea that further tangible progress will do us much good, or, specifically, give us all that much "satisfaction." Then, instead of doing something sensible like suggesting that we seek out the eternal truths and genuine solace found in religion for genuine satisfaction, he veers into his almost delusional paean to the wonders of government (links are in original; bolds are mine):

Economic Growth Isn't Everything

... Gordon’s main thesis is that the low-hanging fruit of technology has, essentially, been picked. He argues that a small handful of Great Inventions -- electricity, the internal combustion engine and a few others -- propelled growth to dizzying speeds from about 1870 through 1970. But there are only so many big important ideas like this to be discovered.

... Gordon’s idea has a little more popular appeal than it ought to, for two reasons.

The first reason we are too eager to believe Gordon is that when we consider the impact of technology, we think in terms of how much it changes our lives. But utility -- the satisfaction we derive from goods and services -- isn't the same thing as growth.

The inventions of the 19th and 20th centuries altered the very shape of human life in rich countries. Material scarcity was effectively vanquished. Starvation was eliminated, and almost all people now have shelter. Grueling manual labor, which defined human life for millennia, is now rare. This has all been possible thanks to the Great Inventions Gordon names. And these improvements can’t be repeated -- food, shelter and security are basic human needs, and once you fill them, other life improvements will probably seem incremental by comparison.

But growth isn't the same thing as life satisfaction. Economists generally believe that humans have a decreasing marginal utility of wealth, meaning that each successive increase in material abundance matters less than the last.

... The second reason I think we’re too willing to believe Gordon is that technology isn't the only thing that makes society better. The quality of government matters too. Some governments rob from their citizens. Others try to control the economy. But the best ones run efficient public services, provide public goods like infrastructure and research funding and minimize the harmful effects of regulation.

There’s a good argument that quality of government in North America, Europe and Japan improved dramatically in the 19th and early 20th centuries. Government became steadily more participatory and less predatory. Bureaucracies became more professional. Spending on infrastructure dramatically increased, funded by taxes. Public services such as urban sanitation -- which Gordon counts among the Great Inventions, but which is dependent on government efficiency -- curbed disease and improved health dramatically. Health and safety regulations helped as well. Public education greatly increased the skills of the workforce.

Libertarians often portray the state as a parasite, but there is a good argument that big government -- and, more importantly, good government -- was responsible for a significant amount of the growth in developed nations between 1870 and 1970.

... So when we evaluate Gordon’s thesis of technological slowdown -- which might not prove correct -- we should be careful of making these two errors. We should remember that growth isn't the same thing as improvement in life satisfaction; the former is actually a lot easier than the latter. And we should consider the possibility that government quality, as much as technology, is what has stopped improving.

But, apparently, "government quality" isn't what it should be because it just isn't big enough.

In the U.S. since the mid-1960s when the "War on Poverty" began (in other words, before Smith's 1970 cutoff), the U.S. government has been big, has grown in real terms virtually without exception, and has inflicted rampant mission creep on virtually every aspect of everyday human activity.

The great achievements of government Smith identifies have largely been halted or are moving in reverse since then, thanks to big government:

  • Government is clearly now more predatory, and routinely spends money it doesn't have.
  • The bureaucracy is far less professional. It is far more interested in its own preservation than in serving the public. The IRS scandal is perhaps the worst such example. Note that no one has been meaningfully punished for blatantly obvious offenses.
  • Infrastructure spending is far less effective, as project selections depend far more on political pull and cronyism than on economic merit.
  • Sanitation and sewers have suffered (see: Flint, Michigan) because the urban bureaucracies commandeer municipal resources for salaries, benefits and completely unsustainable penstions, while habitually shortchanging routine maintenance.
  • Health and safety regulations are overzealously concocted and applied against traditional domestic industries, especially hard-goods manufacturers, while politically correct "sustainable" food practices have caused tangible harm. Meanwhile, basic food and other product safety standards are poorly enforced on imported goods.
  • And for heaven's sake, there can't possibly be anyone who believes that current public education is generally helping to "greatly increase the skills of the workforce."

Smith's final sentence about government — "We should consider the possibility that government quality, as much as technology, is what has stopped improving" — seems to be telling us that we have no right to expect better quality unless we allow government to become even bigger. The past 50 years' experience makes a mockery of that idea.

In the meantime, plebes, be satisfied with a historically weak economy which appears to be getting worse. This is as good as it gets, so stop complaining.

Cross-posted at BizzyBlog.com.

Tom Blumer
Tom Blumer
Tom Blumer is a contributing editor for NewsBusters.