The Great Growth Rate Fantasy
Or, "How to tell when a Republican is lying about his growth promises."
We've heard it all now, from a succession of Republicans going back to Reagan, I guess- brave, confident declarations about how, if we only give them control of the government, we are suddenly going to see growth rates of 4, 5 or more percent, to be created through the simple expedient of just letting rich people do any damned thing they please.
How about a little bit of reality. Here is a chart, from my go-to guy, Thomas Piketty, modified by me, as I shall explain:
First, let me state that the yellow and blue areas, and the red line, were added by me, to make clear a point that Piketty made in his text. The blue area represents the time from the beginning of the industrial revolution until the end of World War II, and the yellow area represents the three decades or so after the end of the period which featured both World Wars, and the Great Depression.
So, here's the story: As you can see, the rate of economic growth from the beginning of known economic date until the start of the industrial revolution remained relatively constant at well below one percent. The industrial revolution produced an increase in that rate to just under two percent. As Piketty demonstrates, this increase was practically all a result of increased population due to agricultural and medical advances in that period. Then, the rate of growth zoomed up to just under 4 percent in the decades following World War II. What is important to note here is that this was totally the result of repairing the damage to the economy caused by the wars and the depression. As Piketty points out, as soon as the world's economy recovered from the damage done to it in the 1914-1945 period, growth began a fast retreat, rapidly reaching the level that could have been predicted in 1800 by simply extending the growth rate out from the experience of the previous two millennia. This is shown by the red line, which I added. The truth is that the higher growth rates of the period of 1950-1980 were an anomaly, totally the result of the devastation of the previous decades, and did not represent any long term change in the economy; now we are rapidly approaching the historically normal levels.
And any politician who tells you different is either 1.) woefully ignorant of economic reality, or 2.) lying; or both, of course- a pretty good bet when you are talking about Republicans.
We've heard it all now, from a succession of Republicans going back to Reagan, I guess- brave, confident declarations about how, if we only give them control of the government, we are suddenly going to see growth rates of 4, 5 or more percent, to be created through the simple expedient of just letting rich people do any damned thing they please.
How about a little bit of reality. Here is a chart, from my go-to guy, Thomas Piketty, modified by me, as I shall explain:
So, here's the story: As you can see, the rate of economic growth from the beginning of known economic date until the start of the industrial revolution remained relatively constant at well below one percent. The industrial revolution produced an increase in that rate to just under two percent. As Piketty demonstrates, this increase was practically all a result of increased population due to agricultural and medical advances in that period. Then, the rate of growth zoomed up to just under 4 percent in the decades following World War II. What is important to note here is that this was totally the result of repairing the damage to the economy caused by the wars and the depression. As Piketty points out, as soon as the world's economy recovered from the damage done to it in the 1914-1945 period, growth began a fast retreat, rapidly reaching the level that could have been predicted in 1800 by simply extending the growth rate out from the experience of the previous two millennia. This is shown by the red line, which I added. The truth is that the higher growth rates of the period of 1950-1980 were an anomaly, totally the result of the devastation of the previous decades, and did not represent any long term change in the economy; now we are rapidly approaching the historically normal levels.
And any politician who tells you different is either 1.) woefully ignorant of economic reality, or 2.) lying; or both, of course- a pretty good bet when you are talking about Republicans.
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