Ideas@TheCentre brings you ammunition for conversations around the table. 3 short articles from CIS researchers emailed every Friday on the issues of the week.
How fast can the US economy grow? There is a lot riding on the answer, not just for Americans themselves but for the global economy too.
During the recent election campaign, Donald Trump said he thought growth could reach 5–6% with the benefit of his policies — but that is fanciful for a large, mature economy; even one that is home to many wonderfully innovative, well-managed businesses.
Trump has since settled on a target of 4% or so, but even this will be difficult to reach and sustain. The only period of sustained growth above 4% in the last half century was 1997 to 2000, when the tech sector boomed and productivity grew strongly.
Records show the US economy registering high growth rates in short bursts when bouncing back from recession, but the first reality facing Trump is that recovery from the Great Recession of 2008-09, although tepid by historical standards, has been going on for seven years and the economy is working close to capacity. Performance from here on will be determined by underlying trends.
The second reality greeting Trump is that established trends in labour force and productivity growth at the outset of his presidency are not strong enough to sustain growth above 4%, or even 3%. And Trump’s mixed bag of economic policies — as far as they can be discerned — contains at least as much that will stifle future productivity growth (such as his trade policies) as will lift the trend.
This is not to rule out the possibility of a short burst of faster growth if the pool of discouraged workers left over from the Great Recession is enticed back into the labour force, and there is an accompanying burst of business confidence and investment. But this would be quite different from a sustained period of strong growth at the rates Trump has targeted.
It’s Australian Open time again. We are halfway through the cycle: we’ve had the articles about whether or not we hate our local tennis brats, and the absurd optimism after early wins. Soon will come anger at the losses, followed by resignation and then 95% of the country will be puzzled at how they got emotionally invested in tennis again.
Why do we think we own our sports heroes? Paying customers may feel aggrieved by Kyrgios tanking, or those with a financial interest might abhor match fixing, but why does John Q Punter believe that sports stars owe them anything?
Sure a good chunk of our tax dollars, and discretionary income, go to supporting sports elite. And if the fact that taxpayers fund public health can be used to justify compulsory bike helmets, sugar taxes and anti-obesity advertising bans, maybe this means we get to tell tennis players they should be more committed?
The thing is; I don’t think for one second this is about taxpayer funding — as shocking as that may seem. No, I suspect what deeply frustrates so many of those emotionally invested in underperforming sports stars is the belief that they would give anything to have the talent of a Kyrgios or a Tomic but have to watch them waste it all.
Leaving aside whether fame is all it’s cracked up to be, it’s curious that snack-hoovering couch spectators imagine they would magically have more dedication if they were a sports star. If your new year’s resolution to get off the couch and get fit has evaporated by the 16th of January, I doubt you will stick at 12 hours practice a day for very long.
Similarly, someone may wonder why an overweight and poor person doesn’t buy fresh food, take up an exercise program, and get a better job. Yet everyone has challenges in their own lives that they struggle to overcome — even if those challenges seem simple to others.
The point is this: you may think you know what’s best for someone else, and that you could make their choices better than they do. But you are probably wrong, and you shouldn’t do it anyway.
From the icy peaks of Davos, the World Economic Forum this week announced that ‘reforming the very nature of capitalism will be needed to combat the growing appeal of populist political movements around the world’. This is a recurring refrain at an event which combats populism by welcoming such economics luminaries as Bono, Shakira, Jamie Oliver and Matt Damon.
This year, Nobel prize-winning economist Joseph Stiglitz blamed corporations for rising inequality, stoking populism. Yet when Stiglitz visited Venezuela in 2007 praising the “positive policies” of populist President Hugo Chavez he was not alone.
Venezuela has been a darling of progressives such as UK Labour leader Jeremy Corbyn, who praised its “twenty-first century socialism” which was “seriously conquering poverty by emphatically rejecting the Neo Liberal policies of the world’s financial institutions.”
But far from conquering poverty, Venezuela’s policies of expropriation and price controls have impoverished a country which, before Hugo Chavez came to power in 1998, was the richest in South America with the largest reserves of oil in the world. When the price of oil crashed, it exposed the damage socialism had done. Venezuela has the world’s highest inflation rate (expected to reach 1660% this year) rolling blackouts, shortages of everything from medicine to milk and Caracas has the highest murder rate in the world.
Chavez’s successor Nicolas Maduro blames a US capitalist conspiracy and, says Amnesty International, is conducting a “witch-hunt against anyone who dares to voice an opinion contrary to his policies,” using “absurd conspiratorial arguments to justify irregular detentions.”
Milton Friedman once said if you put a government in charge of the Sahara Desert eventually there will be a shortage of sand … and sure enough, in Venezuela there are now fuel shortages. Rather than blaming capitalism, Maduro and the WEF should take a closer look at the damage wreaked by governments.