America's Lost Decade: Decline Is Relative

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Here in the United States, we spent New Year’s weekend bidding good riddance to the awful, awful aughties " a miserable decade of bubbles and busts, rising health care bills and soaring deficits, domestic terror attacks and overseas quagmires.

Elsewhere, though, the decade’s turn was probably flavored by nostalgia. For much of the world, the last 10 years was a period to savor " an era of impressive economic growth, ever-higher life expectancy, relative peace and steady progress against poverty.

A billion-odd Chinese had a pretty good decade, and so did a billion Indians: their economies just about doubled in size, minting new millionaires and lifting countless peasants into a growing middle class. Brazil boomed, Indonesia prospered, and even Africa enjoyed a season of substantial growth. Nobody would mistake Vladimir Putin’s Russia for a liberal democratic paradise, but most Russians seem to prefer its stability to the basket-case republic Putin inherited from Boris Yeltsin.

Seen in this light, America’s lost decade looks less like a big zero and more like an inevitable corrective to the high-flying 1990s. The enormous Clinton-era gulf between the United States and its competitors was bound to narrow eventually. For now, at least, our decline is only relative " from hyperpower back to superpower, from the only nation that mattered to the one that matters most.

But as the 2010s begin, there’s reason to worry that America has further to fall. Our politics are polarized, our finances are still overleveraged, and our society is increasingly segregated " by income, education and family structure " between a thriving elite and a struggling working class. Worse, neither political party seems capable of forging a new policy synthesis to reckon with our domestic challenges.

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Type: Discussion • Score: 4 • Views: 4,051 • Replies: 12

[+3] - Thomas - 01/11/2010In the meantime, light has been thrown on the numbers Ross Douthat presented in the OpEd Robert's initial post refers to. I find this light fairly typical of how American conservatives approach...

@Robert Gentel,

Interesting view and very reasonable.

Oz had a good decade economically speaking too, and is very aware of how China and India are doing, because they are crucial to our economy.

I find it hard to get past the hyperbole of "from the only nation that mattered to the one that matters most" though.

IS it true that "the Obama Democrats are returning to their party’s long-running pursuit of European-style social democracy " by micromanaging industry, pouring money into entitlement and welfare programs, and binding the economy in a web of new taxes and regulations.

These policies may help smooth over the inequalities that have opened in our national life since the 1970s. But they threaten to cost America its position in the world along the way. "?

I'd have thought that the results of failure to regulate have been exposed pretty fully. Is Obama really micro-managing to unreasonable extent?

"

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@dlowan,

Good to hear Brazil has done well....and that some lift in African economies has occurred, at least in some countries.

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@dlowan,

dlowan wrote:

IS it true that "the Obama Democrats are returning to their party’s long-running pursuit of European-style social democracy " by micromanaging industry, pouring money into entitlement and welfare programs, and binding the economy in a web of new taxes and regulations.

No. Obama's Democrats still stand a good deal to the right of Europe's Social Democrats. The author sounds as if he hadn't spent much of his life in Europe.

dlowan wrote:

These policies may help smooth over the inequalities that have opened in our national life since the 1970s.

The decades in which America experienced the fastest economic growth were the 50s and 60s. These were also years during which her governments pursued what the author calls "European-style Social Democracy". Where does he take the confidence that Democratic policies are bad for economic grown? Certainly not from the data.

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@Thomas,

Quote:

Certainly not from the data.

That's interesting.

And here I thought you'd be all hands off the free market!

He's a commie, though. Isn't he basically writing about dialectic?

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@Thomas,

Thomas wrote:

The decades in which America experienced the fastest economic growth were the 50s and 60s. These were also years during which her governments pursued what the author calls "European-style Social Democracy". Where does he take the confidence that Democratic policies are bad for economic grown? Certainly not from the data.

I think you know that your "logic" here and the conclusion you infer (but don't state explicitly) are faulty. ' Moving in a certain direction' isnt the same thing as 'getting there' or where one is along a spectrum of conditions'. What you offered may have been "data", but it certainly did not either prove or demonstrate your conclusion.

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@georgeob1,

I would only offer that "relative deprivation" became a major economic reality beginning in the 1950's but not really becoming significant until the 1980's and dominating political reality in 2,000's.

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@dyslexia,

If you are suggesting that "relative deprivation" or some other measure of income/wealth inequality is a necessary prerequisite for high economic growth, I can quickly offer you a large number of counterexamples.

Certainly the relatively social democratic governments of western Europe are not models of high economic growth, and, specifically, they have not outperformed the United States. A very large fraction of the economic growth of Europe is the direct result of the lifting of the socialist chains from the economies of Central European nations after 1989.

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@georgeob1,

[quote="georgeob1"I think you know that your "logic" here and the conclusion you infer (but don't state explicitly) are faulty. ' Moving in a certain direction' isnt the same thing as 'getting there' or where one is along a spectrum of conditions'.[/quote]
No -- but the fact remains that American productivity growth was at its greatest under Eisenhower Republicans and Great Society Democrats. (And New Deal Democrats -- but I'm leaving them out because coming out of the Great Depression, and World War II, make data from the 30s and 40s hard to compare.)

Another fact that remains is that American productivity growth was slower in the 80s, 90s, and zeroes, the area of deregulation and tax cutting. So, even if you do believe that the economy's supply side holds the key to a nation's prosperity, Supply Side Economics simply aren't doing much for it, judging by the history of American productivity growth.

Maybe it would be a good thing if the Republicans channeled their inner Eisenhowers, and the Democrats their inner Johnsons. (That last part sounds so wrong, but there you go ...)

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@dlowan,

dlowan wrote:

And here I thought you'd be all hands off the free market!

I am a utiliarian -- one who approves of policies to the extent that they make as many people as possible as happy as possible. Which policies bring that about is an empirical question for me. I feel free to change my mind about the answer as I learn of new evidence.

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@Thomas,

Thomas wrote:

Another fact that remains is that American productivity growth was slower in the 80s, 90s, and zeroes, the area of deregulation and tax cutting. So, even if you do believe that the economy's supply side holds the key to a nation's prosperity, Supply Side Economics simply aren't doing much for it, judging by the history of American productivity growth.

Maybe it would be a good thing if the Republicans channeled their inner Eisenhowers, and the Democrats their inner Johnsons. (That last part sounds so wrong, but there you go ...)

I think you would agree that productivity growth depends on many more, and more directly important, variables than just contemporary government tax & regulatory policy. Moreover, the effects of tax & regulatory policies themselves take time to act: the economic and regulatory follies of the Johnson Administration had as much to do with the economic stagnation of the 1970s as did the then contemporary follies of the Nixon Administration.

I would agree with your implication that there are no enduring policy remedies for all of these ills, and that the best service of both contending parties is to limit the excesses of the other - and to provide an alternative when earlier remedies have run out of coherence and effect.

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In the meantime, light has been thrown on the numbers Ross Douthat presented in the OpEd Robert's initial post refers to. I find this light fairly typical of how American conservatives approach European Social Democracy nowadays. The numbers seem to becoming from a longish commentary from John Manzi in National Affairs magazine.

Quote:

From 1980 through today, America's share of global output has been constant at about 21%. Europe's share, meanwhile, has been collapsing in the face of global competition " going from a little less than 40% of global production in the 1970s to about 25% today. Opting for social democracy instead of innovative capitalism, Europe has ceded this share to China (predominantly), India, and the rest of the developing world.

These are the numbers Ross Douthat uncritically picked up.

A more critical blogger by the name of Jonathan Chait e-mailed Manzi to check what he means by "Europe" and "European Social Democracy". Manzi replied that it includes all of Europe -- including Eastern Europe, which was governed by communists in the 1970s and 80s. If Manzi's numbers say anything, they say something about the failures of communism, not social democracy. (Which is irrelevant of course, since nobody wants to introduce communism -- not in America, not in Europe.)

Yet there is more: As Jonathan Chait also points out, a nation's share of world GDP reflects its population as well as its productivity. Ross Douhat had conveniently forgotten to mention that America's immigration policies had been a lot more open than Europe's. By doing so, Douhat has overstated American productivity.

And that isn't the end of it, either. After Manzi tried to rebut Chait, citing the dataset he used in the process, Paul Krugman gave Manzi's numbers another round of review. He found that even under Manzi's flawed premises, Europe's numbers don't look quite as bad as he makes them look. Manzi, then, must have made even more mistakes -- Krugman isn't sure which, but guesses that he included Eastern Europe in Europe's GDP of the 70s, but not in Europe's GDP of today.

Krugman concludes:

Paul Krugman wrote:

It’s probably not a deliberate case of data falsification. Instead, like so many conservatives, Manzi just knew that Europe is an economic disaster, glanced at some numbers, thought he saw his assumptions confirmed, and never checked.

And that’s the real moral of the story: the image of Europe the economic failure is so ingrained on the right that it’s never questioned, even though the facts beg to differ.

I couldn't have summed it up better myself.

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@Thomas,

Oh, I just noticed: Paul Krugman is dedicating today's column to the same topic:

Paul Krugman wrote:

Europe’s economic success should be obvious even without statistics. For those Americans who have visited Paris: did it look poor and backward? What about Frankfurt or London? You should always bear in mind that when the question is which to believe " official economic statistics or your own lying eyes " the eyes have it.

In any case, the statistics confirm what the eyes see.

Source

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America's Lost Decade: Decline Is Relative

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