A bright future
Roger Bootle at the Daily Telegraph writes:
Today, I want to discuss the prospects for long-term increases in productive capacity. This may seem arcane, but it isn’t. It holds the key to prospects for living standards – and much else besides.
Not so long ago, it would have seemed incredible that this was up for discussion. My own generation, when we were young, didn’t entertain any doubts.
We regarded it as axiomatic that people would get much better off year after year. Yet most of economic history has been one long non-event, with living standards very nearly static from one decade to the next – until about 1500.
Then came a series of changes that saw economic growth set in – slowly at first but then gathering pace, culminating in what we call the Industrial Revolution. In the decades after the Second World War, productivity and average living standards here grew by about 2pc per annum, and at broadly similar rates elsewhere in the west.
Yes, economic growth seems to be a relatively recent concept. This no doubt explains why the Greens are generally against it!
The gathering idea is that the last two or three hundred years have been an aberration and that we are returning to the prior state of mankind. So no American dream. In fact, no dream anywhere from Sorrento to Scunthorpe.
There are three broad strands to this pessimism. The first concerns the rise of Asia. On this subject, I despair of the chattering classes. They think of economic life as a game of winners and losers.
As far as relativities are concerned, it is, of course, true that as Asia goes up then we must go down. But not in regard to absolutes.
The fact that China et al are going to become more prosperous does not necessarily mean that we are going to become worse off. On the contrary, the growth of markets that their development promises, and the increased global specialisation that it makes possible, offer the prospect of increased prosperity.
I agree. I just hope that as China’s economic prosperity and freedom increases, so too does their political freedom.
The second source of pessimism concerns limited resources. Unfortunately, the resource that is most relevant here is the limited space for this column. Suffice it to say that I have never accepted the view that we are soon facing resource, or energy, crunch time.
The great 19th century economist William Jevons once forecast the end of industrial growth on the grounds that we would soon run out of coal. This set the scene for more than a century of bad forecasting by economists. We didn’t run out of coal. And anyway, it became of much less relevance. Fracking for shale gas is the latest manifestation of the tendency for human ingenuity and the abundance of the earth to trump the pessimists.
Human ingenuity is incredibly resilient. Look at the change in technology in the last 90 years? Motorcars, for example, were just starting to catch on then. Who knows what the world will look like in 2100? Even 2010 is radically different to 1990 thanks to the Internet.