The Economist argues that 2022 was a good year for the West, which in many ways has shown surprising unity against Russia’s invasion of Ukraine. And it’s also regaining positions against a China paralyzed by its enormous mistakes in managing the pandemic (here Danilo Taino’s analysis). But the British weekly also argues that wealthy Western democracies seem unable to get rid of one problem: slow growth. Worse, they seem less and less interested in speeding it up.
politics and closure
An analysis carried out by the weekly newspaper as part of its Manifesto Project, which has been collecting and analyzing the election programs of parties in OECD countries since the 1960s, also says: What comes out is that these programs are only half as strong are geared towards growth, just like in the 1980s. For example, today’s politicians are less likely to tout the benefits of the free market than their predecessors. They tend to express anti-growth moods, e.g. B. Positive assessments of state control over the economy. And it’s not just about words: the U.S. government introduced 12,000 new regulations in 2021, an increase from recent years. From 2010 to 2020, rich countries’ import tariffs doubled. Britain voted for and implemented Brexit. Other countries have rebelled against immigration. In 2007, almost 6 million people migrated to advanced economies. In 2019, the number dropped to just 4 million. And there remains strong opposition to housing in areas that attract workers, such as major cities. Is it any wonder that global GDP per capita grew at an average annual rate of 2.25% between 1980 and 2000, but fell to 1.1% in the new millennium?
Voters over the age of 65
The inconvenient truth, according to The Economist, is that the appetite for economic growth diminishes as we age. Retirees are more interested in investing in welfare and healthcare than creating jobs for their grandchildren. And many Western societies are getting older. The weekly puts it so brutally that it sounds a little petty: People who don’t work or are about to retire tend to have less interest in getting rich. They will support things that benefit them directly, like healthcare spending, but reject things that benefit them only after they’ve left, like immigration or housing. Their turnout is usually high, so their opinions carry weight.
The contrast to the second half of the last century is stark: the second half of the 20th century was a golden age of growth. After World War II, a baby boom produced a cohort of better-educated workers than any previous generation, increasing average productivity as experience increased. In the 1970s and 1980s, women entered the labor market in many affluent countries. The removal of trade barriers and the integration of Asia into the world economy subsequently led to much more efficient production.
Today’s context
It doesn’t take long to realize that many of these conditions are gone and won’t be coming back anytime soon. There are some complicating factors. The fact that social media express displeasure quickly and loudly has many positive aspects, but it also prompts politicians to fill any gaps in consensus with public injections of money. Immediate measures to save jobs during the pandemic or to protect families and businesses in the face of high bills are understandable and make sense in the short term, but if they last longer they risk keeping businesses alive that are no longer in the market or sending false signals to put the need to reform errors and increase the efficiency of the system. Today’s leaders are the most statist in many decades and seem to believe that industrial policy, protectionism and bailouts are the way to economic success. This is partly due to the misconception that liberal capitalism or free trade is responsible for slowing growth. Sometimes this belief is reinforced by another fallacy, namely that growth can’t be green (which of course doesn’t mean that often it hasn’t been, and just as often isn’t).
The British weekly does not appear to be projecting optimism for the immediate future: the West is being cast in a good light for now by autocratic China and Russia, both of which have inflicted deep economic wounds. Unless they return to growth, however, prosperous democracies will lose their economic vitality and weaken on the world stage. Maybe we need a shock, a jolt. Or do we have to wait for another financial crisis or perhaps the natural demise of the baby boomers? Whatever the answer, the Economist concludes, until growth accelerates, Western politicians must hope their enemies continue to make mistakes