Found this interesting, especially when projected growth for the coming decade is 2.2% vs 3.5% for the quarter century that began in 1983.
In 1930, with the Great Depression in its early stages and British unemployment already around 15 percent, John Maynard Keynes wrote an essay about the economic glory to come. As bizarre as it seemed with banks failing all around, Keynes believed that, while there would be turbulence along the way, living standards would soar to unimagined heights thanks simply to the power of compounding applied to historic rates of growth. As it turned out, Keynes was right. In the United States, average real disposable income per person -- the purchasing power of the money that's yours to spend or save -- tripled between 1960 and 2009, says James K. Glassman, former undersecretary of state for public diplomacy and public affairs, and current executive director of the George W. Bush Institute in Dallas.
Keynes asserted that while the "struggle for subsistence" had been the most pressing problem, humans, or at least humans of developed nations, had cracked the code. But what happens after the economic problem has been solved, as it has been in such places as the United States, Japan and Europe, asks Glassman?
Italians, for example, are six times richer now than their grandparents were in 1950. For many Europeans, satiety has been achieved, and therein has arisen a new problem, one not anticipated by Keynes, says Glassman:
Prosperity, it seems, can bring sloth, which in turn disrupts the virtuous cycle, though not immediately.
There is a period, which we are in right now, where the disruption is not apparent, where it can be obscured through government monetary and fiscal manipulation.
But eventually, a simple rule will prevail: you can't live well if you don't work.
The paradise of leisure that Keynes predicted is impossible in stasis. To keep it going, a country has to keep growing. This is an important lesson for Americans as well, says Glassman:
The Congressional Budget Office (CBO) is predicting GDP increases of only 2.2 and 2.3 percent beginning the middle of this decade, compared with the 3.5 percent average for the quarter-century that began in 1983.
With such anemic growth and with reasonable assumptions of spending and taxes, the CBO projects that America's debt-to-GDP ratio will rise to 200 percent -- triple its current level -- by 2032.
Source: James K. Glassman, "Free Enterprise Key to Continued Economic Growth," Commentary Magazine, July/August 2010.
For text:
Notes on Europe?s Economic Decadence
For more on Economic Issues:
Economic Issues - Page 1 | National Center for Policy Analysis
This article deals with the cost to the average wage earner by expanding the size of government. The comparison is made between the USA and Sweden:
Americans are debating whether to substantially expand the size of their government. They should look carefully before they leap, according to Andreas Bergh, an associate with the Research Institute of Industrial Economics, Lund University and the Ratio Institute in Stockholm; and Magnus Henrekson, CEO of the Research Institute of Industrial Economics in Stockholm.
Fifty years ago, Sweden and America spent about the same on their government, a bit under 30 percent of gross domestic product (GDP). This is no longer true, say Bergh and Henrekson:
In the years leading up to Sweden's financial crisis in the early 1990s, government spending went as high as 60 percent of GDP; in America it barely budged, increasing only to about 33 percent.
While America was maintaining its standing as one of the world's wealthiest nations, Sweden's standing fell; in 1970, Sweden was the fourth richest country in the world on a per capita basis and by 1993, it had fallen to 17th.
According to Bergh and Henrekson, Sweden's dramatic increase in the size of government contributed to its sluggish growth. The weight of the evidence demonstrates that when government spending increases by 10 percentage points of GDP, the annual growth rate drops by 0.5 to 1 percentage point. This may not sound like much, but over 30 years this would result in the loss of trillions of dollars each year in an economy as large as America's.
To put it in personal terms:
The average American's per capita income in 2009 was $46,405.
A dip of 1 percent in the economic growth rate (to 2 percent from 3 percent for example) would mean an individual income loss of $464 in the first year.
Over 30 years, a 1 percentage point difference in the growth rate translates to roughly $354,000 in lost income per person.
Many Americans argue that the United States could safely increase its spending share from roughly 32 percent of GDP to between 37 percent and 38 percent of GDP. The evidence suggests otherwise. The United States needs to acknowledge the trade-off between government size and economic growth. A larger government sector may decrease some economic inequality, but will ultimately leave Americans sharing smaller pieces of a smaller pie, say Bergh and Henrekson.
Source: Andreas Bergh and Magnus Henrekson, "Lessons from the Swedish Welfare State," Wall Street Journal, July 10, 2010.
For text:
http://online.wsj.com/article/SB10001424052748704535004575348641192320912.html
For more on Government Issues:
http://www.ncpa.org/sub/dpd/?Article_Category=33
In 1930, with the Great Depression in its early stages and British unemployment already around 15 percent, John Maynard Keynes wrote an essay about the economic glory to come. As bizarre as it seemed with banks failing all around, Keynes believed that, while there would be turbulence along the way, living standards would soar to unimagined heights thanks simply to the power of compounding applied to historic rates of growth. As it turned out, Keynes was right. In the United States, average real disposable income per person -- the purchasing power of the money that's yours to spend or save -- tripled between 1960 and 2009, says James K. Glassman, former undersecretary of state for public diplomacy and public affairs, and current executive director of the George W. Bush Institute in Dallas.
Keynes asserted that while the "struggle for subsistence" had been the most pressing problem, humans, or at least humans of developed nations, had cracked the code. But what happens after the economic problem has been solved, as it has been in such places as the United States, Japan and Europe, asks Glassman?
Italians, for example, are six times richer now than their grandparents were in 1950. For many Europeans, satiety has been achieved, and therein has arisen a new problem, one not anticipated by Keynes, says Glassman:
Prosperity, it seems, can bring sloth, which in turn disrupts the virtuous cycle, though not immediately.
There is a period, which we are in right now, where the disruption is not apparent, where it can be obscured through government monetary and fiscal manipulation.
But eventually, a simple rule will prevail: you can't live well if you don't work.
The paradise of leisure that Keynes predicted is impossible in stasis. To keep it going, a country has to keep growing. This is an important lesson for Americans as well, says Glassman:
The Congressional Budget Office (CBO) is predicting GDP increases of only 2.2 and 2.3 percent beginning the middle of this decade, compared with the 3.5 percent average for the quarter-century that began in 1983.
With such anemic growth and with reasonable assumptions of spending and taxes, the CBO projects that America's debt-to-GDP ratio will rise to 200 percent -- triple its current level -- by 2032.
Source: James K. Glassman, "Free Enterprise Key to Continued Economic Growth," Commentary Magazine, July/August 2010.
For text:
Notes on Europe?s Economic Decadence
For more on Economic Issues:
Economic Issues - Page 1 | National Center for Policy Analysis
This article deals with the cost to the average wage earner by expanding the size of government. The comparison is made between the USA and Sweden:
Americans are debating whether to substantially expand the size of their government. They should look carefully before they leap, according to Andreas Bergh, an associate with the Research Institute of Industrial Economics, Lund University and the Ratio Institute in Stockholm; and Magnus Henrekson, CEO of the Research Institute of Industrial Economics in Stockholm.
Fifty years ago, Sweden and America spent about the same on their government, a bit under 30 percent of gross domestic product (GDP). This is no longer true, say Bergh and Henrekson:
In the years leading up to Sweden's financial crisis in the early 1990s, government spending went as high as 60 percent of GDP; in America it barely budged, increasing only to about 33 percent.
While America was maintaining its standing as one of the world's wealthiest nations, Sweden's standing fell; in 1970, Sweden was the fourth richest country in the world on a per capita basis and by 1993, it had fallen to 17th.
According to Bergh and Henrekson, Sweden's dramatic increase in the size of government contributed to its sluggish growth. The weight of the evidence demonstrates that when government spending increases by 10 percentage points of GDP, the annual growth rate drops by 0.5 to 1 percentage point. This may not sound like much, but over 30 years this would result in the loss of trillions of dollars each year in an economy as large as America's.
To put it in personal terms:
The average American's per capita income in 2009 was $46,405.
A dip of 1 percent in the economic growth rate (to 2 percent from 3 percent for example) would mean an individual income loss of $464 in the first year.
Over 30 years, a 1 percentage point difference in the growth rate translates to roughly $354,000 in lost income per person.
Many Americans argue that the United States could safely increase its spending share from roughly 32 percent of GDP to between 37 percent and 38 percent of GDP. The evidence suggests otherwise. The United States needs to acknowledge the trade-off between government size and economic growth. A larger government sector may decrease some economic inequality, but will ultimately leave Americans sharing smaller pieces of a smaller pie, say Bergh and Henrekson.
Source: Andreas Bergh and Magnus Henrekson, "Lessons from the Swedish Welfare State," Wall Street Journal, July 10, 2010.
For text:
http://online.wsj.com/article/SB10001424052748704535004575348641192320912.html
For more on Government Issues:
http://www.ncpa.org/sub/dpd/?Article_Category=33
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