The Post-1979 Shortfall in American Economic Growth: A Rough Survey: Focus for July 16, 2014
Most of American discussion about equitable growth these days revolves around rapidly growing inequality: that the rising tide has been lifting the big boats much more than the others, that trickle-down economics has not been trickling down, that enormous plutocratic wealth explosions at the top have been accompanied by stagnant wages in the middle and the bottom. But that is not the entire story. Equally important–at least I think it is equally important–is that the American economy has underperformed in real GDP growth since the end of the Social Democratic Era back in 1979.
If you go to Sam Williamson and company’s Measuring Worth website–http://measuringworth.com–and look at the numbers he has scrubbed and put together, you can learn an enormous amount–or at least learn an enormous amount about what our current guesses are…
Today I want to focus on one thing you can learn: the magnitude by which the American economy as a whole has underperformed not just in distribution but in raw total an-extra-dollar-for-billionaires-is-as-good-as-an-extra-dollar-for-everybody-else since the high tide and end of the Social Demcratic Era, as marked by the attainment of a real (2009 dollar) level of GDP per capita of $28,694 at the 1979 business-cycle peak during the Jimmy Carter presidency.
Think back (if you can) to 1979. (I myself can barely do so.) Back then real GDP per capita was double what it had been 28 years before, in 1951. And in 1951 real GDP per capita was double what it had been 28 years before in 1923. Before then growth had been slower: the previous doubling had taken 16 extra years, and takes us back not to 28 years before in 1895 but 44 years before in 1879. And the doubling before that takes us back 49 years to 1830. And my guess is that British settlement in America saw perhaps one more doubling between 1750 and 1830 or so, before which living standards were likely to have been constant. The overall picture is one of accelerating geometric growth since the beginnings of the Industrial Revolution: doubling times of 80 years, then 49, then 44, then 28, and then 28. A techno-realist would have expected a further doubling to $57,388 in 28 years–from 1979 to 2007–as 28-year doubling appeared to be a feature of the modern mass-production research-and-development-based American economy. And a techno-optimist might have speculated that ever-shorter doubling times were a feature of ever higher-tech economies.
They would have been disappointed. 2007 saw American real GDP per capita not at $57,388 but $49,310.6–a 16% gap relative to reasonable expectations as of 1979. And, of course, after 2007 things really went into the toilet: Projecting growth forward from 1923, 1951, and 1979 to 2014 would have led us to expect a 2009-dollar real GDP level right now of $68,246.2. We are going to have $50,295.0–a 35.7% gap.
As of now, the missing growth since 1979–the missing growth, taking no account of distribution, taking an-extra-dollar-for-billionaires-is-as-good-as-an-extra-dollar-for-everybody-else–amounts to more than one-third of the level of our current prosperity. And when we compare the $28,694 real GDP per capita level of 1979 with the $50,295 we have today and the $68,246.2 that is the extrapolated 1923-1951-1979 trend–well, we have had barely as much as half the economic growth since 1979 that back in 1979 we expected.
And, as I said, the distributional considerations are all on top of this…