Thursday, August 11, 2016

"Forgetting" How to Grow

Ingenuity is not "dead". Why, then, has it become so difficult to create product which more closely approximates what people actually want and desire, across the entire spectrum of their lives? After all, this is what economic growth is really about. If there were a simple way to sum up the uncertainty of the present, perhaps the above title could qualify. Economic growth - disparaged though it has become of late - is nonetheless the best means we collectively have, to manifest the kinds of choices which also translate into personal freedom and a strong desire to live.

Even though some pundits and policy makers are still willing to support free markets as they currently exist, the potential for truly free markets - particularly those of knowledge based services formation - is scarcely in the beginning stages of what is actually possible - especially in a digital age. The fact such possibilities are forcefully being held back, given the countless investments in this capacity, endangers the entire edifice of today's wealth structure to a greater degree than it may seem. Hard restrictions in knowledge use, make it easy for all concerned to dismiss a wide range of existing resource capacity which - if given the chance, could contribute to a better reality than what we inhabit now. Few have had the chance to discover the desirable nature of economic growth, as it also relates to the potential for personal growth.

Indeed, special interests disallow innovative product creation in non tradable sectors on a regular basis - a process which increasingly limits knowledge use in populations as a whole. Furthermore: to what degree does a corresponding refusal to innovate our physical environments, influence the higher labor costs which also impact productivity? It is impossible to say.

Too many have forgotten that economic growth via innovation, is the best way to ensure that reasoned logic and practical knowledge remain a part of political and social dialogue. Hope for the future - in the form of growth and new product potential - could ensure that combined societal efforts are about coordination of useful and innovative ideas, instead of the present reality of public personalities which mostly fall back on demagoguery and/or empty promises.

Economically speaking, growth is new supply side contributions for aggregate demand, which means new product and the requisite monetary representation this additional choice entails. Thus far, however, even the dialogue which is supposedly about growth, is really about shifting claims on what is essentially already existing wealth. For instance, from John Cochrane's response, to a call from Larry Summers to create more "demand for the product of business":
Leave aside the last 30 years of growth theory, which is silent on "demand", we can do nothing better than move around 1970s era IS and LM curves, and revive ideas from the 1930s?
Granted, Cochrane was pleased that Summers wanted the Democratic party to take greater notice of a need for growth. He was just disappointed that such a call could mostly take the form of a fiscal wish list, which may or may not correspond with any actual marketplace gains. When policy makers begin to discuss various ways to raise income so as to meet the consumption requirements of business, why is this not a red flag for corporations that something about supply side structure is not working properly?

Worse, government fiscal wish lists are a drop in the bucket of staked claims on existing wealth - claims which take a myriad of forms. It is proving too easy, to confuse wealth capture with productive gains in aggregate demand. But the more insidious problem in this regard, is a growing public and supply side response, which seeks claims on already existing wealth via trade protectionism. Truly, both fiscal wishful thinking and protectionism, are indicative how easy it is to forget, that it is still possible for our society to grow.

History has reminded us too many times, that when growth and economic options are limited, political factions fight all the more over what remains. Finally, citizens grow so weary over the constant feuding, that they become ready for someone to put an end to the struggle. Hence support only grows for an authoritarian state which will do so, even if on terms that everyone does not agree with.

As Timothy Taylor notes, this support is also growing among younger individuals, who in some respects have not experienced the same freedom to express opinions and ideas that was possible, only decades earlier. They deserve better than the limits we have arbitrarily imposed on ourselves, in recent decades. Hopefully it is not too late to turn this unfortunate circumstance around. As a libertarian, it is not enough for me to simply believe in free markets. I have to do whatever is possible to help bring them about, even if it sometimes seems impossible to do so. Life without the spark and dynamism of economic freedom - the solitude and burdens such an empty life can create - is not something I would wish on anyone.

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