Imagine a debate on any subject being like a sea in which
the debaters are immersed up to their necks in water. Using their hands, they
catch what they can of what is supposed to be wholesome; and add it to a basket
that is used to nourish the collective.
Believing that you were going to see active debaters as they
dive deep into the sea to catch the big ideas, you are disappointed to see them
animated by an intellectual lethargy that keeps them near the surface as they
try to catch an occasional worm or a minnow.
But then, you are surprised to see one debater burst with
unusual energy as he lunges deep below the surface. He comes up eventually,
having caught an idea of respectable size. He is George F. Will who wrote an
article that came under the title: “The simple arithmetic that could jump-start
America 's
economic growth,” published on January 29, 2016 in the Washington Post.
Here is that idea paraphrased: “If the average annual growth
of 2.2 percent is maintained over the next 50 years, the GDP will grow from
today's $16.3 trillion (in 2009 dollars) to $48.3 trillion. If, however, growth
averages 3.2 percent, the GDP in 50 years will be $78.6 trillion dollars. This
means that at 3.2 percent growth instead of 2.2 percent, the aggregate wealth
of the nation would have increased by $521 trillion.”
This is great stuff because contrary to what the title of
the article says, it is not simple arithmetic. It is advanced mathematics done
in one of two ways. The first involves the combination of two branches of
mathematics: the expansion series and integration. The second involves the
writing of a computer algorithm for an elaborate formula which, iterated 50
times, adds up to the 521 trillion value. Seeing all that, you can tell that
the writer took the trouble to consult with someone who knows how to do these
things.
Unfortunately, however, George Will does not maintain the
momentum. He lapses into the mundane, even goes a notch below that – to a place
where political considerations the size of a minnow thrive. What he does is
that he elaborates on two subjects that have been flogged to death already. And
he does it without adding one ounce of depth or insight to them. The subjects
are (1) American corporations keep two trillion dollars overseas, and (2) the
tax code in America needs to be revamped.
Instead of repeating the usual talking points, the writer
should have explained that in a mature industrial economy, you must save at
least 3 times as much as the growth rate you desire to achieve. That is, if you
want to see a 3.2 percent growth rate, the nation needs to save at least 9.6
percent of the GDP. Given that the size of the American economy is nearly $19
trillion dollars, the repatriation of the $2 trillion sitting overseas would be
more than enough to do the trick.
This would have raised the question as to why the economy is
currently growing at 2 percent while the nation's savings rate is nowhere near
the 6 percent rate. To find the answer, the debaters would have pushed deeper
into the subject, and would have come up with nuggets of insight which,
stitched together, would have brought up the subject of “Planned Obsolescence.”
That idea has been around for a century, and was restricted
to the manufacturing industries. To comply with the principle, the American
makers of products designed them to become obsolete quickly, thus force the
consumers to replace them just as quickly. But when the foreign competitors –
especially the Japanese – came into the market with quality products, the
American producers were forced to clean up their act.
While this was happening in manufacturing, the culture of
planned obsolescence was far from dying. It infested the service industries,
especially the financial ones; and then the entire economy became infested.
This meant that you could create the perception of real growth – free of
inflation – by creating new services to replace old services when in reality,
everything old was new again.
That is, instead of innovating, you recycled old services
and peddled them as new services by changing the label on them. This done,
planned obsolescence migrated back to the manufacturing industries where old
products were peddled as new inventions when, in fact, nothing had changed
except the price.
In practical terms, it meant that you added nothing to the
wealth of the nation because the size and quantity of the goods and services
produced did not increase. And while the dollar value of the GDP has increased,
it was not perceived as inflation because yesterday's orange became today's
apple, while yesterday's apple became today's mango.
And without the ability to perceive a change in price for
the same product, you could not see inflation, much less measure it.