4% Growth Era for the Taking
For better or worse, the recent financial crisis pushed us to rethink many of the conventional socio-economic paradigms. Although most conclusions have been unorthodox and to some degree anti-free market, one particular position developed into a rather trivial position. According to this view, economic growth (measured by traditional GDP) in the Western developed economies will stagnate around 1.5-2.3% for the foreseeable future. It must not be so. In fact, morally speaking it cannot be so.
Since the end of WWII annual economic growth in the U.S has averaged around 3%, with several recessions, which were followed by remarkably robust recoveries, excluding the recovery after the Great Recession. Therefore, setting a new growth rate above 3%, let alone 4% for a Western economy might sound overly optimistic and even silly. After all majority of economies, who have achieved and maintained 4% or more growth rate are catch-up economies. Nevertheless, there are several reasons to believe that U.S can return to higher average growth rate trends.
But in order to do so, America ought to go through a complete overhaul of growth-impeding policies. Broadly speaking the surest path back to American prosperity is through free-markets and limited government. And although often times such statements are considered as fallacious dogmas from the free-market extremist, historical data overwhelmingly backs up the benign power of capitalism. We must admit first that the path to even more prosperous nation requires U.S to keep markets open and most importantly engage with other countries through sensible trade-policies, which first and foremost prioritize our interests. Quite frankly trade cannot be based on charity.
Of course nothing is written in stone. Technological and demographic trends on top of too few workers supporting non-workers will strain much of labor market overhaul efforts. Moreover, much must be done in reversing current policies, which have led to business uncertainty. Consequently, the boom-bust cycles of the future might have protracted periods of slump and ever weaker recoveries.
Sadly, we’ve tried just about every possible policy mix but free markets and small government policies. What are we so afraid of? Freedom and prosperity?