One of the challenges of writing about economics is that many people treat it as a religion. They know what they think, and they don’t want to be bothered by facts that may not support their beliefs.
The response to my new book, An Extraordinary Time, has reminded me of the intensity of that religious fervor. The book asserts that an economy growing at one-and-a-half or two percent a year is not doing badly. While we all enjoy boom conditions like those that prevailed from the late 1940s until 1973, the extraordinary growth during those years was due to factors that are unlikely to be repeated; the slower growth we see today is not “secular stagnation,” as some would have it, but rather an ordinary economy behaving normally.
This assertion has brought outrage from all over the political spectrum. Gold bugs are convinced that if only the United States would go back on the gold standard, the economy would soar. Supply-siders blame government regulation for all ills; if only government would get out of the way, the economy would grow far faster. Ronald Reagan still has many acolytes who are convinced his policies made the U.S. economy perform far better than it actually did. Many of the mainstream macroeconomists who dispense policy advice so freely naturally disagree with the idea that their wisdom is unlikely to bring back the boom times. Self-styled socialists attack my claim that slow growth is normal because slow growth leaves many workers unable to improve their conditions; they take government’s ability to produce faster growth for granted.
I admit the idea that slow growth is ordinary growth is not enthralling. Who wouldn’t like full employment, big wage increases year after year, and a steadily improving standard of living? But while it’s natural for politicians to promise such things, they have far less ability than they believe to improve productivity, which is the key to long-run economic growth. The fact that we might like the economy to soar doesn’t mean we have the tools to make that happen, at least for an extended period of time. Sometimes faith can overwhelm common sense.