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The power of growth

I've decided to become an Aughts revisionist: The decade just wasn't that bad. Particularly not worldwide. China and India had explosive economic growth, of course. But Brazil, Indonesia and a lot of other populous, poor countries had growth ranging from steady to good. And as Tyler Cowen says, we shouldn't dismiss that:

One lesson from all of this is that steady economic growth is an underreported news story — and to our own detriment. As human beings, we are prone to focus on very dramatic, visible events, such as confrontations with political enemies or the personal qualities of leaders, whether good or bad. We turn information about politics and economics into stories of good guys versus bad guys and identify progress with the triumph of the good guys. In the process, it’s easy to neglect the underlying forces that improve life in small, hard-to-observe ways, culminating in important changes.

In a given year, an extra percentage point of economic growth may not seem to matter much. But, over time, the difference between annual growth of 1 percent and 2 percent determines whether you can double your standard of living every 35 years or every 70 years. At 5 percent annual economic growth, living standards double about every 14 years.

Domestically, this is also why it matters if America lets itself get trapped in a Japan-like decade of unnecessarily slow growth. Incremental progress is better than misery, but we underestimate how much worse it is than faster progress.

By Ezra Klein  |  January 5, 2010; 7:00 AM ET
Categories:  Economy  
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Comments

In America, we lost jobs and wages this past decade. That is not incremental growth. That is misery.

Transnational corporations, on the other hands, did well.

Posted by: Lomillialor | January 5, 2010 7:47 AM | Report abuse

Economic growth has a huge anchor holding it in place and will for the indefinite future Stable strong growth is therefore not sustainable. The problem is two fold,the12 trillion dollar national debt and the practice of borrowing money to pay the bills. Real economic growth is not sustainable until the practice of the feds borrowing practices is reduced and reduced dramatically! On the other side of the coin Americans can't invest money they don't have. Many wealthy Americans don't desire to reinvest the tremendous wealth the have accumulated, example,top teer bankers. People without jobs cannot contribute to the economy. As a realist I doesn't underestimate the dire situation this country is caught up in.

Posted by: joe100821 | January 5, 2010 8:48 AM | Report abuse

No, the Naughts were not bad worldwide.
They were, however, disastrous for America.

Posted by: adamiani | January 5, 2010 9:22 AM | Report abuse

Ezra - Your quote makes the assumption that the Sarkozy (Stiglitz, Sen) Commission is trying to get away from - that more market activity somehow implies a greater standard of living. In the growth of the 1950s, the US left behind good leafy greens and replaced them with iceberg lettuce, replaced fresh artisanal bread with industrial bread and began moving generally to ready-to-eat foods. They were new market transactions replacing production in the home, meaning a higher GDP. But to the extent we value our health or food quality more than the convenience of ready-to-eat foods, they didn't necessarily increase the standard of living. Even more profoundly, when you include externalities, such as pollution, it's not even clear that all economic growth increases consumer surplus.

Posted by: GrandArch | January 5, 2010 9:52 AM | Report abuse

When you look at global GDP growth between 2000 and 2009, there doesn't appear to be much different than other periods. Therefore, the gains of some countries (India, China) appear to have come at the expense of other countries (North America and Europe). Google has an interesting graph at http://www.google.com/publicdata?ds=wb-wdi&met=ny_gdp_mktp_kd_zg&tdim=true&q=global+gdp+growth

Posted by: marvyT | January 5, 2010 10:32 AM | Report abuse

Why do you think "incremental progress" precludes misery?

It doesn't. It just relegates misery to the less visible in our culture, therefore making it much more palatable to the masses.

Posted by: jc263field | January 5, 2010 2:15 PM | Report abuse

It can be misleading to look at statistics by decade. On 1/1/00, we were still at the top of the tech bubble with the Dow at almost 11,000. Two years earlier, the Dow average was just below 8,000.

The starting point for comparison is pretty random, and so should be viewed with appropriate skepticism--which isn't to say it may not turn out to be accurate after all, but just that it requires more analysis.

Posted by: dasimon | January 5, 2010 6:29 PM | Report abuse

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