Can America Produce Genuine Long-Term Growth?

By: Michael Rozeff | Sun, Jan 3, 2010
Print Email

Genuine means authentic which means "conforming to fact and therefore worthy of belief and trust" (as the thesaurus says), and the antonym is counterfeit, false, and a sham.

Amid the intense focus on the recession and Washington's efforts to combat it, a far more important question is being ignored. Can the American political economy come up with honest-to-goodness long-term growth? Year in and year out growth that augments capital, that reduces unemployment and underemployment to stable and low levels, that significantly improves real incomes of most Americans, that raises living standards throughout the land, and that accompanies a solid increase in asset values in gold-deflated terms?

Is the American political economy in a position to augment wealth and create value over the long-term? Much depends on the answer.

The question is not recovery from a deep recession. Nor are we referring to a statistical rise in economic numbers that are heavily influenced by large amounts of new government debt and new government spending. We are talking about a decade or two of real economic growth, such that at the end, nearly all working people are better off and feel better off.

No one can bake a genuine cake without the proper ingredients. One cannot bake a real cake with the wrong recipe and the wrong ingredients. A genuine cake (made at home from scratch) has relatively few ingredients, and they are pure and unadulterated, such as butter, eggs, flour, sugar, vanilla, and baking powder. A fake cake, the kind of cake sold in most grocery stores, has a long list of chemicals such as partially hydrogenated vegetable and/or animal shortening, high fructose corn syrup, glycerin, wheat protein isolate, polysorbate 60, soy protein isolate, sodium stearoyl, and more.

Are Americans in a position to bake a genuine economic cake?

Washington has largely remade the American kitchen to the point where it is equipped mainly to bake fake cakes. It is a government-run kitchen. The cooks are shackled. They no longer control the production. The maintenance of the kitchen is going downhill. We are lucky even to get as many fake cakes coming out of the ovens as we used to. Lately we import many of them, which we pay for with fake money.

Since the point here is to raise the important question, let us put the matter extremely. Genuine long-term growth is impossible given the present political economy of America. Far too many economists suggest the opposite as they spy green shoots, recovery, stabilization, and a stock market rebound. They are addressing neither the long term nor genuine wealth-augmenting growth. Cheerleading for temporary, unsustainable, and unbalanced recoveries has no significant impact on the long-term issue.

If Americans do produce real and substantial growth over the next 20 years, it will not be with the existing structure of excessive control emanating from federal and state capitols. Real growth - growth that brings pervasive and widespread improvements in well-being - is not impossible. It simply won't happen in a society with a high and increasing degree of centralized control that destroys market after market. It simply won't happen in a warfare-and-welfare society. It simply won't happen in a society heavily reliant on government programs.

In order for genuine value creation to occur, Americans throughout every level of our society have to possess the incentives to bring it about. They have to see the possibilities of making money that they then can keep. They have to be able to raise funds to finance their ventures. It has to pay to take the risks. They have to have the power to gather resources and transform them in ways that enhance well-being. This cannot happen in a government-dominated economy.

The recipes for baking genuine cakes have not been lost even if we are inundated with politicians and economists who peddle recipes for the counterfeit variety. But as long as they control the kitchen and the cooks, we are not going to get the real thing.

Sorry, America, but socializing health-care is not going to do it. Subsidizing mortages is not going to do it. Bailing out favored companies is not going to do it. Outsize military spending is not going to do it. Regulating and controlling energy markets is not going to do it. Printing money is not going to do it. Welfare programs are not going to do it. More money thrown at education is not going to do it. More taxes, more subsidies, and more regulations are not going to do it. Sham accounting in an insolvent banking system is not going to do it. Electing Demopublicans is not going to do it.

To stimulate constructive thought and change, the hypothesis bears repeating: Genuine long-term growth is impossible given the present political economy of America.



Author: Michael Rozeff

Michael S. Rozeff
Professor Emeritus
SUNY at Buffalo - Department of Financial & Managerial Economics
Department of Finance and Managerial Economics
Buffalo, NY 14260
United States

Michael S. Rozeff

Michael S. Rozeff is a retired Professor of Finance living in East Amherst, New York. He is the author of the free e-book Essays on American Empire.

Copyright 2010-2012 © Michael S. Rozeff

All Images, XHTML Renderings, and Source Code Copyright ©