The first (advance) estimate of third-quarter GDP will be released next week, on Oct. 26, at 8:30 a.m. EST. Nearly all of the relevant data points for the quarter are in, which should make calculations close to complete, but the Federal Reserve Bank of Atlanta’s GDPNow predictive algorithm is amazingly (and very bullishly) divergent from the consensus of blue-chip economists. In the latest GDPNow report, their weight of all the GDP constituent elements puts last quarter’s annualized growth rate above 5 percent, while their survey of the blue-chip economists’ estimates reflects growth under 3 percent, with the low estimates near 1.5 percent and no blue-chip estimate topping 3.9 percent. So, what does the Atlanta Fed know that no other economist knows?
We’ll know who was right after the second (Nov. 29) and final (Dec. 22) GDP releases.
More importantly, we need to ask why GDP growth is so robust when the Fed has raised interest rates at the fastest pace in history, while the president has declared war on fossil fuels; our labor force-participation rate has remained so low for so long; federal and private debt rates are growing so rapidly; and we have been in a manufacturing recession for nearly a year! On top of that, there is a growing academic consensus that economic growth is a malaise, even a cancer.
The War on Growth is an old, old story. More than 50 years ago, I remember reading the original “Limits to Growth” best-seller of 1972, co-authored by “The Club of Rome”—eventually selling over 30 million copies in 30 languages. It predicted we would run out of many natural resources by the end of the 1980s. It didn’t happen, but true believers said we either “got lucky” or “we only postponed doomsday,” as life-saving discoveries like the Green Revolution only served to “increase greenhouse-gas emissions” later on.
Translation: All those billions of people saved through technology should have starved, to save the planet.
It has become fashionable in the highest circles that growth is cancerous, that it leads toward doomsday.
At the U.S. 2021 Climate Conference of the Parties 26 (COP26) in Glasgow, Scotland, which began on Halloween evening 2021, the ghosts and goblins came out in force. Speaking on Nov. 1, Britain’s then-Prime Minister Boris Johnson flew north from London with his entourage to tell the assembled jet setters that, “It was here in Glasgow, 250 years ago, that James Watt came up with a machine that was powered by steam, that was produced by burning coal ... We’ve brought you to the very place where the doomsday machine began to tick.” He then added that, “It’s now one minute to midnight on that doomsday clock and we need to act now.” And he was one of the more “moderate” speakers at COP26.
If Mr. Johnson (and the other speakers) truly believed their doomsday rhetoric, they would have held their UN Climate Conference (COP26) by Zoom over the internet from home, rather than chartering private jets to fly there. According to data compiled by WingX, an aviation consultancy, 118 different business jets flew into Glasgow and Edinburgh airports on the opening day of the summit. Those taking private jets to COP26 included Jeff Bezos, Prince Charles, and Boris Johnson, who flew back to London to attend a dinner during the middle of the conference, then flew back, indifferent to the extra fuel he consumed.
That conference was held during the midst of COVID, when most of us were learning how to work from home. In the years of COVID and its aftermath, there has been an escalation in calls to limit growth, even though global growth has naturally slowed, in part due to COVID precautions, global trade disruptions, new recessions in China and Europe, and a reversion to higher interest rates in most leading economies.
Britain was the birthplace of the Industrial Revolution, and it also gave birth to the Industrial Counter-revolution. Luddites were named after a legendary weaver named Ned Ludd, who sent threatening letters to mill owners and government officials about the threat of new machinery putting craft workers out of their jobs. Some textile workers went so far as to destroy their machines in clandestine raids. The belief continues to this day, a fear that artificial intelligence (AI) or some other robotic mind machine will put people out of work.
The Economist’s Special Report Favors Reviving Global Trade
The Economist’s special report this week, “Redividing the World,” by Callum Williams, recognizes the fact that “governments across the world are rediscovering industrial policy. They are making a big mistake.” The fact that China has dominated global trade and taken advantage of that dominant position to steal intellectual property has given globalization a bad name, but we ought not to throw out all global trade and buy only from local sources, as that would defy Adam Smith’s tenet of comparative advantage.A series of charts from The Economist article show how globalization since 1990 has helped lower global poverty, closed the income gap, and reduced the number of people living under autocratic control.
The major fallacy most anti-growth theoreticians make is that they equate growth with waste, pollution, consumerism, and “more stuff.” True, that is a risk, but manufacturing isn’t the major “stuff” of growth. It’s miniaturization, efficiency, productivity, creativity, innovation, and technology, so that we can create more with less. We can work, meet and shop on the internet instead of in person. We can put all our data into a small phone instead of a room-sized computer. We travel less, pollute less, and create less “junk.”
Many apocalyptic anti-growth zealots want us to return to a mythical Arcadia of harmony with nature, which never existed. That world was filled with disease and bandits, with a life expectancy under 30.
Our climate zealots now want us to rely mostly on electricity, when we can’t even support today’s grid, much less support a world where all fossil fuel inputs are banned. But that is a story for another day.
The Luddites will always lose, since most people want a better life and will fight hard to make it happen.
