For most now living, there has never been a time when economic growth, indeed, powerful, pervasive, and consistent economic growth, was not assured. We know better, but it’s easy for us blessed with 21st century plenty to assume somehow that robust economic growth is the “steady state,” the natural way, of humankind. That’s why it’s helpful to go back and delve into a little history.
For most of the recorded history of humanity, the growth of economic activity was low to nonexistent. One writer estimates it at .15% to .2% per year, and another at much less.[ref]The .15% to .2% comes from Joel Mokyr, Long Term Economic Growth and the History of Technology, from Handbook of Economic Growth, 2005. John Maynard Keynes said that going back “say, to two thousand years before Christ‑down to the beginning of the eighteenth century, there was no very great change in the standard of life of the average man living in the civilised centres of the earth. Ups and downs certainly. Visitations of plague, famine, and war. Golden intervals. But no progressive, violent change. Some periods perhaps some per cent better than others, at the utmost 1.00 per cent better‑in the four thousand years which ended (say) in A. D. 1700.” Economic Possibilities of Our Grandchildren (1930) At least one of these is wildly, comically wrong. If you apply even the low side of Mokyr’s growth rate, .15%, from 2,000 BC to 1750 AD, it would produce a growth over the intervening 3,750 years of 27,510%. It’s possible that Mokyr didn’t really mean that this growth rate extended back for the duration of human history. Let’s just agree that the growth before 1750 was slow, shall we?[/ref] Suffice it to say, though, that for thousands of years, we didn’t learn much and didn’t get much richer. Then in 1712, something amazing happened. An English iron dealer, Thomas Newcomen, designed a machine to pump water out of his mine, later to be called a steam engine. In doing so, Newcomen lit a fuse that set off the industrial revolution. First we used wood, then coal, then oil, then natural gas. Each time we shifted energy sources, we grew more accustomed to having machines do more and more work at our bidding, fueled by cheap and abundant fossil fuel. And all that work meant unprecedented growth in the economy. It may have taken millennia to double the human standard of living before, but suddenly humans could see a doubling within a generation.
Even though the economy grew from the early 18th century on, it took longer for the concept of economic growth to develop. Adam Smith wrote The Wealth of Nations in 1776, and he certainly spoke of levels of wealth that could increase, but neither he nor anyone else in the 17th century appeared to contemplate an economy that could continue to expand. The prevailing ethos seems to have been an expectation that growth was at any minute about to level off.
The concept of continuing economic growth seems to be a 20th century American creation, born of the seemingly unlimited resources of the new land and the harnessing of them with ruthless efficiency. First Americans, then Europeans, then even Asians and Africans, came to see economic growth as a birthright, the natural condition of mankind. The rest we all understand, because we have seen it and lived it. Everyone reading this page has come of age in a culture that expects economic growth to continue indefinitely. Men and women of all races and religions, rich and poor alike, be they preachers or paparazzi, miners or magnates, jewelers or janitors, allworship at the international tabernacle of economic growth.
We had a brief period during which an American President, Jimmy Carter, tried to tell us that our obsession with economic growth and consumption were taking us down a dead-end street. Conspicuously wearing his much-derided cardigan sweater, Carter asked Americans to sacrifice. He installed solar panels at the White House. He implemented sweeping reforms, including creation of a cabinet-level Department of Energy, robust research funding for alternative energy research, and automobile mileage standards that really had teeth. But Carter’s influence was short-lived. He was that most exasperating of statesmen: uncommonly good at knowing what to do; uncommonly bad at persuading us to do it.
Soon enough, the smiling Ronald Reagan brushed aside any talk of limits. Down came the solar cells. He fired half the staff at the newly strengthened Solar Energy Research Institute, gutted the auto fuel economy standards and let the tax credits for alternative energy expire. Let’s focus on growth, said President Reagan and his allies in the Congress. And focus we did.
Our governments depend on economic growth. The whole concept of lending money and collecting interest depends on it. What child of the 21st century doesn’t expect to see his 401(k) plan grow nicely in preparation for his dotage?
And our faith runs deep, so deep that we will cling to it long after economic growth arrives at its startling quick demise. That faith will keep us vulnerable, because we will believe and follow those who give us easy answers, even when those answers have no logic. We will search desperately for someone we can blame, some nation that needs to be conquered so things can get back to “normal.” It will take at least two generations for us to realize that “normal” is little or no growth.