#83 Secular Stagnation
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Secular stagnation is caused by economic policies that are rooted in a non-Christian worldview.
“The award for shortest-lived economic theory in history goes to Larry Summers for Secular Stagnation.”
That’s a quip I wrote to a friend a few years ago. Here’s the background. There were questions about why the economy was not growing during the Obama administration. It was clearly because over-regulation and high taxes had stifled the economic engine of our country. But the leftists who were running the country at the time could not admit that it was poor economic policy, so they had to come up with another answer. One of President Obama’s toadies – okay, maybe I should not call a former president of Harvard a “toadie,” but he really was. His name is Larry Summers, and until then he had quite a good economic reputation. But he ruined that reputation by cooking up the explanation that the economy could not grow because of a term he coined called “Secular Stagnation.” That caused me to write the quip that began today’s podcast. He was trying to explain that all sectors of the economy were stagnating because we just couldn’t grow anymore. He was assuming that we had used all the good ideas for supplying products and services, and there just were not any left.
Makes you wonder if Larry Summers had ever watched “Shark Tank.” We have a Christian version at Dallas Baptist University called “The Lion’s Den.” Each year, I sit in amazement, at the creative ideas that are proposed to a room full of equity venture investors. Of course, it makes me ask, “Why didn’t I think of that?” See, as Christians, we assume that God’s general revelation is spread across the entire human spectrum. Everyone gets profitable economic ideas that supply demand. God’s creative nature, imbedded in humans, has no limit.
Scarcity vs Abundance
Angus Deaton won the 2015 Nobel Prize for Economics. His book explains how humans escaped poverty after thousands of years when life was short and brutish. The first line of his book The Great Escape, is “Life is better now than almost anytime in history.” Because I’m an optimist, I leave out the “anytime” and simply state, “Life is better now than anytime in history.” And the Arnott extension is, “….and it’s going to get better.” Larry Summers, who invented the term “secular stagnation,” does not agree with me. He thinks it’s going to get worse.
When writing Biblical Economic Policy the section on the subject about how great life is on the planet got so long, I had to take it out of the chapter and it became an appendix. Life is better than anytime in history. In a lecture I give in the classroom in at Dallas Baptist University, I call it Scarcity vs Abundance. You see, economics is based on scarcity. Christianity is based on abundance, meaning there is always enough salvation for everyone.
Just a couple data points today, because I don’t have time to read the entire appendix.
- Extreme poverty fell from 18.2% of the world’s population to 8.6% in the last decade. As recent as the 1980’s, it was 44%. I unpack this in podcast #9 The Poor Will Not Always be With You.
- Child mortality is at a record low.
- Famine has virtually gone extinct.
- Half of the world is now middle class or higher.
- There is no Malthusian nightmare of over-population. As a matter of fact, just this week, China decided to allow their citizens to have three children, up from the one child policy of just a few years ago.
The examples go on and on. Why are the Malthusians always wrong? It’s because they deny the creational belief. More on that in the next section of this podcast.
In Economics and the Christian Worldview, I write, “If God is dead, Malthus was right. He was wrong.” God is not dead! But the Biden administration makes policies that assume He is.
A June 1 opinion column by the editorial board of the Wall Street Journal is titled “A Future of Secular Stagnation” subtitled “The Biden Budget Predicts a Not Very Roaring Twenties.”
From the article, “One critique of Biden’s historic spending blowout is that it steals economic growth from the future in return for a temporary surge in the next two years. The Biden budget says we’re likely to stagnate again after the Keynesian spending flood of 2021 and 2022—though at even lower growth rates than the slow-growth Obama years. the White House says growth will sink to 2.2% in 2023, and then average below 1.9% for the next eight years. That’s striking for a couple of reasons.
I explain some of this in podcast #79 There is no Free Manna. It explains that the money that is now being spent in stimulus has to come from somewhere.
Back to the article, “The White House is essentially conceding that all of its unprecedented monetary and fiscal stimulus really is living for today with little regard for the future. It implicitly concedes that the growth it spurs now will have to be paid back later in the form of higher taxes or tighter monetary policy, which might reduce growth. This is the definition of a “sugar high.” To put it bluntly, this is a budget that is anticipating America’s economic and political decline. The question is whether the American people will settle for it.
For economists, this prediction of less than 2% growth for eight years is just astounding. Mike Solon and Phil Gramm wrote an article in the Wall Street Journal a few months ago, titled “Is 3% growth dead?” They point out that the US economy has grown by an average of 3% over the entire lifetime of the nation. If 3% growth is dead, the pain will be felt most by the poor, whom we Christians care about. Black, Hispanic, and even ex-con employment rates were at historic lows because President Trump cut taxes and lowered regulations. We could not have a more clear economic policy difference: If you care about the poor, you liked the Trump policies. If you care about the rich, you like Biden’s policies. This demarcation between economic systems of these two administrations could not be more clearly different.
Made in the Image of God
In podcast #27, I point out that only one concept separates rich from poor countries, “Policies that promote production.” When humans, whom we believe are made in the image of God, are given motivations to produce, they do. When the motivation is removed, they do not. That’s why one of the seminal books in economics, by Ludwig Von Mises is titled Human Action. Economics is about how humans act. And, in the Christian worldview, we believe they act as though they were made in the Image of God.
Why do Christians always think things will get better, while atheists believe it will get worse? Hope. While Sergiy Saydometov and I were writing Biblical Economic Policy, we had fascinating conversations about this. He grew up in the Ukraine, which was controlled by the Soviet Socialist system. There is no hope in a godless culture. I have been a visiting professor at a University in Eastern Europe for the past seven summers, and I wrote my PhD dissertation on US-Russian joint ventures. The one thing you notice about the difference in atheist and Christian cultures is HOPE. There IS hope in Christian cultures. Why? Because we believe humans were made in the image of God. See, this is so easy. Every atheist who uses the term “creativity” needs to be asked where that creativity comes from. In the Christian worldview, the answer is easy, we believe we were created by God. That answer is quite difficult for atheists.
In their book, The Second Machine Age, Andrew McAfee and Erik Brynjolfsson point out that self-driving trucks will dis-employ thousands of truck drivers. That description is correct. But their prescription is not in the Christian Worldview. They assume that unemployed truck drivers will sit and stare at daytime TV and not find something else to do. This is really offensive to truck drivers, whom I have the greatest respect for. And I might be taking this personally, because my Dad owned his own small business, driving a truck that delivered gas and diesel to farmers and heating oil to homes. I’m trying to imagine if my Dad lost his job, he would sit at home and do nothing, or appeal to the government for help. That’s not in my realm of thinking. He would use his creative nature to find something else to do, as would truck drivers today. I’m just astounded by the elite thinking of these authors, and of policy makers, who assume that the unemployed are helpless. They’re not. If you assume they are made in the image of God, you assume they have the creative nature to find a way to supply products and services that are demanded by their neighbors. This is explained very well in the video series Poverty Cure, hosted by Michael Miller and produced by the Acton Institute.
Joseph Schumpeter coined the term Creative Destruction 1942, but it’s been going on for generations. It’s good. It’s not a part of our fallen nature, it’s a part of our creative nature. Every time creative destruction ends an industry, we all get richer. This needs no theoretical nor empirical support, for those of us who have even a modicum of economic understanding.
I have written an entire white paper on the Christian worldview and how the “Made in the Image of God” assumption is different from the non-Christian worldview. Perhaps it will be a topic for a future podcast.
I will summarize it this way, “There is a limited amount of land and God isn’t making anymore. But He is making creative people in His image who are finding more efficient ways of using it.” God is not dead, nor is His image on us.
Back to the Future
Folks from my generation remember the “General Malaise” speech by Jimmy Carter in July of 1979. Contrast that with Ronald Reagan’s “Shining City on a Hill” speech in November of 1980, just over a year later. The contrast between the statist thinking of Carter and the hopeful Christian Worldview of Reagan is stark. That’s because it’s based in the Christian Worldview. In podcast #72, I point out that the United States is dividing into two worlds, based on worldview. For those of us who have been watching, this worldview is absolutely clear and definitive. Today, we are seeing it exemplified in political and economic thinking.
References Within This Podcast:
Biblical Economic Policy https://amzn.to/3zrGano
Economics and the Christian Worldview https://amzn.to/3wbDzMf
The Great Escape: Health, Wealth, and the Origins of Inequality https://amzn.to/3q0mmmE
The PovertyCure DVD Series https://amzn.to/3q56sr5
The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies https://amzn.to/3q4b0hE