A recent news story (I link to it at the very end of this post) brings to mind two Journey songs (yes, I was/is a Journey fan), “Anyway you want it,” and “Don’t Stop Believing”. Imagine the reaction if I got on the news today and exclaimed,
… that economic standards of living will be slightly lower in 2008 as a result of a perfect storm of poor monetary policy, natural variability in business cycle conditions, ridiculously irresponsible behavior by many investment banks, and poor government policy in response? Few would bat an eye, but that news sure would stir up some folks about how the US economy is broken and needs fixing.
But then suppose I followed up this news / opinion with the following:
“but this year’s income will still be way above historical averages, and we would soon exceed the record year of 2007 because of productivity improvements unleashed by increased trade, technological advancement and capital investment, despite the increasing strangehold of the economy put on by taxes, regulations and political favoritism.”
“the decade from 1998 to 2007 was the wealthiest on record. Since the beginning of the 19th century, global average incomes per capita have increased more than eight-fold, and life expectancy has nearly tripled. Researchers say the uncertainty in the observed value for any particular year is larger than small income differences. What matters, they say, is the long-term upward trend.”
“Business cycles are a natural phenomena whose effects are so huge that it resonates around the world. They have contributed to phenomenal income growth in Ireland and other countries, but also to slower growth in the United States this year.”
“The downtrend in business activity is likely to continue into this summer, depressing U.S. and global income by several fractions of a percentage point. That would mean that global income would not have exceeded its level of earlier years since recession started to encompass the globe.”
“A minority of economists question whether this means that economic growth has peaked, and argue that the economy is more resilient to downturns and bad government policy than predicted. Others insist this is not the case and that we are in store for a long period of economic stagnation, declining incomes and a middle-class that will continue to fall behind the few big winners.
Still the majority insists, “When you look at economic growth you should not look at any particular year,you should look at trends over a pretty long period and the trend of growth globally is still very much indicative of rising living standards.”
“Recession is part of what we call ‘variability’. There has always been and there will always be higher growth and slower growth years, but what is important for living standards is that the trend is up; income and wealth on average is increasing even if there is a temporary stagnation because of the housing and credit crisis.”
“Mike Rizzo, senior economist at the American Institute for Economic Research, said their best estimate for 2008 was about 0.3 percent below the 1961-1990 average, and lower than this if you compared it with further back in the 20th Century.
Mr. Rizzo told the news agency: “What’s happened now is that the credit crisis has come along and depressed incomes slightly but these changes are very small compared to the long-term economic growth signal, and in a few years time we are confident that the current record incomes of 2007 will be beaten when the recession has ended.”
I doubt many would bat an eyebrow. But then how come the same cannot be said for this.