A common refrain from environmental activists focuses on the need to preserve the planet for future generations. But what about the impact for future generations of policies that restrain economic growth? James Pethokoukis addresses that question in a Commentary column.
… George Mason economist Tyler Cowen poses a useful thought experiment in his latest book, Stubborn Attachments. Imagine we redo U.S. history, he says. “But assume the country’s economy had grown one percentage point less each year between 1870 and 1990. In that scenario, the United States of 1990 would be no richer than the Mexico of 1990.”
Michael Strain, my colleague at the American Enterprise Institute, makes a similar point when he writes: “Imagine the world in the year 1900. There was no air travel, no antibiotics, no iPhone, no Amazon Prime, no modern high school and no air conditioning. … Anyone who played down growth a century ago wouldn’t have known they were arguing against any of these things, because none of these growth-enabled features of modern life had been invented yet. But they would have been putting the existence of all these at risk by stifling, even marginally, the economic engine that allowed for their creation.”
Sustained and solid growth is what makes these advances possible and is what separates the median American today from the median residents of the world’s developing economies. Sacrificing a tenth of a percentage point here and two tenths there to, say, protect favored industries from foreign competition or levy punitive taxes on obscenely rich entrepreneurs may seem like a worthwhile trade-off in the moment. But because of how growth compounds over time, in the long term such trade-offs aren’t just unappealing but inexplicable. … Marginally slowing down economic growth to achieve other policy goals might cause little harm to us, but it seems both less fair and less wise when the welfare of ensuing generations are accounted for.