The case for pessimism seems strong, doesn’t it?
Global Real GDP, 2010 dollars (Log scale). Source: Bloomberg, World Bank
Secular stagnation in the economy, nationalistic anti-trade political parties growing, and jihadist terrorism rising: it’s easy to have a grim view of the future. But when you look at long-term economic growth, these concerns—although legitimate—seem short-sighted. The large-scale trends that have fueled global growth since World War II haven’t stopped. More people are gaining access to new, productive technologies than ever before. More people are engaging in free, mutually beneficial trade than ever before. Fewer military conflicts roil the world’s waters.
The world’s average well-being is triple what it was 60 years ago. And, if anything, that measure understates how much better off people are. Global per-capita economic growth has increased at a fairly consistent 2% rate—a little slower in the ‘80s, a little faster in the ‘90s—driven by advances in trade and technology. But the technology that facilitates economic growth has also made our lives much better. Life expectancy in the US has risen from 70 to almost 80 years. In China it’s risen from 43 years to 76 years. In parts of Africa, life expectancy has almost doubled. And advances in communication technologies mean that these people are far more productive for far longer than has ever been imagined before.
Source: Bloomberg, World Bank, US Census Department
In part this is due to visionary direction by leaders like Deng Xiaoping and Rajiv Ghandi, who realized that economic competition doesn’t mean that one nation wins and the other loses. Comparative Advantage allows global trade to make everyone who participates more productive, as long as the transition to a new regime is gradual enough for displaced workers to adjust to different, more globally competitive jobs.
But in part this is the inevitable progress of technology. Some feel that all the obvious technological advances have been made—that the introduction of electricity, automobiles, and sanitation are unlikely to be matched ever again. But I believe that having 3 billion more human minds working on the grand challenges of our time—like economic inequality and environmental degradation—will ultimately lead to solutions that benefit everyone.
I’m not saying we aren’t facing near-term problems. But with technology racing ahead, it seems that reports of the economy’s stagnation have been greatly exaggerated.
Douglas R. Tengdin, CFA
Chief Investment Officer