Donald J. Trump said something truly bat-shit stupid about the economy during his prominent Oval Office interview with editors at the Wall Street Journal that took place last month.
To establish context: it is widely accepted as fact, or at least as historic trend, among economists that when a country reaches a certain stage of social development, it doesn’t have as much room as it once did to grow economically. Once a country reaches its ceiling, its “developed” stage, a high economic growth rate doesn’t necessarily help people. As noted last year by the Atlantic’s Alana Samuels: “[D]espite a growth rate that has averaged three percent over the last 60 years (which is quite robust), there are still 43 million Americans living in poverty …” She goes on: “the median income of households in 2014 was 4 percent lower than it was in 2000, despite positive economic growth in all but two of the years during that time period.” In fact, a low growth rate can be considered preferable to a higher one; when a developed economy experiences a drastic spike in economic growth, as has happened from time to time in the United States, it is a pretty good sign of a bubble that is about to burst and leave a lot of unfortunate souls in the lurch. (It probably also heralds golden parachutes for those who designed the bubble.) Simply put, the country has grown into its adult britches, and those britches just need to be washed or patched or tailored every now and again.
Conversely, a country that lives mostly in poverty, i.e. is in the “developing” stage, has lots of room to grow. These countries experience – along with with often staggering levels of social instability, unrest, even violence – fast economic growth, sometimes exceeding 6 percent.
To give a sense of the mind-boggling nature of exponents, French economist Thomas Piketty included in his 2013 book “Capital in the Twenty-First Century” a graph plotting what he called the “the law of economic growth.” His exponent shows that a 1 percent growth rate, sustained over a millennium, increases a figure by a factor of 20,959 percent. That for 2.5 percent is 52,949,930,179. He couldn’t include the number for 5 percent on his graph because it wouldn’t fit. (76)
With that in mind, here is what Trump said, as noted by Slate’s Jordan Weissmann, during Trump’s WSJ interview.
So I’ll call, like, major – major countries, and I’ll be dealing with the prime minister or the president. And I’ll say, how are you doing? Oh, don’t know, don’t know, not well, Mr. President, not well. I said, well, what’s the problem? Oh, GDP 9 percent, not well. And I’m saying to myself, here we are at like 1 percent, dying, and they’re at 9 percent and they’re unhappy. So, you know, and these are like countries, you know, fairly large, like 300 million people. You know, a lot of people say—they say, well, but the United States is large. And then you call places like Malaysia, Indonesia, and you say, you know, how many people do you have? And it’s pretty amazing how many people they have. So China’s going to be at 7 or 8 percent, and they have a billion-five, right? So we should do really well.
But in order to do that – you know, it’s tax reform, but it’s a big tax cut. But it’s simplification, it’s reform, and it’s a big tax cut …
The United States, stepping into the dominant global economic role, grew quickly after World War II (but also partially as a result of FDR’s deficit spending). It’s filled up the niche. There’s no room to grow. Trump’s economic gibberish doesn’t comport with reality. And the third-world countries he cited are growing at a breakneck pace to catch up with the developed world. Growth rate has much less to do with a country’s population than it does with a country’s level of social advancement.
Anyway, that’s what got me thinking about my last post, in which I compared the economic growth of the Philippines and that of the United States:
The growth rate for gross domestic product [in the Philippines] was 6.1 percent in 2015 and 6.9 in 2016, a staggering number. Compare it to 2.6 and 1.6 in the United States respectively.
I didn’t note this subject’s nuance in the way it deserves. But I wanted, in light of the president’s statements (and my tweet of the Weissmann piece), to clarify why I used this comparison. There are three important distinctions between the president’s statement and mine. The first is that I did not use the comparison to justify a massive tax giveaway to the wealthy, which his economic policies call for. The second is that I used the United States’s growth rate as an example of relatively fast growth in the longview of history; global economic growth sat at less than 0.1 percent for most of economic history. (Piketty, 73) Though politicians generally remain antsy until economic growth approaches 3 percent, the 1- to 2-percent level is quite enough for a vibrant – even unsustainable and perhaps dangerous – long-term economic prosperity. In that light, the comparison is apt, though I should have further explained it in the post. The third pass I give myself is that I used the growth rate to illustrate the Philippines as a state lost in the throes of various economic, social and environmental crises. It was not a cherry-picked figure to insinuate, as the president did, that the United States is losing out in the global economy. Though it’s lost a bit of steam, the United States is not lagging the third world.
Still, I could have been clearer.
P.S. Read “Capital.”