Worldwide Growth is Stagnating, and Everyone has a Theory.

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The central banks of the world are explaining worldwide economic stagnation on insufficient aggregate demand. For some reason people do not have enough money to buy things and drive the economy, or people are frightened and choose to save instead of consume.

Their solution is lower interest rates, or negative interest rates, to make more money available, discourage saving, encourage borrowing and increase demand.

Other academics say that we need an engine of growth, in the 1970 it was a computer revolution that was followed by innovation in networking (the Internet), than globalization and liberalization of China, then sophisticated financialization of assets. Now we are out of new prods to growth.

I would say it is plainly evident that growth naturally occurs. It is the natural state of free people if they have relatively low corruption, rule of law, private property and contract. The United States from 1800 to 1900 moved from agrarian ex-colony to  one of the most powerful and largest economies in the world with no policy directing growth, no central bank, no business incentives, no master plan. In fact I would say there was no national goal to grow the economy or become a world economic power at all. It was simply free individuals trying to better their lot that made things better for everyone and made a powerful economy.

So why the stagnation today? Obviously the conditions for people to better their lot have deteriorated.

There is more official corruption. There is less incentive to better you lot and invest in producing something if you are not secure in enjoying the results of your efforts.

The rule of law is being eroded. When I was in law school, if the professor wrote a hypothetical on the exam, there was basically a correct answer. Common law develops by actual cases coming before courts and the decision made in each case becomes the rule for future similar cases. One could tell objectively what a future set of facts should result in given knowledge of the prior cases.

Only in Constitutional Law as that not true. In Con Law there were not Rules you could outline from the cases, there were balancing tests. The Court instructed future judges to balance, for instance the value of the category of speech against the societal costs. What would they weigh “value of speech,” how would they weigh “societal costs?”

Compare and contrast to the rule from Regina v. Dudly and Stevens. Four ship wrecked sailors facing starvation kill and eat one so that the others could live. After an improbable rescue, murder charges are brought. The defense is necessity. If they had not killed one sailor all four would have perished. The rule of the case: necessity does not justify killing. Verdict, Murder. The only things that justifies taking the life of another is self-defense. Ironically if Richard Parker (the boy killed by Dudley and Stevens) had turned the knife on them and killed them both he might have been acquitted of murder. One thing you have to glean from this case is application of a rule without respect to emotional considerations. The seamen endured 28 days in an open boat thousands of miles from land with no hope of rescue. The boy Parker was weakest and likely to die first anyway. The court that condemned Dudley and Stevens even noted “Other details yet more harrowing, facts still more loathsome and appalling, were presented to the jury, and are to be found recorded in my learned Brother’s notes.”  There was no balancing of the interests of Dudley and Stevens against the interests of Parker. There was no subjective holistic attempt to provide cosmic justice. There was a rule of law, necessity does not justify murder. Anyone could discern it and apply it. You could tell if the court was correct or not.

As a matter of fact, there was an institution capable of weighing the intangible relative factors outside of facts the law was able to consider. The Queen of England pardoned Dudly and Stevens.

 

scrivener

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