The Urgent Case for Growth
Brian Gongol


The U.S. Enjoyed a Century of Economic Predominance
"If you are rich and are worth your salt, you will teach your sons that though they may have leisure, it is not to be spent in idleness; for wisely used leisure merely means that those who possess it, being free from the necessity of working for their livelihood, are all the more bound to carry on some kind of nonremunerative work in science, in letters, in art, in exploration, in historical research -- work of the type we most need in this country, the successful carrying out of which reflects most honor upon the nation. We do not admire the man of timid peace."

-- Theodore Roosevelt, "The Strenuous Life", April 10, 1899
When Roosevelt delivered his address to the Hamilton Club of Chicago, the United States was on the verge of eclipsing the United Kingdom in terms of per-capita gross domestic product (GDP). Effectively, the United States was in the process of emerging as the world's most powerful economy. The ensuing century was undoubtedly one of American economic dominance, a carriage drawn by the horses of technological innovation and private-sector growth.

But sic transit gloria mundi: As of 2004, the economic growth rate of the United States was in a long-term holding pattern around 2%. Meanwhile, China has been operating at a per-capita growth GDP growth rate of more than 8%.

The United States Will Not Be the World's Largest Economy in Twenty Years

Admittedly, China has much more ground to cover in order to deliver individual prosperity even remotely comparable to that of the United States. Per-capita GDP in China is about $5,000 (US), while the figure is close to $38,000 in the United States.

When taken as a whole, however, China's economy at $6.45 trillion, growing at rates of 8% to 9%, will shortly match the United States' $10.99 trillion, growing at a real rate around 2% to 3%. In fact, the day of reckoning is likely to arrive within a decade.

The ramifications of a rapidly-growing China are enormous unto themselves: But those purely economic ramifications become a force multiplier when viewed through the prism of China's political atmosphere. Despite economic liberalization, China's government remains characteristically totalitarian. China's capricious leadership still restricts even such basic Western institutions as the free press and continues to hold political prisoners in indeterminate numbers.

Changing the Economy Before Time Runs Out

Virtually no one believes that China can perpetually maintain an 8% growth rate, nor that the United States can raise its long-term growth rates by more than a percentage point or two at the very best. But the world is one of leaders and followers, particularly in the geopolitical and economic arenas. The US growth model set the pace for the entire world through the 20th Century. For those who favor that model -- looking beyond the little particulars and toward the big brushstrokes of freedom, opportunity, and widespread prosperity -- it is imperative to advocategrowth and innovation in the United States and other Western economies ahead of any other agenda.

The US has fallen prey to a sort of prosperity trap, described by Robert Barro in his Determinants of Economic Growth: Having achieved material wealth alongside political freedom, many Americans vote for political activity which has a negative effect on growth.

To wit: Thus, just at the moment when a serious rival to American economic power is emerging, Americans are distracting themselves from the nature and reality of their own model for growth.

Conclusion: If People Favor American-Style Growth and Behaviors, They Should Vigorously Advocate Growth

Whether one believes in Solow's model of growth or any of the many others that have been advanced over time, it's difficult to improve upon Roosevelt's words from 1899. Having achieved material prosperity -- or at least a set of conditions under which they may selectively complain -- Americans are in extraordinary need of new work in science, exploration, and research. On a microeconomic scale, these are the factors that distinguish successful firms from unsuccessful ones. It is not only wise but imperative to acknowledge their importance on a macro scale as well.

A renewed dedication to prosperity through growth and innovation is perhaps the only route by which the United States can hope to maintain its stand on the top rung of the world's economic ladder. For those who think it's hard to protect intellectual property rights against theft in places like China today, wait until their economy is larger than that of the United States. For those who object to media bias, wait until the world's largest economy belongs to a government that doesn't acknowledge press freedom. For those who decry American military unilateralism, wait until the engine fueling the fire behind the world's largest army is the world's largest economy.

If one concurs that the American model is preferable to the Chinese, there is little time to waste: Pro-growth policies are the only objectives that will matter for the next ten years.

Table of Projected Growth Rates

Following are the projections for estimated growth over the next 20 years in the US and Chinese economies: In the real world, these growth rates may vary widely from year to year, but this forecast does not presume to represent a sophisticated model with multiple probabilities but rather a functional estimate projecting what is likely to occur if present patterns hold true.

Year US GDP 2003 Actual Growth Rate US GDP Long-Term Growth Rate US GDP Pessimistic Rate China GDP 2003 Actual Growth Rate China GDP Long-Term Growth Rate China GDP Pessimistic Rate
2003 $10,990,000 3.1% $10,990,000 3.0% $10,990,000 2.0% $6,449,000 9.1% $6,449,000 8.6% $6,449,000 6.0%
2004 $11,330,690 3.1% $11,319,700 3.0% $11,209,800 2.0% $7,035,859 9.1% $7,003,614 8.6% $6,835,940 6.0%
2005 $11,681,941 3.1% $11,659,291 3.0% $11,433,996 2.0% $7,676,122 9.1% $7,605,925 8.6% $7,246,096 6.0%
2006 $12,044,082 3.1% $12,009,070 3.0% $11,662,676 2.0% $8,374,649 9.1% $8,260,034 8.6% $7,680,862 6.0%
2007 $12,417,448 3.1% $12,369,342 3.0% $11,895,929 2.0% $9,136,742 9.1% $8,970,397 8.6% $8,141,714 6.0%
2008 $12,802,389 3.1% $12,740,422 3.0% $12,133,848 2.0% $9,968,186 9.1% $9,741,851 8.6% $8,630,217 6.0%
2009 $13,199,263 3.1% $13,122,635 3.0% $12,376,525 2.0% $10,875,291 9.1% $10,579,651 8.6% $9,148,030 6.0%
2010 $13,608,440 3.1% $13,516,314 3.0% $12,624,055 2.0% $11,864,942 9.1% $11,489,501 8.6% $9,696,912 6.0%
2011 $14,030,302 3.1% $13,921,803 3.0% $12,876,537 2.0% $12,944,652 9.1% $12,477,598 8.6% $10,278,726 6.0%
2012 $14,465,241 3.1% $14,339,457 3.0% $13,134,067 2.0% $14,122,615 9.1% $13,550,671 8.6% $10,895,450 6.0%
2013 $14,913,664 3.1% $14,769,641 3.0% $13,396,749 2.0% $15,407,773 9.1% $14,716,029 8.6% $11,549,177 6.0%
2014 $15,375,987 3.1% $15,212,730 3.0% $13,664,684 2.0% $16,809,881 9.1% $15,981,607 8.6% $12,242,127 6.0%
2015 $15,852,643 3.1% $15,669,112 3.0% $13,937,977 2.0% $18,339,580 9.1% $17,356,026 8.6% $12,976,655 6.0%
2016 $16,344,075 3.1% $16,139,186 3.0% $14,216,737 2.0% $20,008,482 9.1% $18,848,644 8.6% $13,755,254 6.0%
2017 $16,850,741 3.1% $16,623,361 3.0% $14,501,072 2.0% $21,829,254 9.1% $20,469,627 8.6% $14,580,570 6.0%
2018 $17,373,114 3.1% $17,122,062 3.0% $14,791,093 2.0% $23,815,716 9.1% $22,230,015 8.6% $15,455,404 6.0%
2019 $17,911,681 3.1% $17,635,724 3.0% $15,086,915 2.0% $25,982,946 9.1% $24,141,796 8.6% $16,382,728 6.0%
2020 $18,466,943 3.1% $18,164,795 3.0% $15,388,653 2.0% $28,347,394 9.1% $26,217,991 8.6% $17,365,692 6.0%
2021 $19,039,418 3.1% $18,709,739 3.0% $15,696,426 2.0% $30,927,007 9.1% $28,472,738 8.6% $18,407,633 6.0%
2022 $19,629,640 3.1% $19,271,032 3.0% $16,010,355 2.0% $33,741,364 9.1% $30,921,393 8.6% $19,512,091 6.0%
2023 $20,238,159 3.1% $19,849,162 3.0% $16,330,562 2.0% $36,811,828 9.1% $33,580,633 8.6% $20,682,817 6.0%
2024 $20,865,542 3.1% $20,444,637 3.0% $16,657,173 2.0% $40,161,705 9.1% $36,468,568 8.6% $21,923,786 6.0%