Economic Growth in the New Millennium

Wow! That was quick!

“Greek Bailout at Risk as Party Pushes Back,” reports Bloomberg.

“Greece Plunged Into Political Turmoil Over Austerity Measures,” chimes The New York Times.

“Greek government hit by resignations,” adds the FT.

We spilled a good deal of virtual ink in yesterday’s issue casting doubt and aspersions over the validity of the Greek bailout plan. The story, we reckoned, was at best an old one…at worst an irrelevant one. Bailout or no bailout, the Greeks are broke. The rest is merely noise.

Curiously (and to their credit), markets yesterday would not be roused to action, neither by rumour, hearsay or scuttlebutt regarding the imminent, 11th hour deals “struck” between Greek Prime Minister Lucas Papademos and European Central Bank President Mario Draghi.

Instead, they held tight, patiently.

“Among other things, investors are waiting to see what happens with Greece,” we observed in yesterday’s reckoning, before adding, “We’ll save them some time. Nothing will happen. Nothing different, anyway.”

And lo! Twenty-four hours later and the Spartans are back in Syntagma Square, bellowing at their useless politicians. Markets have since responded accordingly with measures in the US ticking ever so slightly to the downside.

Good for them, we say. At least they’re pointed — according to our own quack theories — in the right direction. Besides, all this delusional optimism was beginning to get to us anyway.

But let’s take a break for a moment and return to the other thread we touched on yesterday, the one about the sheer enormity of history occurring in our own, short lifetimes.

Data compiled by The Economist a year or so ago showed that an astounding 55% of all the economic output generated since Jesus played QB for Jerusalem came in the last century of the last millennium. Why was this? How could one century account for more growth than the previous 19 centuries combined?

Well, partly it was because there was nobody around before then to do much of anything anyway. Big trends require big drivers…and there simply weren’t enough people alive to take the wheel. The global population-o-meter didn’t click over from millions to billions until 1811…smack bang in the middle of the Industrial Revolution…but still 70 years before Colonel Drake would really steepen the curve of production by sinking the first commercially viable oil well in Pennsylvania.

Mankind had, somewhere around that time, reached a critical mass of sorts, one accelerated by the splendor of cheap, abundant energy and the many luxuries and advancements derived from it. By the time Tim Tebow got around to taking his cues from the late, great J.C.’s playbook, the world was standing on top of a single decade that had produced nearly one quarter of the total economic growth of the past two millennia.

More remarkable still, this heretofore-unseen growth flew directly in the face of the prevailing trends in the western, “developed” countries. Japan, leading the way, had already been a zero-growth zone for two decades. Likewise, the gears of the Old World were grinding to a halt as the euro-currency began exposing itself as the flawed experiment it always was. The Greek saga, visited above, is only the latest chapter in that well-rehearsed play.

As for the United States, it was in for perhaps the rudest awakening of all. Leveraging the emotion hinged on a terrible tragedy suffered at the outset of the millennium, the world’s only remaining “superpower” went about compounding its many pre-existing problems by spending trillions of dollars it didn’t have (but was always ready to print) on wars it didn’t need to fight and will never ever win.

But still the human race marches on, at once spurred by the innovation of entrepreneurs and hampered by the heavy hand of the state.

There are more scientists alive today than at any time in history…but the same goes too for politicians…and for TSA agents and their vulgar, mirthless ilk.

The developing world continues to surge, though it must outgrow dependence on an export model that the collapsing developed world may no longer be fit to sponsor.

Thriving bastions of free market innovation — such as the Internet — are daily delivering more education, more information and more opportunities to more people around the world than ever before thought possible, but the driving force that fosters its growth — the freedom to share, copy and evolve — is the very target the Feds want to take out.

And in the midst of all this, we travel along at breakneck speed…quickening our clip with every mile clocked.

What to do but throw our hands up in the air and enjoy the ride. Whee!

Joel Bowman
for The Daily Reckoning

The Daily Reckoning