One Economy to Rule Them All

NO ONE HAS IT HARDER THAN THEIR FATHER DID:

Americans Are Not As Poor As They Think They Are (Thomas R. Wells, 1/08/24, 3Quarks)

The evidence shows that most Americans are richer than ever, and richer than most people in the rich world – that they consume more, live in larger homes, and so on. They are objectively some of the luckiest people in world history. On the one hand all this narcissistic whining about imaginary poverty is mildly annoying for the rest of the world to have to listen to. On the other hand, it reflects shared delusions about individual entitlements and America’s economic decline that are driving a toxic ‘doom politics’ of cynicism and resentment, while also neglecting the needs of actually poor Americans.

Two misunderstandings in particular seem to drive the mistake: that everything is more expensive these days, and that the rich took all the money.

OPEN THE BORDERS:

What Are the Economic Benefits of Trade, American Style (James Pethokoukis, 12/04/24, AEIdeas)

But can we put a number on all that good stuff? The Peterson Institute for International Economics gives it a try in a recent report and comes up with some encouraging data, along with a caveat:

US GDP in 2022 was $25.5 trillion. Without post-World War II engagement in the world economy, our estimates indicate that US GDP in 2022 would have been $22.9 trillion, some $2.6 trillion lower… The $2.6 trillion in gains in 2022 work out, on average, to about $7,800 per person and $19,500 per household. Average gains in 2022 would have been considerably larger but for political headwinds that have slowed trade expansion since the global financial crisis of 2008-09. Indeed, nearly all the gains — expressed as a percent of GDP — accrued before the global financial crisis, although gains expressed in dollar terms have continued to grow at a slow rate.

ALMOST LIKE SUPPLY/DEMAND WORKS:

Welcome to the Neighborhood! Wall Street Designed It (Carol Ryan, Jan. 3, 2024, WSJ)

Your new suburban rental has granite kitchen countertops, built to withstand even the most hard-wearing tenant. The neighbors next door have the exact same laundry machine. Welcome to the community where every detail has been designed to keep costs down for the Wall Street landlord.

Big investors are bullish about America’s family homes. So bullish they are willing to build entire new neighborhoods as it becomes harder to buy houses from the usual channels.

ALWAYS BET ON THE dEEP sTATE:

Who Gets Credit for No-Recession 2023? Everyone and No One (Elisabeth Dellinger — 12/18/2023, Fisher Investments)

[T]he basic, simple yet powerful story of the past few years appears to be this: It is far easier to turn an economy off, as lockdowns did in 2020, than it is to turn it on again—especially when different countries are firing back up at different times and speeds. The US got going before Europe got going before Japan got going before China. So you had demand boom in one place before supply in another was capable of meeting it. Even in the US, some states and industries reopened before others, creating a mismatch for made-in-the-USA goods and services. For just one example, I was back in the office before I could get my hair cut without crossing state lines.[iii] First-world problem, maybe, but it is mostly a microcosm of the broader picture: Lockdown and reopening caused countless dislocations and disruptions that couldn’t resolve until the whole world, developed and developing, moved beyond lockdowns. Parallel to all of this, the world’s energy markets had to realign after Russia’s Ukraine invasion and the resulting sanctions, which shifted oil and natural gas supply and demand globally. That took a while, too, but at this point it is largely solved.

Furthermore, a lot of the reopening decisions in the US were business-specific, not government-ordained. When the economy was shut down, some companies innovated or otherwise managed through it, quickly returning to normal operations when allowed. Others waited. To each their own—no judgments here! The key is this: It speaks to how decentralized and messy a developed economy really is. In the Western world, as the UK has shown lately, governments can’t even order civil servants back to the office, much less private workers. In the end, businesses respond to conditions—all conditions—as incentives dictate.

Governments can tweak those incentives, but that is about it.

Turns out a gl;obal pandemic was disruptive…briefly.