Economic Growth

Common Idea

Economic growth is the most important study in economics today. The first book on economics was by Adam Smith The Wealth of Nations the full title was the Inquire Into The Nature And Sources Of The Wealth Of Nations. "Economic growth determines a countries future, and economic growth in the past determines a countries present as far as itís material values are concerned." (Buechner Recording) So every material value of the modern world is a result economic growth in the past, or your standard of living is the result of economic growth in the past. Economic growth in the future will determine whether or not there is rising or falling economic wealth, and coordinated with that whether or not the standard of living in the future continues to rise or fall.

For example: In 1870 England was the leading industrial power of the globe, and as a consequence it also was the leading political power of the globe. According to M. Northrup Buechner the real wage rate in England is estimated to have been about 50% higher than the real wage rate in other European countries at that time. (Recording) It was about 1870 because of the rise of statist policies and ideologies that rate of growth in England started to lag behind that of the other European Countries. It didnít lag a lot Buechner states the statistical estimate was less than one percent a year, however for a period of 10 or 20 years thatíll make a difference hardly anybody would notice. Yes maybe so, but if you compound that interest rate over 100 years what you get is what you see today. England is essentially a third rate economic power, and the real wage rate in England today is estimated to be "about 33% less than the real wage rate in other European countries." (Buechner Recording) In 1870 the United States in 1870 was an economically backward, internationally insignificant, and unimportant country in the world with respect to matters regarding foreign affairs. According to Buechner it was about 1870 when the United States embarked on a growth rate of over 5% percent a year, which was sustained for a period of over 40 years. (Recording) No country in the history of the world matched that record. At the end of that period about the time of World War I the United States took Britainís place as the leading industrial power of the globe.


Here is the subject, and the direction on which I would like to approach my thesis. In the 19th century the United States rate of growth was over 5% a year. According to Wayne D. Angel et al., chief economist for Bear, Stearns & CO. itís estimated the best we can do is estimated at somewhere between 2 or 3 % a year. (Online) The long term expected growth rate in the United States has been cut in half. What has happened? As a student of economics I have an economic answer. Iím going to be looking at this from the perspective of the material, physical, and economic means of economic growth. That is the economic causes of economic growth or decline. Iím not talking about philosophy here Iím just looking at basic mechanics. What has to be done in reality? Well it is no surprise that the fundamental answer that question is thought; then, there is action that has to been taken based on the thought. What specific actions are required? I donít want to be accused of ignoring philosophy so let me just state briefly the philosophical preconditions of economic growth because these are really fundamental. Any Rand, the infamous author of Atlas Shrugged states the belief in the reality of this earth, and the world we see around us is real, not just an imperfect reflection of a higher reality. Also the belief in the power of reason to grasp the world, to know the world, to grasp reality in order to deal with the facts, and that the mind is competent to guide life. Some sanction on the pursuit of personal happiness is also a precondition. Some belief apart from the idea of that to be selfish is irredeemably evil; you canít believe that and have economic progress. (1075-84) There has to be some