While Communism and Capitalism Battled, “Technology” Won

Imagine you’ve been asked to be on a panel that is hosted by a well known national media outlet.

The panel is supposed to be a discussion about ideas and solutions for solving economic inequalities.

Your opening argument is based on U.S. GDP:

The U.S. already leads the world in GDP, but what could our GDP be? 🤔

Specifically, a study in the Journal of Economic Growth (reported on by Reason)found that:

The average American household receives about $277,000 less annually than it would have gotten in the absence of six decades of accumulated regulations — a median household income of $330,000 instead of the$53,000 we get now. The researchers, economists John Dawson of Appalachian State University and John Seater of North Carolina State, constructed an index of federal regulations by tracking the growth in the number of pages in the Code of Federal Regulations since 1949. The number of pages, they note, has increased six-fold from 19,335 in 1949 to 134,261 in 2005. (As of 2011, the number of pages had risen to 169,301.) They devise a pretty standard endogenous growth theory model and then insert their regulatory burden index to calculate how federal regulations have affected economic growth. (Sometimes deregulation extends rather than shortens the number of pages in the register; they adjust their figures to take this into account.)

Whew… so what if economic regulations were left at their post-war levels? The researchers found that:

“Annual output in 2005,” they conclude, “is 28 percent of what it would have been had regulation remained at its 1949 level.” The proliferation of federal regulations especially affects the rate of improvement in total factor productivity, a measure of technological dynamism and increasing efficiency. Regulations also affect the allocation of labor and capital — by, say, raising the costs of new hires or encouraging investment in favored technologies. Overall, they calculate, if regulation had remained at the same level as in 1949, current GDP would have been $53.9 trillion instead of $15.1 in 2011. In other words, current U.S. GDP in 2011 was $38.8 trillion less than it might have been.

So if you humor the study and speculation…

Let’s use those results as the starting point for some rough calculations. The Bureau of Economic Affairs estimates that real GDP in 1947 was $1.8 trillion in 2005 dollars. The real GDP growth rate between 1949 and 2011 averaged 3.2 percent per year. Compounded over the period, that would yield a total real GDP of about $13.3 trillion in 2011; that’s the same figure the bureau gives for that year. If regulation had remained fixed at 1949 levels, GDP growth would have averaged 2 percent higher annually, yielding a rate of about 5.2 percent over the period between 1949 and 2011. Compounded, that yields a total GDP in 2005 dollars of approximately $43 trillion, or $49 trillion in 2011 dollars, which is in the same ballpark as the $53.9 trillion figure calculated by Dawson and Seater.

Imagine that. What if we were better at crafting regulation? What if being willing to remove certain regulations is just as vital (maybe more so) than creating new ones?

That’s the WHY behind today’s newsletter. It seems like:

While “communism” and “capitalism” battled, technology won. (Tweet This)

After presenting the research on the panel, our argument was simple:

As a culture, we need to figure out how to accelerate the growth of GDP. It’s an imperfect measure, but if we strategically arm the businesses (who are the best capital allocators and playing by the rules!) with more investable resources, good things happen. We want to create a future of abundance, not one where people can’t grow their firms because of ineffective regulations.

Several of the panelists were angered, and it was clear that a conversation wasn’t what they were looking for. Rather than solve the problem, they wanted to find out who was the guilty party and punish them…

While that mindset is helpful sometimes, it’s not helpful in our current economic climate. We need more growth, better jobs, and more opportunities for more people. And we need them faster than ever before.

Luckily, we bounced from the panel, and kept building a community (Mission!) where freedom of debate, thought, and conversation are paramount. 🤝☮

Maybe you’ve encountered a similar scenario. When the words “communism”, “capitalism”, “left” and “right” get thrown around, people get scared. They worry that they aren’t qualified or that they’ll get in trouble if they say the societally sanctioned “wrong thing.”

But in order to say NEW THINGS, we must run the risk of saying the wrong things(Tweet This). Our current global economy isn’t growing fast enough. Our current pace of new technological innovation is not fast enough. Our current pace of culturally solving iatrogenic (unintended harm caused by the healer) technology is unacceptable.

So how can you start to solve these challenges today?

We can solve these problems by having the courage and tact required to bring up dangerous words and ideas in conversations.

So while every talking head on the news argues about “left” or “right” and “communism” or “capitalism”… a new type of debate and economy is already emergent.

The words we use to characterize immensely complex, leviathan-like systems are inadequate. They block us from seeing the full picture. They make us fearful of each other when, in reality, we all should be collaborators.

We have to be better collaborators with each other, because as we saw in last week’s newsletter… we really only have two choices: extinction or evolution. And the only way to evolve is by having the courage to go through technological and cultural event horizons.

“Capitalism” is a word that most people feel sums up western economies. Many other economies attempt to mimic what they view as “capitalist” economies. But do we have the right system and models in place for others to imitate? Are we spreading a gospel of technology creation and capital allocation? Or, is what we call “capitalism” just a codename for the hoarding of resources that happens when people run out of investable ideas, courage, and strategies(Tweet This)?It would seem to be the latter, as most of the fiction stories and worlds that are produced here present horrible dystopian futures.💀

The answers are dark, the woods are deep, and we have millennia to go before we (as a species) sleep.

Stay tuned for tomorrow’s newsletter to learn why the innovations per individual are falling. We’ll also study why the formation of new businesses is down, and present some ideas to solve these challenges. Also, stay tuned to learn how technology beat communism and capitalism. Here’s a sneak peek:

Source: Medium.com

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