A wide, shallow river
With the Federal government partially shut down for two weeks and Washington politicians playing chicken with the country’s credit score, it is easy to conclude that our best days are behind us. We beg to differ.
The US economy always seems to surprise the pessimists. Even though the current recovery is less robust than those we experienced in the past, it is still much better than the economy predicted in the dark days of 2009. Growth in GDP has averaged 2% since 2009, double the growth predicted by the “New Normal” crowd.
The one thing everyone seems to agree on is that we have the wrong economic policy—some say the government isn’t spending enough, while the rest say it is spending too much. But neither side does a good job of explaining why we have managed to produce the best growth in the developed world since the crisis of 2008.
Here’s how I think about the US economy: Imagine a river 20 miles wide and two inches deep. Occasionally someone tries to dam the river, or divert it in a significant way—think war, tax increases, Wall Street Greed, big business, big unions—take your pick.
What happens? This very wide and shallow river always finds its way around whatever obstacle is placed in its way. No one has been able to build a dam fast enough to stop the continually adaptive monster that is the US economy.
But in a global economy, the river is much wider than it used to be. Holding back the ingenuity of three billion people connected by the Internet (with 3 billion more on their way) is a big job and, we believe, an impossible one.
Next year is shaping up to be a good one for the world economy. Of the four major drivers of growth, the US, China, Japan, and Europe, none will be in recession in 2014. That’s a big deal and it is an environment that should treat stockholders well.
Daniel A. Ogden