The Great Growth Target Leak of 1961
In Doctor Strangelove, General Ripper explains to Captain Mandrake why Clemenceau’s dictum on war is now obsolete:
He said war was too important to be left to the generals. When he said that, 50 years ago, he might have been right. But today, war is too important to be left to politicians. They have neither the time, the training, nor the inclination for strategic thought.
Oddly enough, it was not generals who were at the forefront of strategic thinking but academics like Henry Kissinger, Herman Kahn, Thomas Schelling and Daniel Ellsberg. Meanwhile, liberal politicians had concluded that the economy was too important to be left to the economists — let alone to the unscripted dealings of consumers and producers. Soon after Kennedy’s inauguration, signs appeared in the Commerce Department asking, “What have you done for growth today?” [implicitly: ask not what growth can do for you…]
The entire dynamic of this discussion suddenly changed when OECD bureaucrats and delegates learned that immediately before the MCM [ministerial meeting] the US proposal to set a growth target had leaked to the press. First in the New York Times and then around the world, newspapers were analyzing the viability and hidden motives of the target and reported on the different views on the proposal among OECD member countries. In all articles the initiative was interpreted as a direct response to Khrushchev’s announcements, an allegation the US delegation denied. The press was generally skeptical, in particular in Europe, and argued that the proposal was unrealistic. Characteristically, the German business daily Handelsblatt stated that member states did “not at all command the necessary economic policy instruments to force onto their industry and agriculture a specific growth rate.” Furthermore, there was some fundamental critique. For example, John Allen complained in the Christian Science Monitor that the growth target set by the OECD could not be achieved because the US had “grown nearest the top of the tree.” Arguing that the richest nations have “the ‘worst’ growth rates” and that for America and Britain growth rates were bound to decline, he stated: “The United States already has run a race and won. It does not have to accept the challenge to the same race over again, against a fresh runner.” Instead, the US should focus on improving the quality of education and housing, on alleviating poverty, and aim “to lift the underdeveloped countries up to Western standards.” Irrespective of these more nuanced critiques, the prior leak of the US plans put immense pressure on OECD ministers. Although it was not stated explicitly in the debates, at least the German delegation seems to have interpreted the leak as an intentional act of the US delegation to get agreement on its “propagandistic” target. At the meeting the German Economics Minister Ludwig Erhard accordingly complained that it was “improper that Ministers should read in the newspapers of the previous day and the day before what they were to decide that day.”
It is interesting to note that within all the extensive discussions among OECD experts and the key economists from member countries, the idea that a distinction could be made between absolute and relative growth numbers, between the size of an increase of the economy and the rate of increase, had not been brought up. Although no one expected the US and Britain to grow at the same rate as Italy or Japan due to the possibilities for catch-up, the shared assumption was that given the right policies growth rates could be stabilized between 4 and 5 percent annually for all countries, irrespective how rich they were and how large their economies had already grown. The growth rate dominated economic policy debates in the 1960s, exponentiality was the implicit ideal, not linearity.
So that is how co-ordinated growth targeting first leapt onto the world stage — as a panacea propaganda stunt without the technical know-how for accurate forecasting, targeting or policy selection to meet the targets. By happenstance, the OECD countries came close to meeting their joint 1960s growth target. The econometric analysis and policy prescriptions came as an afterthought.
It is all about ignoring externalities.
btw: Schelling et al worked for US funded humbug factories, for RAND more bombers is the conclusion the trick is to deduct it without someone checking the reasoning.
The good old appeal to the infallible experts’ humbug.
“It is all about ignoring externalities.”
That’s why Kapp didn’t like the term “externalities” — if they are “external,” they are easy to ignore. In fact, they are not external, they are intrinsic elements of the production/consumption process whose costs are shifted to third parties.
well, i spun out on that last turn.
greenhouse gas reduction targeting resembles growth targeting?
care to explain that?
Yes, basically a propaganda stunt with no substantive policy analysis to support the prospects for achieving the goal and no assurance of political priority for it. On the contrary, economic growth remains the priority so any direct conflict between targets will be resolved in favor of growth. The litmus test here is leisure/income “choice”. People can (hypothetically) choose to take more of the benefits of technology in increased leisure rather than increased income. Governments can also choose to “level the playing field” between the choices or to tilt it one way or another. Since the beginning of the cold war, the tilt has been toward more income (= more growth!). You should be aware of this, coberly, with the ongoing attacks against social security. “Oh, we just can’t afford to have people not working!” (because it’ll eat into the growth imperative).
sammich
i can’t tell if i am just getting old and feeble minded or if i am just not with it… with the ongoing conversation.
are you saying that greenhouse gas reduction targeting is some kind of misdirection that avoids the real problem of global warming? or are you saying that you don’t think global warming is a real problem?
I’m saying that targeting is a propaganda stunt and doesn’t address the real problem of global warming. That’s not to say that you couldn’t have a propaganda stunt in conjunction with real solutions but I see only desultory action from the Obama administration. Admittedly desultory may be better than nothing — except if it sends the message that this isn’t a real problem.
for my part a recent new item in Oregon that the state would require greenhouse gas emission reductions from industries like cement production caused me some concern:
producing cement may be hard to do without burning fossil fuel, and targeting an industry that is probably essential at least for the time being and unable to comply at reasonable cost… seems to me to be ill advised compared, say, to the greenhouse gas advantages availble by requiring cars to run electricity even if that means slower cars and shorter trips for most of the driving we do… in other words the old political problem of getting people to do what is good for them.
as for SS, a similar problem lies in the failure of the left-most to recognize that the workers can pay for their own Social Security with an extra dollar a week, and instead insist upon demanding higher taxes on the rich…
sorry if this seems to lead off into a tangent, but i really did not / do not get your point.
Sandwichman:
Paul Kennedy wrote The Rise and Fall of The Great Powers which tracked the history of nations who spent more of their economy on defense/war rather than the domestic economy. You are kind-of going off in that direction. Kennedy’s over all point was nations that spend more on war and defense at the expense of a domestic prosperity end up a 2nd and 3rd tier nations in the end as they can not sustain both.
The size of the US economy would make it extremely difficult to grow as it did several decades ago. If we were to cut Defense and plow it into the domestic economy, the growth “could” be greater if such were on material product and not paper growth.
Yes, I think the percent of GDP spent on defense is misleading, in part because it doesn’t include the cumulative federal debt and debt service charges that could be attributed to ongoing military-industrial “Keynesianism.” Then there is supporting infrastructure and veterans administration that doesn’t count as defense spending but that reflects costs that arise out of war-making.
sammich
then we agree.
that is, i agree with your July 26: 6:16 which appears before my July 25: 7:04.
The Angry Bear practice of inserting some comments out of the regular chronological order can be confusing.
But my reply was to your 6:58 comment. Nevertheless, we agree.