Tape 184 - World growth to 2000 A.D.

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-	Welcome once again as MIT professor Paul Samuelson	0:03
	discusses the current economic scene.	0:05
	This series is produced	0:08
	by Instructional Dynamics Incorporated.	0:09
	Professor Samuelson, now that the recession is apparently	0:12
	behind us, what are your thoughts on the longer term	0:15
	prospects for economic growth worldwide in this century?	0:19
-	It's true that the recession of 1974, 1975 does look	0:26
	to be behind us in the sense that we hit bottom in May,	0:33
	but the rest of the world still	0:39
	has to look forward to the end of its recession.	0:44
	Still, let's take the dangerous road	0:50
	and try for the occasion	0:56
	to be a futurologist.	1:01
	I've been asked by a Brazilian publication	1:03
	to speculate on what will happen	1:07
	to the world economy for the rest of this century.	1:13
	So, here goes.	1:18
	If we read the writings of the famous Club of Rome studies,	1:22
	those on limits of growth by Professor Meadows,	1:28
	and world dynamics by Professor Forrester,	1:32
	many of them written right here at MIT,	1:36
	we must regard growth as very soon	1:40
	to be a thing of the past.	1:44
	Natural resources are finite,	1:46
	and hence, according to the new computer version	1:48
	of the old Malthusian Theory continued population growth	1:51
	must spell out a decline in the standard of living,	1:55
	to say nothing of producing an overcrowded	1:58
	and polluted environment.	2:01
	Yet, in the year 2000, when economic historians	2:04
	come to look back on the last quarter of the 20th century	2:07
	I rather doubt that they will find the facts	2:11
	in close agreement with the explicit	2:14
	and implicit predictions and policy recommendations	2:17
	of the new Malthusians.	2:22
	To be sure, the natural rate of population growth	2:24
	will be falling almost everywhere in the world.	2:27
	Still, world population will then be billions higher	2:30
	than in 1975, and for the most part,	2:34
	material living standards can be expected, I think,	2:38
	to continue their long historical climb.	2:42
	So let me review the evidence	2:46
	on which I base these predictions.	2:48
	That way, any reader can then form his own opinion	2:51
	and modify my guesses as he thinks best.	2:54
	What are present global trends?	3:01
	So far in the 1970s, total world GNP	3:04
	expressed in real terms after appropriate adjustments are	3:09
	made for price inflation seems to have been growing	3:13
	at an average annual rate of perhaps 5%.	3:17
	In 1973 when the advanced countries were	3:22
	going into a growth recession, world GNP,	3:25
	and that's the last year for which we have complete	3:29
	figures yet, seemed to grow at more than 6%.	3:31
	It was a year of good crops.	3:36
	With world population growing in the 1970s	3:38
	at about 2% per year, this means that	3:42
	real per capita income in the 1970s has been	3:45
	averaging out a growth rate of about 3% per year	3:49
	on the average.	3:53
	This is in contrast to what was happening	3:56
	in the decades around 1900, when I suppose it might be said	3:58
	that capitalism was at its peak,	4:03
	because it's been estimated that in those years	4:07
	total world GNP grew only about two or 3% per year	4:10
	with per capita incomes therefore scarcely	4:15
	rising at all on the average as population then soared.	4:19
	Within this global pattern of course we discern	4:26
	special regional trends.	4:28
	We discern the decline of the position of the leader	4:31
	that is the United States.	4:36
	The United States with only about 6% of world population	4:38
	now enjoys a bit more than 25% of world GNP.	4:43
	However, at the end of World War II my guess is	4:51
	that the U.S. share was almost a half of world GNP.	4:55
	In the 1950s our share sank to below 40%,	5:01
	in the 1960s to below 30%.	5:06
	Now it's about 26%.	5:10
	If the world develops as it ought to,	5:12
	by the end of the century the U.S. share	5:14
	should be below 20%, but not I hasten to add below 6%,	5:16
	or down to 6%.	5:21
	As an American patriot and as a citizen of the world,	5:24
	I rejoice in this salutary trend.	5:27
	The rest of the world's gain is not our loss.	5:30
	Now that a typical Swiss and Swede have almost as high	5:34
	real incomes as my American neighbors,	5:38
	we in America still get every bit as much pleasure	5:41
	as we ever did from our increasingly comfortable	5:44
	standard of life.	5:47
	What I do regret is the inequality of development,	5:50
	that the prizes in the growth sweepstakes have been	5:54
	going not to the underdeveloped world	5:57
	with its historical poverty, but rather primarily	5:59
	to the less than most affluent economies of Western Europe,	6:03
	Australasia, and Japan.	6:07
	These countries deserve their new sprint towards prosperity,	6:11
	but I wish that some of that same good luck	6:15
	could rub off and happen to India and Bangladesh,	6:18
	to Egypt, Haiti, El Salvador, Ghana, and Argentina.	6:22
	It's not true that the less developed countries	6:28
	fail these days to make progress.	6:31
	What would have been miracles of growth in the old days	6:33
	of undiluted capitalism have been occurring regularly	6:36
	over recent decades in Taiwan, Thailand, Mexico,	6:40
	Singapore, Puerto Rico, Spain,	6:44
	and some Eastern European socialist economies like Bulgaria.	6:48
	This is without regard to what the accidental discovery	6:52
	of rich oil deposits can do for Venezuela,	6:56
	Nigeria, or your random, run of the mill	7:01
	Persian Gulf sheikdom.	7:06
	But alas, the picture is spotty.	7:09
	A Brazil may flourish where a Chile will stagnate.	7:12
	Many Asian and African countries,	7:16
	freed at long last from the fetters of colonialism,	7:19
	have introduced elaborate plans for socialism,	7:24
	five year plans, 10 year plans, plans that do not seem	7:27
	to be worth the paper they're written on.	7:30
	Well, so far I've been speaking of the present and the past.	7:35
	What about the future?	7:39
	Will new rules apply to it?	7:40
	Is the fourfold increase in oil price,	7:43
	engineered by the OPEC cartel, merely one sign	7:45
	that the day of judgment is fast approaching	7:49
	when scarce natural resources will have been exhausted?	7:52
	Are repeated Russian grain purchases an omen	7:56
	that the number of hungry stomachs is finally	8:00
	outstripping the amount of food	8:03
	that men's arms can wrest from the soil?	8:04
	No scholar has the right to be dogmatic about the future.	8:08
	But let it be noted that the quantum jump in oil prices	8:12
	is much more a reflection of a newly formed	8:17
	and newly firmed monopoly than of actual depletion	8:20
	of known geologic reserves.	8:25
	If Saudi Arabia and Kuwait threw upon the world	8:29
	all of the world they were capable of producing	8:33
	in the same fashions that such countries used to do	8:37
	we would I am sure many times in the next 10 years	8:42
	witness sharp drops in world energy prices.	8:45
	I don't want to be misunderstood.	8:50
	I'm not one of those economists who are constantly	8:52
	predicting with great confidence that the OPEC monopoly	8:54
	will break down or will break down soon.	8:57
	But I am an economist who believes that	9:00
	you should call a spade a spade, and a monopoly a monopoly.	9:03
	Well, similarly let's consider the prospects	9:10
	for food production.	9:13
	It is not the case that agriculture experiences	9:15
	less technological advance than industry.	9:18
	Historical statistics show otherwise.	9:20
	Now, it may be the case that world climate	9:25
	is now going through a new cycle.	9:27
	Perhaps in two centuries we shall be at a new Ice Age.	9:30
	Perhaps the Sahara and the Indian Peninsula	9:34
	are in for an extraordinary frequency of droughts	9:37
	and disappointing monsoons, and disappointing harvests.	9:40
	But knowing the difficulties of identifying genuine	9:44
	rather than spurious statistical cycles,	9:48
	I should not like to bet that scientists' discovery	9:52
	of new hybrid grains, pesticides, fertilizers,	9:56
	and improved farming methods will fall behind	10:00
	the indicated rise in world population in the years ahead.	10:04
	What I think one can legitimately fear	10:10
	is that certain regions will on numerous occasions	10:13
	in the next quarter century experience disastrous	10:17
	crop failures and mass starvation.	10:21
	Hundreds of millions of people will at those times	10:24
	have to throw themselves on the mercy	10:28
	of the luckier world powers.	10:30
	I don't think one has to be a pessimist or a cynic	10:33
	to have doubts that the philanthropic response	10:37
	will at such times be fully adequate	10:41
	to alleviate the human distress and suffering.	10:44
	One doubts the adequacy of the response.	10:48
	And I don't think that this rather gloomy,	10:52
	foreboding in mind will be materially exercised	10:54
	by any of the various international stockpiling schemes	11:00
	that I believe possess any realistic feasibility.	11:04
	Well, what will be the economic pecking order	11:11
	in the year 2000?	11:15
	A couple of decades from an observer of the world	11:19
	from outer space will I suspect at first glance	11:22
	think that matters have not changed much.	11:26
	The highest standards of living will still be	11:29
	in the temperate zones, in Europe, North America,	11:31
	and regions below the Tropic of Capricorn,	11:35
	Australia, New Zealand, perhaps,	11:38
	perhaps Chile, Argentina, Brazil.	11:42
	The tropics and the polar regions will still offer	11:47
	the greatest challenges to longevity	11:49
	and a comfortable life.	11:52
	But at a second glance, I think that observer will see	11:54
	some notable changes.	11:58
	Although Japan's miraculous growth spurt	12:00
	of the 1950s and 1960s must in all likelihood	12:03
	abate somewhat, still I suspect she should be able	12:08
	to maintain a positive growth differential	12:12
	over the other advanced nations of at least	12:15
	a couple of percent per annum.	12:18
	Small differences like this accumulate at compound interest,	12:22
	and they should serve to bring the Japanese standard of life	12:27
	to the top of the pack by the end of the century.	12:31
	Can one extrapolate for a country like say Brazil	12:36
	a continuation of her recent spectacular progress?	12:40
	In terms of size, resources, and cultural mix	12:45
	of her population, Brazil could be on the brink	12:48
	of a long term takeoff.	12:53
	Temporarily, by virtue of her strong governmental structure,	12:56
	Brazil has avoided some of the turmoil and disorganization	13:00
	that results in modern democracies as the electorates	13:04
	are subject to a wave of so-called rising expectations	13:09
	and rising insistence on entitlements.	13:13
	However, the history in many countries of strong	13:18
	governments, whose early economic successes do not last,	13:20
	makes it hazardous for the social prophet	13:26
	to extrapolate over the long run	13:29
	will growth rates in the neighborhood of 10% per annum,	13:31
	such as Brazil has in many recent years been experiencing.	13:35
	Still, if even 6% real growth could be achieved	13:41
	over the long pull that would bring Brazil	13:46
	to preeminent economic position in Latin America	13:50
	and into the general range of affluence of Great Britain.	13:53
	For a semi-tropical country with a diverse	13:58
	ethnic background, this would indeed	14:02
	be a notable achievement for Brazil.	14:05
	Still more dangerous it is to guess on the future	14:09
	of mainland China.	14:12
	Its stability and the degree of equality in which it shares	14:14
	what we must remember is still a very low standard	14:19
	of living, these are impressive.	14:21
	But one has to remember how promising looked	14:26
	the future of Soviet growth in the early 1930s,	14:28
	and how many have been the vicissitudes	14:32
	in the years since then.	14:35
	Beyond guessing that China will do better than India	14:38
	in the rest of the century, one must reserve judgment.	14:41
	It's interesting to speculate on what is going to happen	14:47
	to those Persian Gulf countries	14:51
	born with the equivalent of a golden spoon in their mouth,	14:55
	namely with rich oil resources.	14:59
	These certainly provide the wherewithal that could make	15:03
	for a rapid increase in the general standard of life.	15:07
	At first, it will be rational for these countries	15:15
	to use much of the surplus funds which they earn	15:19
	because of the new higher price of oil	15:24
	on foreign investment, letting the money grow	15:28
	at a compound rate of return.	15:34
	Not all of the funds, of course, can prudently be	15:37
	invested in this direction.	15:41
	Much should be invested in domestic development at home.	15:43
	But there is a limit to the absorption capacity	15:50
	that those countries in the present state	15:54
	of their sophistication can in the short run invest at home.	16:00
	Increasingly if the initial developmental programs	16:06
	at home turn out to be successful,	16:14
	the foreign kitty built up by investment abroad	16:19
	should be drawn down on to turn the desert sands	16:24
	into industrial gold.	16:30
	However, one does not find in history	16:35
	very many cases where, let us say, impoverished peasants,	16:44
	hillbillies have had lightning strike	16:50
	in the form of lottery winnings,	16:57
	or oil strikes and gold strikes in which those peoples	16:59
	have move rapidly ahead into the ranks of the affluent.	17:08
	The Navajo Indians may well have benefited	17:13
	from domestic oil lease lands in the United States,	17:17
	but we do not consider the average Navajo today as,	17:22
	free of oil, having a sustaining income base	17:29
	equivalent to that of the average Episcopalian	17:33
	or average Presbyterian just to mention two	17:36
	of the more affluent sects of,	17:40
	of churches upon which statistics have been collected.	17:47
	The shah of Iran may be correct that	17:52
	his country will by the next decade	17:56
	be moving to the standard of life	18:00
	of a typical Western European country,	18:03
	Belgium, Holland,	18:07
	Ireland, the UK.	18:11
	But knowing how low is the base from which they start	18:14
	and knowing how vulnerable to error	18:21
	and corruption and to political turnover	18:26
	are the planning agencies of countries at that stage	18:32
	of development, I would not like to make book at long odds	18:36
	that history will record that the shah of Iran	18:42
	is correct in his prediction.	18:47
	And the same can be said for Saudi Arabia	18:51
	and Iraq and Libya, even though as we now look	18:58
	at real incomes dividing the total	19:04
	of the annual increment to wealth in those countries	19:09
	by the total of the population we find	19:13
	that they no longer belong among	19:16
	the underdeveloped countries, but had to be moved	19:18
	in with the United States.	19:21
	Whether, when the oil gives out in Kuwait,	19:24
	and in Iraq and Libya, it'll be a longer time	19:28
	before that event happens in Saudi Arabia.	19:33
	But when that event happens,	19:36
	will the oil that has come out of the ground have been	19:38
	transmuted by the alchemy of prudent investment	19:43
	into industrial plant and equipment which can maintain	19:48
	those high standards of living and a trend	19:55
	parallel with that of the development	20:00
	of the most advanced countries?	20:03
	It is a possibility, but I think that	20:07
	I would still say that the issue is moot.	20:10
	Let me think aloud and say a few words about	20:16
	the relative prospects of the totalitarian planned	20:21
	socialist, communist countries in comparison	20:28
	with the rest of the mixed economies.	20:33
	At first blush, one might think that	20:39
	a controlled economy dedicated to the eradication	20:42
	of poverty and to growth could out-perform	20:47
	a market economy, which depends upon the day to day	20:53
	saving decisions of individuals,	20:57
	individuals who are being bombarded	21:00
	by television performances which dangle	21:03
	before them attractive ways of spending	21:08
	on current consumption, so that even if you live	21:12
	in a poor state of the union, like Mississippi,	21:16
	you hanker after the same sleek automobiles	21:20
	and the same luxuries of food	21:28
	as the more affluent people from California	21:34
	and from the Northern industrial states.	21:37
	Well, the same thing happens on a international scale.	21:40
	The more austere controlled economies can,	21:48
	you would think, presumably, by fiat hold down	21:54
	the level of current consumption.	21:59
	This is a straight capitalistic reasoning	22:01
	that I'm giving as applied to real capital,	22:04
	but not to privately owned capital.	22:09
	They convert current consumption into new capital formation	22:13
	in a larger percentage than do the market economies,	22:20
	and so they can be expected to grow more,	22:24
	so, might run the argument.	22:28
	I have even heard it said,	22:32
	it's now perhaps two decades ago,	22:35
	by Professor Peter Wiles of the London School of Economics,	22:37
	an expert on the Soviet Union, an Oxford trained economist,	22:42
	trained around World War II, that the socialist,	22:47
	communist societies are less efficient	22:53
	at any stage of the game than the market economies.	22:57
	So, they do not arrange the elements of the vector	23:01
	of what can be produced in as, in an efficient way,	23:05
	as efficiently as the market economies.	23:11
	But since they grow at a more rapid percentage rate	23:14
	than the market economies, even an inefficiently arranged	23:17
	vector of elements which continually grows at 8%	23:22
	will ultimately in every element of the vector	23:28
	outstrip the efficient market economy	23:32
	which grows at only five or 6%.	23:38
	If you had acted upon the Wiles prediction	23:46
	these last 20 years you would have been in for a surprise,	23:51
	because it turns out that those	23:55
	controlled economies do not grow in all the elements	24:00
	of the vector at 8%.	24:04
	On the contrary, Professor Bergson who is our foremost	24:06
	American authority on the Soviet system	24:11
	in many recent publications, most notably	24:14
	in the (mumbles) lectures he gave a year ago May,	24:18
	no, a year ago this summer I guess, in Stockholm	24:25
	has shown that it's extremely unlikely that	24:29
	the Soviet economy will in the 1970s	24:31
	and 1980s be able to maintain the growth rate of the 1950s.	24:35
	That growth rate was premised upon both the recovery	24:41
	from wartime devastation.	24:47
	We always know that such growth can be rapid,	24:49
	but also it was very heavily capital using,	24:51
	and it will be very hard to maintain the same incremental	24:55
	deepening of capital in the years ahead	24:59
	for purely arithmetical reasons.	25:03
	It looks as if the Chinese system	25:11
	has done better in meeting the problem of agricultural	25:16
	advance an agricultural reform.	25:22
	China, in a good year now, is, the experts tell us,	25:25
	almost self-sufficient in grains.	25:30
	She is using good hybrid seed,	25:35
	some of it developed by the Rockefeller Foundation	25:40
	in Mexico, but some of it developed in China itself.	25:42
	She is spreading the knowledge of this technology.	25:47
	She doesn't have as much inorganic fertilizer.	25:50
	There is a apparent unity,	25:54
	you might call it a docility if you like,	25:58
	of the Chinese people which perhaps augers well	26:01
	for their kind of controlled system.	26:05
	But we have to remember that they do start	26:08
	from a very, very low base.	26:10
	I might mention a very interesting comparison	26:16
	that I've seen out of Ann Arbor,	26:18
	the group survey center there,	26:22
	done by an emeritus professor	26:26
	at the University of Bridgeport	26:28
	which compares Bulgaria and Greece.	26:29
	On another occasion I'll go into the details	26:33
	of that comparison.	26:35
	Well, my time is almost up.	26:37
	One cannot conclude a discussion of long range forecasting	26:44
	without emphasizing that precision	26:50
	in long run forecasting is a myth.	26:54
	Surprise should never surprise the futurologist.	26:57
	Karl Marx, Oswald Spengler, Thorstein Veblen,	27:02
	Arnold Toynbee, Joseph Schumpeter,	27:06
	they are like poets, not like scientists.	27:09
	They aren't even like historians.	27:12
	The world as it is today was predicted by nobody,	27:14
	not by Marx, or Engels, or Lenin,	27:18
	not by Vilfredo Pareto, or Friedrich von Hayek,	27:22
	not by Henry Adams or de Tocqueville,	27:27
	not by John Maynard Keynes, though he did come	27:31
	remarkably close in his 1930 article	27:34
	on economics for our grandchildren.	27:39
	But then even a random archer must by chance alone	27:41
	some time come close.	27:45
	Nevertheless, the future is not a matter of sheer chance.	27:48
	It grows organically out of the present and the past.	27:53
	The analyst must peer into a glass darkly	27:57
	as best he can to appraise the likelihood	28:00
	and finally if he's honest he must warn against	28:05
	the imprecision of even his best guesses or visions.	28:08
-	If you have any comments or questions	28:15
	for Professor Samuelson, address them	28:17
	to Instructional Dynamics Incorporated,	28:19
	450 East Ohio Street, Chicago, Illinois, 60611.	28:21

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Title:

Tape 184 - World growth to 2000 A.D.

Date:

July 1975

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Samuelson, Paul A. (Paul Anthony), 1915-2009

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Paul A. Samuelson papers, 1933-2010 and undated

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Paul A. Samuelson papers, 1933-2010

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Economics Cassette Series: Paul Samuelson

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Tape 184 - World growth to 2000 A.D.

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