The hunt is on, among the scholars and politicians, for a plausible explanation of the economic stagnation in the world's most productive industrial countries. Growth of output has been more or less zero in North America and Western Europe for more than three years. The conventional reasons are wearing thin.
For 25 years, beginning in the late 1940s, the industrial democracies enjoyed the most rapid rise of wealth, and standards of living, in history. But growth rates began to slow sharply after the oil crisis of 1973 and, around the end of the decade, it stopped. In the United States, Germany and Britain, output is now actually a little lower than it was in early 1979.
To blame it all on oil prices, or on unstable exchange rates, is no longer persuasive. Inflation has had something to do with it, but inflation is as much the effect of low growth as its cause. What else was happening?
One illuminating answer comes from the economist Mancur Olson, in his recent book "The Rise and Decline of Nations." He observes that in most countries, during long periods of peaceful development "without upheaval or invasion," people tend to organize themselves to protect their own livelihoods--and the effect is invariably bad for economic growth.
Along with much else, World War II destroyed a great tangled network of producers' cartels, trade associations and legal restrictions that had hampered economic growth in continental Europe. In contrast, the United States, which was farthest from the destruction, has had the lowest rate of economic growth in the industrial world over the past three decades, Britain, closer to the war but never invaded, has had the second lowest rate.
Olson argues that "with age British society has acquired so many strong organizations and collusions that it suffers from an institutional sclerosis that slows its adaptation to changing circumstances and technologies."
Conventional theory holds that a strong and stable political system is important to economic development. If that is true, why did growth rates remain consistently high in France in the late 1950s, when the country was teetering on the edge of a military coup over Algeria? And higher still in Italy?
At a time when the organization of special-interest groups might otherwise have begun to slow down the continental economies, the arrival of the European Common Market and the dismantling of tariffs forced on them another wave of disruption and expansion. It was Britain's historic bad luck to join the Common Market 15 years after it was founded, just as it was finally slowing down.
International trade becomes more important than ever, if you accept Olson's logic. He points out that international markets are exceptionally difficult for anyone to organize and control. Foreign trade dilutes the ability of domestic producers to manage their markets to their own advantage. You can see the reaction in the vehement campaigns by trade associations and labor unions, both here and in Europe, to hold down the menacing flow of imports.
Economics is based on the assumption that people want to get richer--and that's quite true, in the sense that everybody would like to be paid more money for the jobs that they are now doing. But real economic growth, at high rates, is a deeply threatening force. It may destroy your present job, and push you toward another, unfamiliar one in another place--perhaps even in another country, like the Italians and Yugoslavs working in German car factories. Fast economic growth makes you richer, but it also makes you live differently. It makes your childern grow up to be very different people from their parents.
Most people, reasonably enough, focus primarily on the immediate impact of economic growth on their own lives, rather than on the broad and gradual benefits that it brings to society as a whole. Hardly anybody opposes growth in principle. But most people are pretty good at organizing themselves for protection against it, in ways that slow the growth down.
Is Olson arguing that peace and social stability are a bad thing? Of course not. But he is offering politicians a warning that they are caught in paradox.
Every government in the world is desperately looking for rapid economic growth as the only possible remedy to unemployment and every other kind of social distress. But throughout all the democracies, people are busy building protective coalitions to defend themselves from the effects of growth. Those coalitions, as time goes on, seem to be increasingly effective at holding the growth rates down.