Warren Buffett, stock-picker extraordinaire and CEO of Berkshire Hathaway, is one of the richest men in the world – his words are invariably ‘pearls of wisdom’
His optimism contrasts well with the pessimism of his fellow-countryman Professor Robert Gordon who claims progress, and so prosperity, has peaked
A precis of a recent bullish article by WB on wealth thus follows
I have good news:
- Most American children are going to live far better than their parents did
- Large gains in the living standards of Americans will continue for many generations to come
Yet pollsters find most Americans are pessimistic about their children’s future – leaders say the economy is spluttering – GDP has grown by only 2% or so in recent years
But let’s do a little math – wealth (i.e. prosperity) is defined as GDP per capita, and that’s what counts:
- We can expect America’s population to increase by 0.8% per annum:
- Births less deaths will add no more than 0.5%
- Immigration is estimated at 0.3% (1 million)
- So GDP growth of 2% will deliver annual 1.2% growth in per capita GDP
Such growth might sound paltry but, over 25 years, a single generation, it boosts current $59,000 of GDP per capita to $79,000 – and this $20,000 increase guarantees a far better life for our children
In America, this is not unusual
I was born in 1930 – the richest man then was John D Rockefeller Sr yet he could not buy all the pleasures and conveniences we now take for granted e.g. options in travel, entertainment, medicine and education – they were simply not available then – they now are, all thanks to innovation and productivity
Go back further, to 1776 and the Declaration of Independence, when 80% or so of workers were employed on farms to provide the food and cotton needed – now only 2% of today’s workers are needed to do the same job, thanks to tractors, planters, cotton gins, combines, fertilisers, irrigation and a host of other productivity improvements
The staggering productivity gains in farming freed nearly 80% of the nation’s workforce to redeploy their efforts into new industries that have changed our way of life
And this game of economic miracles is in its early innings – there will be far more and better stuff in the future
The challenge will be to have this bounty deliver a better life for all, not just for those in the vanguard of changes
Sadly, that’s not what has happened since 1930:
- The wealth of the top Forbes 400 increased 29-fold whilst millions of hardworking citizens remained stuck on an economic treadmill
- The tsunami of wealth didn’t trickle down – it surged upward
- The market system left many people hopelessly behind
These devastating side effects can be ameliorated – just as a rich family takes care of all its children, not just those with talents valued by the marketplace
Hence, in the years of growth that lie ahead, I have no doubt that America can deliver riches to many and a decent life to all
We must not settle for less
WB