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Our Age of Anxiety

Romney’s challenge is to address the deep uneasiness in America and point the way to a comeback.

May 28, 2012, Vol. 17, No. 35 • By YUVAL LEVIN
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The problem is that America is unprepared for the future, and Barack Obama is not so much the cause of that problem as the embodiment of it. He stands for what has gone wrong, and his ideological views, his party’s most powerful constituencies, and his policy commitments stand in the way of America’s future prosperity. 

A proper understanding of the nature of that problem would not only help to show voters why Obama must be sent packing, but would also reinforce the case for Romney’s particular strengths in this unusual moment. The Romney campaign has yet to make an overarching case for the candidate. They would be wise to notice that a careful assessment of what America lacks as a new global economic order takes shape could add up to just such a case. 

The Great Slowdown

The American public knows that the nation’s economic prospects are in exceptional peril. Huge majorities of voters say that this recovery feels like a recession, that the country is on the wrong track, and that their children’s economic prospects seem dimmer than their own. There is more going on than a cyclical downturn.

There are many ways to describe what appears to be worrying these voters, but if we were to sum up the danger in one word it would be stagnation. After decades of galloping growth, America now faces the prospect of a harsh and sustained deceleration, and therefore of falling behind in the world economy. 

In the 60 years following World War II, the American economy grew at an average rate of 3.4 percent per year—a truly astounding persistent pace of expansion. This growth brought with it sustained improvements in income and standards of living—improvements that we have come to regard not as miraculous advances but as the normal course of American life. Our sense of the nation’s overall standard of living takes such growth for granted, so that a period of significantly slower growth feels like a real step down. 

We have been living through such a period lately. Annual economic growth averaged 3.5 percent between 1960 and 1999, but only 1.7 percent between 2000 and 2009. In the Obama years, we have averaged 0.6 percent growth. 

It will not be easy to regain our old trajectory. Economic growth is in essence a function of two factors—workforce expansion and productivity improvement—and the growth of the past half-century has involved both in roughly equal measure. As the population grew in the wake of the baby boom and women entered the workforce en masse, the American labor force grew by leaps and bounds, accounting for just under half the total economic growth in this period. Meanwhile, as new technologies and business-model innovations emerged in fierce succession, productivity gains accounted for the rest. 

It is already perfectly clear that this balance of factors cannot be sustained. As the baby boomers retire and the proportion of women in the workforce plateaus, the growth of the labor force contributes less and less to the growth of the economy. In the past decade, productivity gains accounted for 80 percent of total economic growth, up from 53 percent in the 1990s and 47 percent in the 1980s, according to a recent study by McKinsey and Associates. The role of the labor force is diminishing quickly as the growth of that labor force slows. This suggests that economic growth in the coming decades will depend decisively on productivity growth. If we are to experience anything like the prosperity of the postwar era, our economy will need to be more productive than ever. Efficiency must be the watchword of our economic policy.

But we are not well positioned for the kind of explosion of efficiency we will need. Our government finances are in shambles, our public sector is woefully inefficient, and our private economy is very poorly served by a set of policies and institutions that seem intent on denying us a productive future workforce and on subjecting more and more of the economy to a regulatory mindset that prefers consolidation to growth.

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