A confused doom-monger

In: Uncategorized

8 Mar 2009

Thomas Friedman, the New York Times foreign affairs columnist and doom-monger-in-chief, has written an op-ed piece claiming the economic growth model must come to an end:

“We have created a system for growth that depended on our building more and more stores to sell more and more stuff made in more and more factories in China, powered by more and more coal that would cause more and more climate change but earn China more and more dollars to buy more and more U.S. T-bills so America would have more and more money to build more and more stores and sell more and more stuff that would employ more and more Chinese …

“We can’t do this anymore.”

This passage makes the elementary mistake of conflating two different things. It is true that the economic imbalance between American consumption and Chinese production looks unsustainable. Either the Americans will have to produce more than they are or consume less relative to the Chinese. America cannot simply continue borrowing huge amounts of Chinese money to finance its consumption. But this is a fundamentally different problem from the supposed natural limit to economic growth that Friedman is suggesting.