The lost generation
Matthew Yglesias catches Eugene Fama making a strange assertion:
And as Matt points out, the giant success story in the developing world was China, where the driver was the end of Communism — not modern finance. Actually, it’s even more absurd to give finance the credit than Matt realizes: China has not been experiencing net inflows of capital, partly because it has maintained capital controls, effectively insulating itself from the whole finance thing.
So why does Fama believe that something wonderful happened around 1980? Part of it, I suspect, is that in his milieu the politically correct thing is to pretend that nothing good happened until Reagan came along.
And this has a truly weird effect in the American context: the best quarter-century of growth America has ever experienced, the postwar generation — which happens to be the era during which many of the founders of neoconservatism came of age! — has gone down the memory hole. After all, it’s impossible that living standards would double under a regime of high marginal tax rates, generous minimum wages, and strong unions. So it just didn’t happen.
Beginning in the early 1980s, the developed world and some big players in the developing world experienced a period of extraordinary growth. It’s reasonable to argue that in facilitating the flow of world savings to productive uses around the world, financial markets and financial institutions played a big role in this growth.The assertion about developed countries is, of course, entirely wrong. From Angus Maddison’s dataset:
So why does Fama believe that something wonderful happened around 1980? Part of it, I suspect, is that in his milieu the politically correct thing is to pretend that nothing good happened until Reagan came along.
And this has a truly weird effect in the American context: the best quarter-century of growth America has ever experienced, the postwar generation — which happens to be the era during which many of the founders of neoconservatism came of age! — has gone down the memory hole. After all, it’s impossible that living standards would double under a regime of high marginal tax rates, generous minimum wages, and strong unions. So it just didn’t happen.
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