I’d like to focus today on US and global economic growth since 1945 guided by the new economic order of win/win free trade installed by the Bretton Woods conference.
The US economy has grown 11-fold since then in real economic terms. The US economy, which won the war, was just 9% as large as it is today! This is a little less than 3-fold population growth combined with 4-fold per capita production/income growth.
Visually, it is clear that US economic growth has been steady across these 80 years, only interrupted by a few severe recessions.
The US had already doubled its GDP between 1938 and 1945. So, the US economic growth was 22-fold from 1938 to 2025. Other leading countries showed flat total output in the war era.
This chart shows that the US reached its apex as a share of global GDP right after WWII. I think that president Trump mistakenly believes that the US could have maintained its 28% global market share forever. In more realistic terms, the US reached 19% of global GDP in 1913 and properly maintained that share in 2008.
Summary
The post-WW II global institutions drove 11-fold growth for the US and 15-fold growth for the world. The historical benchmark in 3x. The US experienced an extra doubling of its economy from 1938-1945. The mercantilist views of 1880-1920 simply cannot compete with the post-war free trade regime.
I believe that Charles Taylor is correct about the critical role which our background worldview plays in shaping our lives. Our unconscious mind has views of the world and uses them to influence us “all night and all day”. I think that major events and ideas find their way into our paradigms about life, science, religion, philosophy, politics, morality, character, careers, recreation, and communities. Maslow argued that safety and security are at the base of our pyramid of psychological needs. If fear and insecurity is a main feature of modern life, we need to understand why this is so. In a world of educated/acculturated individuals and mass media communications, the abbreviated “history of the world” drills deeply into our minds, shaping its categories, structure and evaluations.
I’ve reviewed dozens of lists about the most important events overall and within various categories of modern (post 1400’s) life. I documented 257 (!) greatest events with Wikipedia references. I’ll use this database to analyze their impact on fear/insecurity today.
The events are roughly equally divided between those which make the world riskier (92), safer (83) or do not have a clear, significant impact (82)
Using 40-year periods to summarize the events, there is no clear trend toward riskier or safer events. From a current perspective, the 1820-1859 period was negative with 7 riskier to 4 safer events. The 1848 revolutions threatened the integrated worldview. Spencerian Social Darwinism, even before Darwin, pointed to “scientific” national, racial and class divides. The “dismal Dane” Kierkegaard defined an existential perspective as an alternative to a confident belief in God. The western powers essentially conquered proud China in the “Opium wars”. Lyell summarized geology as the scientific study of changes in the earth, itself. Marx invoked a Hegelian, materialistic, historical, “scientific” philosophy of class division and revolution required by capitalist ownership of the means of production. Darwin’s “theory of evolution” rocked a world that was deeply invested in a deterministic, structured, certain, law based, deeply unchanging, yet socially, politically and economically changing world, philosophy and religion.
The next 1860-1899 period was also negative with 13 riskier to 9 safer events. Nietzsche’s “God is dead” and William Jennings Bryan’s populist “crucified on a cross of Gold” confronted the progressive spirit of the age. The US Civil War showcased the terrors of modern military technology. Famines, urbanization, agricultural productivity improvements, and religious wars drove millions of young Europeans to leave home for other nations like the USA. Art became abstract and individualistic, disconnected from citizens. New forms of popular music arose from the cultural melting pot of the USA. Nationalism grew. The US became an imperial power. Japan engaged with the West and decided to imitate it. The European powers discovered Africa as a new continent to colonize. These events impacted the nineteenth century and still impact all of us today.
The period from 1980 to today is also more negative, with 15 riskier events to 11 safer events. Populist politicians, including far-right partners and supporters are succeeding. Greater legal and illegal immigration from non-European countries to the US concern many citizens. The economic growth of Asia threatened American factories and workers. The transition from European to local power in South Africa raised concerns. The 9/11 terrorist attacks frightened Westerners. Russia’s invasion of Ukraine threatened the modern military world order. Innovations like “junk bonds” increased the risks in the increasingly integrated global financial system. The Great Recession was triggered by “financial innovations”. Michael Porter’s “competitive advantage” theories caused the most powerful corporations to more ruthlessly pursue success. The Reagan/Thatcher revolution undercut unions as a counterbalance for workers versus owners. ChatGPT passed the “Turing test”, indicating that computers are indistinguishable from men.
By Category
Philosophy/Politics riskier 16, safer 13, neutral 9. The breakdown of the nicely integrated “ancien regime” with certain answers for everything is a major and an ongoing source of insecurity. You either have total belief, or you don’t. Kierkegaard defined the need for a “leap of faith” in the modern world. Fundamentalist Christians redefined a world that maintains the historical certainty.
Society/Religion riskier 14, safer 9, neutral 7. Change is the dominant theme.
International relations riskier 27, safer 7 and neutral 2. WWI, WWII, Cold War dominate.
Business/economics riskier 12, safer 13, neutral 15. Process and efficiency make the world safer, while the unequal distribution of income and wealth drive political conflicts.
Physics/Mathematics riskier 9, safer 7, neutral 8. Scientific rules can be defined numerically. But they change!
Technology riskier 2, safer 12, neutral 15. The world benefits from a series of energy and agricultural revolutions.
Computers/Communications riskier 1, safer 6, neutral 24. Tools are mostly neutral, able to be used for good or bad.
Biology/health riskier 11, safer 16, neutral 2. Medical advances accumulate and promise more in the future. We better understand the concerning true risks of microorganisms, evolution, public health, adaptive threats, pandemics, human changes to genetics, and human impacts on the environment.
Science and technology have a very nice 41 safer to 23 riskier ratio. The social areas unfortunately show a 69 riskier to 42 safer profile. The social sciences, arts, philosophy and religion are not winning the war.
Highest Priorities
Ignoring the 82 neutral events, there are 36 items that are most influential/important within the 92 riskier and 83 safer events.
The 16 most important “riskier” items are not evenly distributed among the 8 categories. 4 philosophical items. Rene Descartes’s radical doubt opened the way to complete skepticism. Karl Marx defined a necessary utopian solution to class conflict. The Russian revolution and Chinese Mao revolution followed. Friedrich Nietzsche explored the logical possibilities of “God is dead”. Fascism was defined as a reasonable form of nationalism. The western cultural revolution of the 1960’s provided a fully secular option where religion and culture do not control the individual. WWI, WWII, the cold war, the atomic bomb, Nazism, and the holocaust. The Great Depression. Darwin’s theory of evolution. The Spanish flu and the 2019 global pandemic. “Things fall apart, the center cannot hold”. These important events point toward a meaningless, self-destructive world.
On the other hand, there are 20 much more positive events in the modern world that surely shape our subconscious thoughts. The progressive era of 1880-1920 created governmental reforms and new non-governmental organizations to meet human needs. The post-WWII set of international institutions thrived for 80 years growing global real dollar GDP 40-fold and preventing WW III. The Cold War ended without a hot war! John Maynard Keynes invented the effective discipline of macroeconomics, allowing nations to roughly control their economies and minimize the damages of the business cycle. Scientists demonstrated that the universe is “regular”. Newton, Pascal and von Neumann defined definite, probabilistic and dynamic laws. Edison made commercial electricity practical. The second and third agricultural revolutions transformed production, society and trade. The internet and Google’s search engine made all information easily accessible. Modern surgery, pharmaceuticals, public health, DNA insights, vaccines and social medical insurance have boosted life expectancies far above 70 years.
Summary
Why do we live in such a fearful, insecure time, despite the 83 big events that make our world permanently safer?
The mass media highlights negative, emotional stories.
Politicians use negative, emotional stories to gain and retain support.
Human nature discounts solved problems and historical events. It focuses on today’s challenges. In a sense, we’re always on a treadmill.
The meritocratic, late capitalist, Schumpeterian “creative destruction” economic system leaves everyone without true financial security.
Individualistic Americans don’t really believe in a safety net or welfare state. Politicians have destroyed rather than upgraded or enhanced the welfare System to deal with the modern challenges.
Religion, a critical source of understanding reality, is losing the war against secularism. It has not found a new structure, motif, concept, killer app, theme, bridge, attraction, rationale, argument, or appeal.
Skepticism is a very powerful worldview. It feeds on the human desire for certainty, authenticity, rationality, explanation, and perfection. It celebrates superior knowledge, history, logic, insights, contrarianism, irony, modernity, and progress.
I think that the misguided belief in scientific certainty in all arenas is also to blame. People misunderstand Newton. He discovered physical laws and mathematics that described the world like no one had done before. Yet, he did not abandon the gods, Christianity or alchemy. He was not a materialist reductionist. He knew better. He recognized Aristotle’s “final causes” as deeply important and accepted that he had no idea how or why gravity functioned.
The “orange one” does not “hold all of the cards”. He is critically threatened by his foreign handlers and the US justice system. He was not elected to promote a trade war. No one expected a trade war. He merely “shadow boxed” during his first term on trade. He has made the “trade war” his first priority because it is a “sure win” politically, in the short-run. He first bluffed exaggerated 50% and 100% tariffs, and the media duly reported these crazy claims that anchor or outline the story. He now claims HUGE victories with 15% tariffs. The self-described GOAT negotiator thereby proves his standing. He claims victory. He uses this temporary bump in support to take over the government.
Citizens need to recognize that this is clearly not a “win” for the country. Import tariffs are simply taxes. They get split between the foreign exporter, the importer and the retail customer. At 15%, the typical payment split is 25%, 25% and 50%. Exporters still want to sell goods and maintain market share. They have fixed costs. They have profits. They can reduce prices in the short-term. Importers still want to sell goods and maintain market share. They can limit price increases in the short-term. Most markets are “sticky”. Brands, supply chains, habits, marketing and convenience matter. Import costs are half to three-quarters of retail prices. The consumer price increase is 5-8%. Some consumers switch to lower priced options, some don’t. The “next best” low price option for an imported good is probably another imported good. The “Trump tariffs” distort markets. They don’t deliver a “victory” for American consumers, producers, labor, finance or government. They merely “gum up the works”.
The “orange one” understands leverage, populism and persuasion. He really doesn’t understand markets, as demonstrated by his dozens of business failures. A 15% import tariff will cause pain for foreign exporters, US importers and consumers. It’s not large enough to cause a domestic firm to invest in expanded capacity. They will use all of their existing capacity and even cut prices a little to win market share. Manufacturing investments require 20-30-40 year timeframes to be viable. They require confidence in government policies on trade, regulations, antitrust, labor, environment, intellectual property, lobbying, property taxes, inventory taxes, corporate income taxes, international taxes, international finance, transportation, supply chains, labor costs, etc. Trump’s policies strongly work against such investments.
US industries don’t import goods to save just 10%. They import goods because the total cost of imports is at least 20% lower and trending in the right direction. Importing always has extra costs for transportation, communications, delays, coordination, property risks, quality control, product development, supplier management, flexibility, tariff risks on both ends, legal risks, capital controls, financial transactions, inventory, obsolescence, etc. There is a “step function” involved here. US firms from 1970-2000 only relinquished their domestic manufacturing because when they completely ignored all fixed costs and only looked at short-term variable costs, they had to outsource production. There will be no overall manufacturing renaissance. There will be some very low labor cost manufacturing that returns to the states. That is, only where labor costs are a small percentage of the total production cost. Hence the “job creation” impact will be tiny, impossible to measure.
So … if they won’t build new factories, what will be the leading responses of domestic importers? They will find ways to import/reroute goods from lowest tariff countries. They will find ways to reclassify goods and avoid tariffs. They will lobby for exemptions. They will import only key components and do “final assembly” locally in highly automated factories. They will hold imported goods in a Free Trade Zone. They will split physical products from services and intellectual property to minimize tariffs. They will lobby for domestic government subsidies. They will offer “service hour models” to customers as in aircraft engines and never sell the physical goods and incur the tariffs.
Will the import tariffs reduce the federal budget deficit? Yes. The US imports 15% of GDP. Tariffs will be applied to about half of the imports. Imports will be reduced and replaced by domestic production, a little. 15% of 5% is about 0.75% of GDP. The federal budget deficit is 6.5% and climbing. This will help a little. Consumers will pay for half of this as in a sales tax.
What are the secondary impacts of the tariffs? Domestic firms will invest management time and money in managing the system instead of developing better goods and services. Lower import competition often leads to higher prices overall. Domestic producers experience higher input costs and attempt to pass them along to consumers. Foreign countries will increase their tariff and non-tariff barriers to US exporters. The US loses its moral advantage as a promoter of “free trade”. The US loses opportunities to reduce trade barriers through global and regional “free trade” agreements. The US loses the opportunity to drive global labor and environmental standards. The US loses the opportunity to expand free trade in services, the industries of the future. The US’s “unfair advantage” as the manager of the US dollar as the global currency will be challenged. The US’s soft power in language, arts, education, language, culture, and global leadership will be questioned. The US’s role as a stalwart ally will be undermined, leading to merely costlier and unreliable transactional relations with former allies. Foreign citizens will choose to not consume US goods and services. The US will have to pay directly for its global military bases. The US will have to pay for allies’ support on the “war on terror”. The US will have to pay for all global initiatives. The US will have to directly control “rogue states”. The indirect costs are HUGE and unappreciated.
Why did the US pursue the post WW II new world order? Ending imperialism and colonies. Forming the United Nations and trying to use it to manage some conflicts. Principles of political self-determination and human rights. Global bodies for better health. Investments in Germany, Italy, Japan and Europe instead of reparations. International Monetary Foundation and World Bank to support developing nations and manage currencies. GATT and WTO to promote lower trade barriers and multilateral deals. NATO and other alliances rather than colonies and protectorates. The win/lose approach of the 1800’s, WWI and WWII had failed. The world was ready to try a win/win approach. The US, with its history of isolationism, exceptionalism and national independence, chose to not pursue “world dominance”. The post- WWII institutions were not perfect, but they demonstrated that they were much better than those that had governed international relations for the prior 500 years.
Again, put everything in perspective. The US imports 15% of GDP. 15% import tariffs on half of goods. Consumers adjust and substitute domestic and lower total price imports. US consumers pay a 1% sales tax on imported goods. US military and influence costs rise by much more than 1% of GDP. Consumers pay higher prices. The US has less global influence. Where is the win? Marginal manufacturing plants and jobs are not returning to the US, no matter what the “orange one” says unless they are subsidized by the local, state or national government.
This is just another “con” by the “orange one”. We want to believe that American jobs have been unfairly stolen by government subsidized factories and low-cost labor without environmental protections in foreign countries. There is a grain of truth in each claim. Foreign governments do subsidize export firms. They try to maintain low currency values to support exports. They accept low total labor costs and environmental damages. Every country tries to be globally competitive.
No “magic wand” exists to force or entice everyone into embracing win/win institutions or deals naively. There is always an incentive to be a “free rider”, taking advantage of the global deals and quietly not really complying, just like some oil producers in OPEC. There is always an advantage for a single country with enough power to “hold out” or bluff or play “chicken” to extract a better deal for that country than for the others. This is the real world of bargaining, negotiations and deal-making. No system, philosophy, institutions, social pressure, or trump card easily delivers win/win results without overcoming the win/lose incentives of the game’s players.
There was a time when “Republicans” were supposedly the party of realism, pragmatism, common sense, business, efficiency, logic, finance, trade, capitalism, science, industry, proof, objectivity, best practices, and elite opinion. “Democrats” allegedly appealed to emotions, wishes, utopias, fairness, justice, perspectives, hopes, possibilities, oppression, victimhood, persuasion, popular opinion, populism, and ideals. The post-WWII institutions were supported on a bipartisan basis for more than 50 years. In 1992, President Clinton and the Democratic party embraced the “third way”, fully supporting these policies, capitalism and limited government, despite criticisms from the progressive, new, far left. The post – WWII system of international institutions has been criticized as “globalism” and “neo-liberalism” by the left wing of the Democratic party.
The post-WWII institutions were not perfect for Democrats, Republicans, the USA or the global community. But they worked incredibly well. Real global GDP has increased by 40 times since 1945, from $2.5 trillion to $100 trillion!!!!! That is 4.72% real growth compounded year after year after year for 80 years, coming out of a world war, encompassing a cold war, the Vietnam War, the Korean War, a global pandemic, the collapse of birth rates, business cycles, financial panics, energy crises, Middle East wars, and terrorism.
A comparable 80-year period before the Great Depression shows just 4-fold global real GDP growth, not 40-fold. Of course, much of this difference is due to differences other than the post-WWII institutions. This was a time of 1.75% annual growth rather than the modern 4.72%. The 3% annual difference compounded across 80 years delivers 10 times greater growth. This is not a marginal advantage. This is an UNBELIEVABLE advantage. This is difficult to communicate. Small percentage differences across a lifetime.
The “bottom line” is that the “orange one” only believes in “win/lose” and rejects any form of “win/win”. The post-WWII institutions are win/win, so they must be rejected. Capitalism, alliances, partnerships, joint ventures, corporations, modern supplier relations, families, communities, nations, treaties, fraternities, sororities, ecosystems, clubs, cooperatives, unions, study partners, mentors/mentees, credit unions, mutual insurance companies, social enterprises, not-for-profits, churches, service organizations and many others are win/win. The “win/lose” framework supports the “orange one’s” desired position as a great leader needed to save the people.
Free trade has provided truly amazing benefits for the US and the world. The post-WWII cooperative institutions have reduced wars and conflicts. The “Trump tariffs” will slow global economic growth. They will not provide any material benefits for the US.
The US has enough economic, social, political and military power to force country by country “deals” that appear to benefit the US, when considered in a short-term win/lose framework. These deals will harm the US and the global economy.
From 1945-2000 “free trade” was Republican economic orthodoxy. “Free trade” benefitted US multi-national corporations which had the ability to take advantage of global markets. The US economy and labor markets were flexible enough to manage the changes. Capitalism was supported as the best economic system versus communism, fascism, socialism, protectionism, imperialism, colonialism or mercantilism. US financial institutions were well positioned to facilitate trade. US universities were ready to educate the world. Imported goods and immigrant labor drove lower US wages.
Trump is appealing to his populist base to oppose the “others” of immigrants, non-whites, non-fundamentalist Christians, criminals, thieves, rapists, sweat shops, subsidized factories, polluters, underpaid workers, etc. “We should produce everything we need in America. We have the factory capacity, finances and skills to do so.” He appeals to nationalism while ignoring the critical principle of comparative advantage. Countries export only what they are very best at growing, producing or serving. They do not produce everything themselves just like states, firms and individuals that are not fully self-sufficient.
1637 – The world can be described mathematically, in 3 clear dimensions. We can convert geometry into algebra. We can “know” everything. And in my spare time I will revolutionize philosophy too.
1654 – We can use algebra to fully describe uncertain, probable events. In my spare time, I will contribute to mathematics, physics, chemistry, theology and the scientific method.
1673 – The world can be understood. Calculus, philosophy, politics, law, library science, music, biology. Newton was greater. Leibniz gets second billing then and now.
1687 – The world can be understood. Calculus, physics, astronomy, theology, optics, scientific method, alchemy. The reduction of physical forces to a simple equation is the highlight of all science. His legacy is largely misunderstood. He remained religious. He was a mystic and an alchemist. Describing events mathematically did not “explain” them. Aristotle’s emphasis on “final” causes still mattered.
1734 – The world is dynamic and complex. Yet, we can still describe it mathematically. Let’s describe sets of differential equations. Defining several fields of mathematics. Showing how math can be applied to physics. Perhaps the greatest mathematician of all time.
1821 – Carl Gauss competes for the greatest mathematician of all time. Algebra, geometry, connections between subfields, many challenges solved, analysis, topology, non-Euclidean geometry, astronomy, calendars, advances in probability theory, maps, magnetism, optics and mechanics.
1862 – Electricity and magnetism can be described by a set of equations, more complex, but similar to those of Newton describing gravity. We barely understand these phenomena, but the equations can predict how they function. Math and physics.
1895 – We can describe an abstract mathematics called “set theory” which describes how individual components relate to the whole. This approach can describe all formal logic. It can potentially serve as the basis for all of mathematics. It begins to fully address the idea of infinity.
1895 – The world is mainly comprised of waves of various lengths. Some wave lengths can be used to “see” within physical objects. We’ll call them X-rays.
1911 – The atom is much more complicated than we thought. It has a center of protons and neutrons. It has multiple shells of probabilistically present tiny electrons. Atomic particles “disappear” as radioactive decay based on probabilities.
1915 – Everything you thought you knew about the world is false! The speed of light is fixed. There is no physical background space “ether”. Speed of light is a rare constant. Energy and matter are interchangeable. Time and space interact. Time is relative. Space is warped by matter (gravity). In essence, several dimensions of reality cluster, pull, interact, interrelate together in mathematically describable ways. Everything is very connected. I worked the rest of my life to combine the laws of physics, but they did not comply.
1925 – We’ve digested all of the new theories and experimental results. Everything in the universe is unavoidably probabilistic. Light is wave and particle. Space is relative. Electrons are probably in SPDF circuits. Particles are probably there! Measurements impact reality. Schrodinger’s cat can be dead or live. Spooky action at a distance. We can never really know “for sure”. This is before the exploration of sub-atomic particles which raises many more very difficult questions.
1931 – We cannot reduce any “robust” mathematics to simple formal logic or set theory. Infinity and other non-reductionist components stand in the way.
Our universe has a well-defined structure. Observer perspective really matters. Mathematical equations are amazingly powerful. There is no simple deterministic universe. It is probabilistic “turtles all the way down”. Perspective is relative. New mathematical perspectives are impossible to predict and difficult to comprehend.
1984 – Eli Goldratt offers a “theory of constraints” as a way to understand and manage complex systems effectively, leading to true “lean manufacturing” and “lean operations”.
Process standardization. Financial innovation. Highly focused strategies. New business forms. Markets and international trade deliver desired products, lower prices and competition. A role for government regulation remains. The macroeconomy can be managed to reduce the impact of business cycles and shocks.
Colonization and de-colonization. Opening of Asia. World Wars. Nuclear threats. International integration. Economic progress. Bipolar, superpower, multipolar world.
Good News 