“The most pro-market government is that of China. In China, there are fewer government interventions than in the European Union,” says ROBERT FOGEL, a major economic historian and Nobel Prize Laureate.
How do you – as a true researcher – view the present crisis from the historical perspective? Is it exceptional?
An average post-war recession in the US takes less that eleven months; this one has already been twice that long. In this regard, it is different, but it is not too deep. I would say that it is comparable to the recession of 1983. It seems as if we bottomed out in July. The question now is how fast the revival will be. The US central bank pumped a considerable amount of money into the economy last year, but it is always necessary to wait for six months to a year to see what effect it has. With fiscal interventions, it takes a long time for them to be approved and even longer to be implemented. So it will not be manifest in the next, let us say, year, but after that, it will give the reviving economy the desired “kick”.
You are definitely not expecting another economic crisis?
That is mere speculation by the media.
Do you think that the media are exaggerating the impact of the crisis?
Some of them really do exaggerate it. The commentaries of specialised economic journalists are usually very good and precise. But general, unspecialised journalists have a tendency to emphasise bad news and neglect the good. At the moment that can be seen in the tendency to look for various threats to the recovery. In general, however, I think that this will be a typical recovery that will last some five or six years.
UP TO A HUNDRED. “Today’s young people will regularly live to be a hundred, predicts Robert Fogel.
After all, the stock markets have been signalling a recovery for several months.
Stock exchange indices are ahead of the real economy – they bottom out sooner and start growing earlier. On the other hand, delayed indicators such as the unemployment level only reach the bottom after the economic cycle has bottomed out, that is, when the economy is reviving. Unemployment will therefore probably go up yet.
According to many, increased inflation will be a stumbling block for the recovery.
It depends on how high the inflation level would be. To tell the truth, slight inflation would be beneficial for the growth of the economy at that point, not harmful. It would help stimulate the economy. Our problem still is to get out of the recession. There will always be pessimists who see problems behind everything. But it is not very likely in my opinion that the recovery will stumble. We are talking about a recession not only in the USA, but a global recession. And presently, there is also a revival on this level, and it is especially evident in China. The expansion of the Chinese economy will provide a impetus to growth to the entire global economy. At this stage, India will probably also do very well.
Is the time really right for the introduction of all of those social programmes of Obama’s? It seems like the time could not be worse…
The central problem of all those stimulus programmes lies in the fact that they are debt-financed. The debt will pull the economy down in the future. Now, the money is stimulating and encouraging, but we will have to pay it back… As for the healthcare system reform, it is not clear what form the final act will have. Obama is very vague in formulating what it is he actually wants. Or, better said, he wants everything for nothing. Many people are afraid that the government will push out private insurance companies; I do not think so, because Obama will in the end push his ideas through.
And even if he were to do so, does America still have the money for it?
I don’t fear that we are spending too much on healthcare. I predict – I recently wrote a specialised study about it – that by 2040, the share of healthcare in the economy will increase to 29 percent. That is natural: as people get rich, they want to spend more and more on healthcare. And it can be financed. Expenditures on food, clothing, and housing used to account for eighty percent of household budgets, whereas now they only account for less than a third. For example, because the productivity of agricultural production keeps growing – and food is therefore getting cheaper. That means that there are more resources free for financing healthcare, education, and other services.
You are an optimist with respect to the human race, even in another regard: you predict a significant lengthening of human life.
Yes, for my “cohort” the average age at which people die is 79 years. During my father’s life, it was fifty. I predict that today’s students will have a median life expectancy of one hundred years. Simply put, people keep living longer and longer.
But demographers claim that there are limits on the lengthening of human life, which cannot be exceeded.
Yes, there probably are, but we don’t know at what age precisely. Many demographers predicted the upper limits of the human lifespan a hundred years ago, which they increased over time; and even those are being surpassed in today’s reality. I read a study of two demographers in Science magazine, who found out that every ten years the human lifespan lengthens by 2.2 years. I think that that is the best estimate available to us. Some demographers think that there is no limit – and if there is, then at some point in the 135th year of life.
Robert W. Fogel (83)
Professor of Economics at the University of Chicago, a major world historian, a so-called cliometrist. In 1993, he earned the Nobel Prize in Economics for his research in the field. He attended Columbia University and Johns Hopkins University. In 1964, in his book Railroads and American Economic Growth, he arrived at a conclusion that was scandalous for his era: on large statistical samples, he showed that America would have achieved the same level of a per-capita gross domestic product on 31 March 1890 that it actually achieved on 1 January 1890, had the railroad not been invented. According to Fogel, the “iron horses” therefore contributed to the economic growth of the end of the 19th century far less than had been generally believed until then. Ten years later, Fogel again caused upheaval by co-authoring the book Time on the Cross. In it, the authors documented in detail that Southern slavery was an extremely effective enterprise – and not only in terms of the slave owners, but also for the slaves, who often lived in better conditions that “free” workers in the Northern States of America. “When I got the Nobel Prize, I got many invitations to various conferences and other events. For a year and a half, I participated in that cycle, but then I decided that I did not want to retire yet. With that kind of a lifestyle, I was not able to devote myself to further research. I was spending too much time like a celebrity and I do not want to be a celebrity, I want to discover new things,” says Fogel, a widowed father of two (his wife Enid died two years ago).
The lengthening of human life is, according to you, due to better healthcare and to the eradication of serious diseases. The number of deaths from cancer, however, keeps growing in the developed world and many people warn that it is a foreshadowing signal for the future?
It is related to the fact we just talked about. Cancer is, for the most part, a disease of an advanced age. Before, people simply did not live long enough to get cancer – they died at a younger age and for different causes. In spite of that, certain types of oncological diseases are in retreat. Killer number one are still the diseases of the heart and blood-vessels, including stroke. One of the diseases whose share of deaths is increasing is diabetes.
What do you think about global warming? Do we need to fear the future in this regard?
Global warming is primarily the worry of rich people; the poor are not interested in it. China or India do not fear global warming nearly as much as does the USA; the primary goal of those countries is still to increase their standard of living. Securing education, procuring food, those still take precedence over warming. I think that we will hear a lot on this topic from the representatives of developed countries, there will be more conferences, treaties, proclamations about the need to act, and perhaps also new taxes in this regard that will burden polluters, something like emission allowances. But as long as China and India insist on fossil fuels to that extent, not much will change.
Are you therefore afraid?
Phenomena such as global warming may be related to long solar cycles. And in that case, it holds true that although we consider them to have been caused by human activity, they are, in fact, absolutely natural. Another matter is that global warming is not so purely harmful. Perhaps the sea level will go up by several centimetres, but on the other hand, the area of arable land will increase by several hundred kilometres. Global warming will, in short, cost us something, but also bring us something. I also think that there is a relatively general agreement among scientists that the technologies that will help us cope with the consequences of global warming will be far more developed within a few decades. Then any interventions will be more cost efficient.
The crisis, cancer, and warming. Why do people devour these – as you indicated – over-sized adverse phenomena?
Optimistic views of the future are more controversial than the pessimistic ones. Furthermore, scientists tend to be more optimistic than journalists; for example, that was shown in 1979 during the investigation of the Three Mile Island nuclear power station accident (to this point the worst accident of a nuclear power station in the USA, note by L.K.). Scientists were in favour of further use of nuclear energy, by a ratio of ten to one, while journalists and the media were against it by the same ratio. Don’t ask me why.
As a young man, you had inclinations toward communism…
I became a communist in secondary school, during the Second World War, during the Russian-American honeymoon. Films painted communists as fighters for freedom in Europe – as the part of the underground that fights against Nazism. At that time, nearly every student in New York considered himself a radical, whether a Communist, a Trotskyite, or Socialist. For most of them, this passed a few years later, for me about ten…. What originally drew me to communism was that it styled itself, among other things, as a science of society. At that time, I wanted to take up physics or chemistry on a scientific level. I was impressed by the fact that the communists stood by the poor, by the blacks. And our generation believed that we have a good heart, that we will fix the world that our parents had so perfectly shattered. All of that was wrapped up in my attitudes.
And what finally discouraged it?
At some point in 1946, the central organs of the movement predicted that there would be a new Great Depression in the following year. But in 1947, the same people explained why it did not come and that it will come in 1949, and so on. At that time, I lost my patience and I thought that they did not seem that scientific, and that in their predictions they were not as good as the bourgeois economists whom they criticised so sharply. Simply put, at that time, I accepted too much too naively and too early. So I again launched into my studies. My inclinations towards communism definitely left me around 1956 and I became a relatively conventional economist.
Now you work at the University if Chicago, which is often described as the academic outpost of capitalism and the free market.
Which government is the most pro-free market today? That of China. They still do present themselves as a socialist market economy, but in reality, there is nearly no socialism. They have fewer government interventions than in the European Union.
The interview, obtained in Chicago, was published in Týden No. 37 on 14 September 2009.