On pages seven and eight of his thirty page-long annual letter to shareholders of Berkshire Hathaway, Warren Buffett takes issue with politicians who are emphasizing the supposed weakness of the US economy.
After arguing, reasonably, that even 2% real GDP growth (more than double the growth of the population) is something Americans should be happy about, he says:
“Though the pie to be shared by the next generation will be far larger than today’s, how it will be divided will remain fiercely contentious. Just as is now the case, there will be struggles for the increased output of goods and services between those people in their productive years and retirees, between the healthy and the infirm, between the inheritors and the Horatio Algers, between investors and workers and, in particular, between those with talents that are valued highly by the marketplace and the equally decent hard-working Americans who lack the skills the market prizes…
The good news, however, is that even members of the “losing” sides will almost certainly enjoy – as they should – far more goods and services in the future than they have in the past. The quality of their increased bounty will also dramatically improve…My parents, when young, could not envision a television set, nor did I, in my 50s, think I needed a personal computer. Both products, once people saw what they could do, quickly revolutionized their lives. I now spend ten hours a week playing bridge online. And, as I write this letter, “search” is invaluable to me. (I’m not ready for Tinder, however.) For 240 years it’s been a terrible mistake to bet against America…”
I’m sure this is at least directionally true. But it’s also a view from the sunny “winning” side of the struggles for a bigger slice of an expanding pie. From the “losing” side, however, the picture is increasingly nineteenth century Dickens-ugly. It’s also debatable whether a very poor family with a flat panel TV is that much better off than a generation-ago family with a radio.
The plight of people left behind by rapid structural change may present much more of a political and social problem than Mr. Buffett is able to see. Whether such issues become stock and bond market problems as well remains to be seen.
More tomorrow.