Many have expressed doubts that the so-called 'goldilocks economies' in the US and the UK can be sust...
The recent strong growth, falling inflation and low unemployment levels in the West have been in stark contrast to the stop-go economic cycles to which both our generation and the previous generation have become accustomed.
However, if you compare what is happening in the Western economies today with the situation at the end of the last century, there are some startling similarities.
Between 1860 and 1900 the US and the UK enjoyed a huge boom as technological innovation spurred on a new wave of investment.
The technological revolution changed how people lived in a way that is similar to what is happening now.
Sailboats gave way to steam ships, gas was replaced by electricity, and the electric light, the telephone and the train were about to revolutionise the way people lived.
Refrigeration, for example, was placed in ships and led to the successful transportation of perishable goods from the colonies to sell cheaply in the shops. Wood was replaced by steel and iron - previously most shop construction was carried out in wood, but the invention of the steel girder led to the emergence of large department stores.
The pony express, which had been the most reliable form of communication, was replaced by the telephone and the wireless, while the stagecoach disappeared as the train system emerged.
Improved communication via the Suez Canal, faster modes of sailing, the Atlantic cable and the various railways opened up the 'global village' for the first time and massively increased the speed of travel.
Baron Playfair, writing in 1900, reflected that the application of science in the telegraph, railroads and steamships had altered commerce completely. It was also a world of relative stability, in part due to the existence of the British Empire and various international treaties which created a period that saw few major wars.
The gold standard made for stable currencies and Victorian values of prudence ensured government budgets remained in surplus.
The expanding British population, which trebled in the 19th century, and huge emigration from Europe, China and Asia to the emerging world of the US, South Africa, Australia, New Zealand and Argentina, provided both an expanding workforce and a market for the new products.
Between 1865 and 1900 prices fell dramatically in the US by 1.3%pa. Bond yields fell. Wage rates rose steadily and, because there was deflation but full employment, consumers spent more. As a consequence, US production increased dramatically - on average 5.8%pa.
Stock markets rose on average about 3%pa, although the huge changes industry experienced made it a volatile time. For example, there was an amazing increase in bicycle production following the invention of the pneumatic tyre and later, when the motor car arrived, some of the original bicycle manufacturers turned to motor manufacturing.
These fundamental circumstances and the economic factors associated with them parallel much that is happening now, 100 years on.
As in the late 19th century, a technological revolution is spurring increased productive investment and slashing the costs of production.
E-mail and fax are replacing postal mail. Internet shopping and e-commerce are looking likely to replace, or at least augment, high street shopping. Cable is replacing localised TV and the mobile phone is revolutionising communication between individuals.
It is staggering to think that companies such as Microsoft, Compaq, Oracle and Cisco did not even exist in 1975 and that there is more computing today in cars than there was in the original Apollo spacecraft.
The world is certainly a more stable place once again. The Cold War has ended and there is free trade and no exchange controls. The world is now trading as three major trading blocks; NAFTA, ASEAN and Euroland. China has joined the World Trade Organisation and, doubtless, in five years time these three divisions will have disappeared as well.
The global population is once again expanding. A staggering four billion new workers from China, India, Russia and Eastern Europe are joining the world stage. In similar fashion to the British working class of the late 19th century, these workers are providing the necessary resources for their countries to industrialise.
Meanwhile, as they also become greater consumers of Western goods, they provide Western producers with welcome new markets.
In the US economy today, bond yields are falling and the country is in its ninth year of expansion. Over the last three years its economy has been growing at over 4%pa.
Since 1987 inflation has been on a gentle downward trend and the combination of deflationary forces and technology should continue to keep the lid on inflation. Stock markets are rising but are extremely volatile. There is good growth and high tax revenues and, as a result, we have balanced budgets.
The most interesting aspect of the circumstances that prevailed in the late 19th century, is that those economic conditions of high growth and low inflation were sustained for up to 60 years.
That period provides the evidence that, under the right circumstances, high growth and low inflation can be sustained over long periods.
Consumer confidence remains the key and at present it is running exceptionally high in the US.
Joseph Schumpter, a 19th century economist, summed it up by saying: "Periods of rapid technological advance generate more output, with better quality at lower prices". That is as true today as it was then.
It is also worth noting that just as the Industrial Revolution spread out from its original base in the UK to embrace the whole of the free world during the 19th century, the technological revolution we are witnessing today looks set to spread from the US and the UK to embrace the rest of the wor
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