January 15, 2019

Whenever I share my columns with friends or family, they may like some of the things I write, but they are turned off by the word Growth. Their instinctive knee-jerk reaction is, “We don’t need more ‘things’ in this world – more pollution, more consumerism. We need smaller, sustainable, cleaner growth.”

Our universities and media have inculcated these Pavlovian reactions deep in their sub-cortex. Words like “growth” once represented greater health, wealth, and life expectancy, but now they conjure up visions of congestion, pollution, or even cancerous growth. I can’t explain in Twitterese why most growth is good, but maybe I can start to clean the closet of some misperceptions of the term “growth” in this short essay.

Most growth comes from greater productivity with fewer materials – like the miniaturization of our hand-held computers, offering more computing power in a smaller device through Moore’s Law. The Internet also offers us more opportunities to meet through telecommunication rather than via fuel-burning travel.

Although America keeps growing, our greenhouse gas emissions sank to a 25-year low in 2017. That, plus the decline in the cost of energy, means that the amount we spend on energy hit the lowest levels since the federal government started tracking such data. We spend less than 4% of our household budget on energy. From 2007 to 2016, GDP grew 12% (including the Great Recession of 2008) while energy consumption fell 3.6%. Over the past 25 years, according to the Business Council for Sustainable Energy, 92% of new electricity capacity built in the U.S. has been powered by natural gas or renewable energy.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The long-term story of growth is toward greater cleanliness of energy sources, not through subsidies but through innovation. John D. Rockefeller saved the whales by making kerosene far cheaper than whale oil. Henry Ford saved our city streets from tons of horse manure by making a “horseless carriage” affordable to the masses. Someday soon there will be cheap and less-polluting energy sources than fossil fuels.

One story on 60 Minutes last weekend profiled amateur scientist Marshall Medoff, 81, who invented a way to unlock energy inside plants to create clean fuel for cars and a plastic substitute that disintegrates in as little as 11 weeks. He is also converting some “junk” plant residue into ethanol, gasoline, and jet fuel that emits 77% less greenhouse gas than traditional gasoline. Maybe this is the next clean energy breakthrough but, if not, somebody just as creative will find a replacement to fossil fuels this century.

You may have seen last week’s report that carbon monoxide emissions increased in 2018 for the first time in seven years. This is supposedly one of the downsides of our phenomenal GDP growth rate (3%+) in 2018. In reporting this news last Wednesday, The Wall Street Journal printed this dramatic chart:

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

However, if readers would take the time to read the full report and the cause of the one-year reversal, the news is far better. Prior to 2018, the U.S. had been one of the world’s few success stories in moving away from coal-fired power. U.S. utilities had retired nearly 14 gigawatts of coal-fired power generation by the end of 2018, which may be a record, according to the report, issued by the Rhodium Group last Tuesday.

Meanwhile, natural gas generation grew four times as fast as wind and power combined through the first 10 months of 2018, the report said. While there was a 3% increase in diesel trucking and jet fuel used last year, the biggest demand surge came from unusually cold weather – yes, cold weather, not warming. The use of fuel oil, diesel, and natural gas to heat buildings rose 10% in 2018 to the highest level since 2010.

Longer-term, carbon emissions in 2018 were still down 11.2% from 2005 levels. The Wall Street Journal could have printed the following chart next to the above chart – just to put the two trends into perspective:

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The Internet Increases Productivity Without Boosting GDP Much

Here’s how productivity and growth make life easier: In the mid-1990s, when I first began editing Louis Navellier and several other market analysts, they would need to fax their editorial copy to me. I would drive 20 miles a day, each way, to a brick-and-mortar office, where I would edit the copy, send it to a typist, who would load it into a primitive word-processing computer, then I would edit a few more iterations, send it back to the analyst for approval, then send it “camera-ready” to a printer, who delivered it to a mailer, who sent it to the subscriber. The whole process took about two weeks, 10 business days.

Today, I work in my home office. I receive copy electronically Sunday morning, edit in the afternoon, send it in the evening to editors on both coasts for review and approval, including legal compliance on Monday, and we send it to readers Tuesday morning. Many Internet publishers (without much fact-checking or legal compliance) publish their ideas in minutes. Today, I don’t commute (or burn gas) two hours a day and customers don’t wait 10 days to hear from their analyst, with outdated prices or advice.

None on this progress is reflected in the rising GDP. We charged $100 or more per year for those letters. That became a part of GDP. The gasoline I burned was part of GDP. So was the mail postage, the printing cost, and the word processors. How to value the Internet in GDP, in fact, is quite an accounting challenge!

More examples: An airline ticket in the 1970s cost $900 through a travel agent. I can buy the same route today for $350 on my own, online, and pick my own aisle seat. My convenience is sky-high, but GDP has fallen. I used to buy encyclopedias for $500. Now, Wikipedia has far more data, constantly updated, free.

None of that adds to the GDP. GDP was born in a manufacturing era, but today’s U.S. economy is over 70% in services or intangibles. It’s easy to measure “things you can drop on your foot,” but it’s very hard to value a service, especially those invisible electrons that make our life easier and more convenient.

I don’t mean to be overconfident or cocky about mankind’s progress. There is still much work to be done, and we all need to do as much as we can to improve our environment and to help others in our orbit.

A good place to start would be for multi-millionaires who preach about global warming to do away with their private jets and take fewer trips, then own fewer homes that are kept warm or air-conditioned year-around. I’ve got nothing against wealth – only against those who hector us about anthropogenic global warming and then fly around in their gigantic private jets to lecture Mr. and Mrs. Jones in their small home on 123 Elm Street that they should drive a costly, tiny electric car and recycle their paper straws.

Are you listening, Al Gore, Barbra Streisand, Leonardo DiCaprio, and Michael Bloomberg?

A Dassault Falcon burns an average 318 gallons of fuel per hour, whereas a modern Boeing 737 MAX-8 or MAX-9 burns only two liters of fuel per 100 kilometers per passenger, which equates to 115 miles per gallon per passenger. Meanwhile, Mayor Bloomberg’s Dassault 900 gets less than two miles per gallon.

About The Author

Gary Alexander
SENIOR EDITOR

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. *All content of “Growth Mail” represents the opinion of Gary Alexander*

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