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The hidden side of U.S. economic growth: Is it over?
As President Obama and Mitt Romney practice their talking points and zingers on the American economy, Freakonomics reveals why we may never get big-time economic growth back.
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The candidates are warming up at the lecturns. As President Barack Obama and GOP hopeful Mitt Romney prepare their talking points for tonight's debate, they know jobs and the economy are top of mind for most voters.
But the age of American economic growth may well be over, says "Freakonomics" co-author Stephen Dubner. That would really turn those campaign pledges to dust.
Dubner points to the research of Northwestern economist Robert Gordon, who studies the long-term economic history of the U.S. "We had a century of relatively rapid productivity growth say between 1870 and 1970. And then it slowed down," says Gordon. "A major puzzle for the economics profession and all of us writing through the '70s and '80s was to figure out why it slowed down."
Gordon's answer to the puzzle? That mega-growth in the 19th and 20th centuries was the result of two industrial revolutions. The first gave us steam power and railroads. The second, electricity, clean water, and the internal combustion engine. Compared with those innovations, our current era of portable electronic devices and computer evolution just doesn't hold up. While smartphones and computers have made our lives more convenient, they haven't fundamentally changed productivity or our personal welfare the way that, say, indoor plumbing and mass transit did.
"America's golden age of growth may have been exactly that -- a golden age, which by its nature cannot last forever," says Dubner.
All isn't bleak, however. Some economists argue that new technology, like artificial intelligence, may lead to further growth.
"I think our ability to forecast future growth has never been all that great. So about the future, I'm actually fairly optimistic," says Tyler Cowen, an economist at George Mason University.
Dubner says that it may be time to start thinking about the U.S. economy not in terms of never-ending growth, but in terms of sustainability. Even so, that's not what you'll hear at the debates tonight.
"They'll do what they always do: promise a bigger and brighter economic future. Because if there's one thing politicians are really good at, it's making promises that they're absolutely incapable of keeping," says Dubner.
This is only true of free- market economics. That is indeed over. What we will see now is a gradual downsizing of corporations as markets close and with that a return to regional markets. Then we will see corporations forced to make workers their consumers and reverse the downward trend of wages and quality of life.
Bernanke will not be able to feed these corporations free money for too much longer, which is the only thing inflating their pockets. The Fed was central in the massive frauds that moved money to the top and now it is central in maintaining that wealth.....all having nothing to do with healthy markets or free- markets.
What a concept, a sustainable economy! It's not just for the environment any more. Seems like that's a more rational goal than surrendering to an inevitable boom/bust cycle. I always thought that one purpose of government is to moderate the swings of the economy, rather than to promote growth.
Derived from the invention of the transistor, the most important revolution is still underway: the creation of machines that gather, manipulate, and act on information (or allow a human being to act.)
Using computers to 'raise productivity' by more efficiently processing banking transactions (creating 'growth' of the banking sector) misses the most important aspect of the information revolution: allowing us to grasp patterns too large for a single human being to understand (the human genome) and allowing machines to grasp patterns so small that no single human should be bothered with dealing with it over and over again (e.g. processing banking transactions.)
The conventional wisdom of 'growth' in terms of 'dollars made' is finally at wonderful risk of being supplanted by increasing growth of 'time available' for each human being: wealth of a different sort.
If true, it can not mean societal transitions will be simple or easy (see Kurt Vonnegut's "Player Piano".) If fewer people 'have to get a job' that doesn't speak to the essence of who they are, perhaps more people become the makers of new patterns (music, art, engineering and storytelling) that are the basis of richness in our communal life.
This pattern-making richness may not be measurable in dollars. Perhaps our 'dollar life' need only be sustainable, while our pattern-making and pattern-living grows continuously to a point where nobody has to 'do a job' that they don't like (we have one or more 'life-tasks' we enjoy), and yet there is food on the table, family around it, and a roof over everyone's head.
Implausibly rosy-hued?
"Make no small plans, for they have no power to stir the soul." {Machiavelli}
