The hidden side of U.S. economic growth: Is it over?
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.
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