THE BEAR'S
LAIR Population the only
problem By Martin Hutchinson
Robert Gordon, of Northwestern University,
has aroused fear among conventional commentators
with his paper (NBER Working Paper 18315)
suggesting that US economic growth has begun to
slow inexorably, and that it will cease
altogether, slowing to the sluggish levels
prevailing before the Industrial Revolution, by
2100. To some extent, these arguments are
familiar, having appeared both in this column and
in some of my other work as long ago as 2004. Yet
for once I have found someone more pessimistic
than myself. On this occasion the normal attitude
of this column will be reversed - perhaps to a
"Bull's Hall" - and I will outline the lacunae in
Gordon's analysis, and why the future may be more
cheerful than he suggests.
Gordon believes
that economic growth in the "frontier" economy
with the highest
productivity and wage rates - Britain before about
1906, the United States since - has been generated
by three industrial revolutions, the
steam/textiles/railroad revolution between 1750
and 1830, the electric power/internal
combustion/indoor plumbing revolution of 1870-1900
and the electronics revolution since 1970.
He then asserts with some plausibility
that the second, which produced innovations
running through 1970, was much the most powerful
of the three and that the third has already run
its course, bringing a brief peak of productivity
growth in 1996-2004 and not much since but some
clever playthings.
He lists a number of
factors that will retard both innovation and
growth further and suggests that by 2100 not only
will the great benefits from industrialization
have passed, but that six "headwinds" buffeting
the US economy will slow living standards
improvement even further below the pace of
technological improvement.
One repellant
aspect of Gordon's analysis is that he conflates
overall growth with growth of living standards for
"the 99%", which is of course lower in periods of
rising inequality. This unpleasant intrusion from
the ethos of "Occupy Wall Street" distorts his
analysis. It enables him to claim that growth was
fastest in 1929-57, which is intrinsically
implausible since those years contained the Great
Depression and a world war.
What changed
in those years was income distribution; by
impoverishing the 1% through higher taxes, lower
executive salaries and a sluggish stock market, a
leftist government and society transferred the
admittedly fairly robust fruits of economic
expansion entirely to the "99%", producing no
extraordinary growth in overall living standards
but a growth of working class living standards
that was indeed unparalleled.
He then
makes the opposite mistake with respect to the
pre-industrial period, claiming that British "99%"
living standards multiplied sixfold between 1300
and 1800. As anyone who has read Robert Allen's
The British Industrial Revolution in Global
Perspective will remember, they did nothing of
the kind. They rose rapidly from 1300 to about
1470, driven not by technological change but by
the Black Death, which removed nearly half the
population and created "Merrie England" for the
remainder.
Then, from about 1500, working
class living standards fell back and inequality
rose, so that by the middle 17th century real
manual labor incomes were a quarter of their level
180 years earlier, although consumption patterns
among the aristocracy and upper gentry were much
more lavish.
Then after 1650 the
scientific, agricultural, industrial, political
and economic revolutions all kicked in, producing
general growth, so that by 1800 working class
living standards were nearly back to their 1470
level (in other European countries such as Austria
they were still an eighth of their 15th century
peak) while inequality had remained high or even
increased somewhat.
Bottom line: there was
at most a modest increase in the living standards
of the "99%" (or at least the bottom 90% of it)
between 1300 and 1800 but sixfold growth per
capita had indeed occurred, accruing almost
entirely to the top 10%, as well as allowing
England's population to quadruple.
Some of
Gordon's "headwinds" facing living standards in
the 21st century are temporary, while others are
avoidable. The removal of the "demographic
dividend" of women's entry into the workforce
simply removes a one-off tailwind - if we pretend
that today's two-career families are indeed better
off than the home-cooking nuclear families of the
1950s.
Two other "headwinds", the removal
of the US advantage over other countries in
college education and the "flattening" of the
world economy through the Internet are temporary
factors that have probably done most of their
damage - for one thing, the benefits of college
education have been distinctly oversold, as I
shall discuss below.
Inequality has risen,
but there seems no reason to assume that it will
continue rising, rather than leveling off or even
dropping back. The costs of combating "Global
Warming" are an entirely self-inflicted headwind,
which can be removed by electing governments that
dismantle most of the environmental and other
regulatory molasses that, contrary to Gordon's
thesis, I regard as largely responsible for the
post-1973 drop-off in productivity growth.
Finally the twin household and government
deficits, as discussed frequently in these
columns, can be eliminated by sharply raising
interest rates, eliminating deductions in the tax
code and taking a baseball bat to wasteful
government spending. In short, Gordon's headwinds
mostly result from foolish policies and foolish
lifestyle choices, and can be eliminated if we
have the will to do so.
More interesting
than Gordon's headwinds, however is his contention
that the benefits of technological change are
bound to slow following his three "Industrial
Revolutions". Here I think he is also misguided.
Even without speculating about the second half of
the century, I can think of three technological
developments between now and 2050, two marking
further developments in his third industrial
revolution and one marking the initial emergence
of a fourth industrial revolution, which are
likely to keep productivity growth healthy for at
least the next half century.
The first is
in education. As Gordon points out, the US
advantage in education has eroded, while college
costs consistently rise faster than inflation.
Gordon claims that the rise in college costs is
due to an arms war in science labs and athletic
facilities; I would claim that much more of it is
due to an unstoppable escalation in the number of
diversity officers and the like - caused both by
grossly excessive unfunded mandates from
politicians (as in medicine) and by the escalating
foolishness of the academic class itself.
Add to that the declining quality of the
education experience and the increasing amount of
rubbish in college courses (evidenced by the
increasing disparity between male and female
graduation rates - young men, being mountains of
testosterone and possibly misguided
self-confidence, have less patience with
officially required uselessness than young women).
Thus, if there were no technological solution, we
could expect the US educational position, male
graduation rates and the actual knowledge levels
of the younger generation to continue declining,
while college costs escalate to infinity.
However, there is a technological
solution. It is increasingly possible to get
college courses of increasing quality on the
Internet. The kinds of young men who, while
intelligent enough to complete college
nevertheless drop out, are the most likely to take
advantage of these offerings, since they are
generally technologically savvy self-starters.
However, the existence of these courses,
costing a tiny fraction of the same lectures in a
college auditorium, removes the need for college
altogether for many people. What's more, Internet
learning allows an a la carte approach to
education; there are no useless "required core
courses" taught by teaching assistants in lecture
halls of 400 students, and the executive who finds
his knowledge base going stale at the age of 40 or
50 can quickly update himself on the latest
developments.
We need a mechanism whereby
potential employers can be informed reliably of
the knowledge gained through these courses, but
the traditional employer demand for college
degrees is mere credentialism, counterproductive
in a modern economy.
The revolution in
education will change all our lives, causing
increases in efficiency in our career paths
comparable even to the advent of indoor plumbing,
in Gordon's well-chosen example. Sandra Fluke,
demanding free contraception as she ploughs her
way through Georgetown Law School at the age of
31, will become a relic of the past, as her
successors will be more than a decade into the
workforce by that age, picking up the knowledge
they need from the Internet and paying for
contraception from their earnings.
A
second economically gigantic change is the recent
success in producing self-driving automobiles.
Once these are perfected (and they don't need to
be perfect drivers, only better than the majority
of distracted motorists) they will result in huge
improvements in productivity and quality of life.
The old and infirm (like myself in a relatively
few years) will be kept off the roads, to the
great relief of other motorists, but will still be
able to enjoy a full life without having to resort
to dubious and expensive taxis once they can no
longer pass a road test. My new car next spring
will probably be a lightly used Lincoln, but the
one after that will, I trust, be self-driving.
Commuters will free up their mornings and
evenings from the stress and time consumption of
driving - they will be able to text their friends
all they like once a machine is doing the driving.
Road congestion will be eased, as the greater
reaction speed of machines will allow faster
driving speeds and smaller distances between cars.
Automobile design will be revolutionized, as
motorists will have the option of cars equipped
like a bedroom, a kitchen or a conference room,
rather than the current awkward arrangement. Urban
design will undoubtedly be revolutionized again,
and human life's possibilities enlarged almost as
much as they were when the first automobiles
appeared.
Those two innovations represent
extensions of the electronic industrial
revolution, deriving from it just as aviation
derived from the mechanical/electrical industrial
revolution of 1870-1900. The third innovation
probably represents the beginning of the fourth
industrial revolution; it is the field of genetic
engineering and cloning.
There are two
such technologies that can potentially
revolutionize human life, both probably about a
decade away from reality. One is the ability to
clone human beings, allowing parents to produce
children that are identical twins of themselves.
The other is genetic engineering, allowing parents
to improve the intelligence and health of their
offspring, potentially, as techniques get better,
creating human beings with capabilities far beyond
those achievable in nature.
The ethics of
these techniques are tricky. Given the alliance
between the Christian lobby and the left on this
issue, it is quite likely that available
techniques will be banned in the United States.
However if they are, that will merely transfer the
technology abroad. Asian societies, brought up
with Confucian ethical systems, do not appear to
have the problems with genetic engineering from
which the West suffers, and so the techniques will
be developed there if not here or, in extremis, on
some uninhabited island owned by a strong-willed
billionaire.
Once developed, these
techniques will truly revolutionize human life,
probably to the same extent as steam or
electricity. Human capabilities will be improved,
as will the speed of innovation and creation,
pushing productivity up at previously unimaginable
speeds. Life itself will be extended, further
increasing the productivity of the workforce and
producing currently unavailable capabilities, such
as interstellar travel, that require a longer than
human lifespan to carry through.
Provided
that politicians don't get in the way (and I quite
grant you, there is a substantial probability that
they will) Gordon's pessimism is thus ill-founded.
The only caveat is that of population. US
productivity growth and living standards have been
held down in recent years by mass unskilled
immigration, legal and illegal. In any case, no
country is an island; the growth of global
population is itself the greatest threat to the
world's poor achieving "Western" standards of
living.
Just as living standards were
hugely improved by the tragic accident of the
Black Death, so too a global conquest over the
scourge of population growth will make it easier
for all to share in the fruits of technology, as
well as banishing the environmentalist curse from
the global economy.
The chances of Gordon
being right are thus quite substantial, given the
fallibility of human endeavors, especially those
in which politicians get involved. But a better
future is there, waiting for us nationally and
globally, if we take the steps to achieve it.
Martin Hutchinson is the author
of Great Conservatives (Academica Press,
2005) - details can be found on the website
www.greatconservatives.com - and co-author with
Professor Kevin Dowd of Alchemists of Loss
(Wiley, 2010). Both are now available on
Amazon.com, Great Conservatives only in a
Kindle edition, Alchemists of Loss in both
Kindle and print editions.
(Republished
with permission from PrudentBear.com.
Copyright 2005-12 David W Tice &
Associates.)
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