Is The American Century A Thing Of The Past?
The last century has been defined by several innovations and inventions that has an astonishing impact on the forward trajectory of the US economy. The innovations which gave birth to a robust auto industry, the development of household appliances, such as the refrigerator and washing machines, and a rapid growth of mass transportation transformed how we live.
The last decade, however, has been marked by stagnant wages, the slowdown of the auto industry and a dearth of transformative inventions, which economist Robert J. Gordon says may signal the reality that our best days are behind us.
He maintains that sluggish economic growth is a consequence of the fact that innovations occur in industries such as technology and computers, which do not have the same impact as an invention of, say, the combustion engine.
“We had a complete transformation of human life in the special century between 1870 and 1970. Since then we’ve had plenty of innovation, but in a narrower sphere; in entertainment, communication, and information technology,” says the Northwestern economist in an interview with C-SPAN.
Gordon is the author of a new book, “The Rise and Fall of American Growth,” which lays out his argument that the period between 1870 to 1970 produced such unique economic growth and that “no other era in human history, either before or since, combined so many elements in which the standard of living increased as quickly and in which the human condition was transformed so completely.”
He argues that the optimistic hopes held by some economists that advancements in health care and medical research can stimulate the economy in the same way are misled because drug development is increasingly expensive, and those who reap the benefits is a small segment of the population. He also says an uncomfortable reality is that life expectancy was three-times higher in the early part of the century.
“The fracking revolution and soaring oil and gas production have also excited optimists. But this isn’t a source of future economic growth; it merely holds off future economic decline,” he wrote in a 2012 Wall Street Journal column.
Writing in the Harvard Review of Business, columnist Martin Ford says he agrees with Gordon’s overall analysis that the innovations of the last century had consequential benefits to US standards of living. But, he disagrees with his underlying assumption that if there were a return to broad-based innovation (rather than in the smaller sectors of technology and robotics), then real incomes would begin to recover.
“I think that assumption is wrong. It’s wrong because information technology (and specifically artificial intelligence) is going to intertwine with any innovations that occur in the future, making them less labor-intensive. Unless we change our economic rules — perhaps with something like a guaranteed income — broad-based prosperity will remain elusive, even if those robust innovations do eventually show up. The innovations may come, but the people at the top of the income distribution will continue to capture nearly all of the gains,” Ford contends.
Washington Post columnist Robert Samuelson, who leans to the left, also agrees with parts of Gordon’s analysis, but suggests the answer to whether he is right or wrong may take decades to find out. However, he does believe Gordon’s contribution to the ongoing debate is valuable.
“In the debate over the country’s future, the issue is not whether to be optimistic or pessimistic. The right approach is to be realistic. The infatuation with technology is a source of strength, but also of simplistic self-deception. What Gordon has provided is not a rejection of technology but a sobering reminder of its limits,” wrote Samuelson earlier this year.