Getting Our Growth Checked Out
The podcasts of Mokyr and Cowen both forecast amazing technological growth, but differ on how that growth will impact the American economy and living standard. While Mokyr pounds the table for Tech as a near universal good, Cowen is more cautious with his optimism, and exhibits concerns about stratified social gains.Mokyr claims growth is just starting to rev up. Although entrepreneurs and gradual improvements aid growth, most growth comes from sudden breakthroughs in the hard sciences. His theory reminds me a lot of how football teams move the ball. Although an offense can extend a drive by stringing together small yardage gains, most yards come in bunches off one big play down the field.
Mokyr predicts that automation and processing power will handle more of the boring jobs, giving individuals more leisure time. That leisure may not be easily quantifiable by traditional accounting standards, but it unlocks a world of knowledge for the everyday American. We will monetize our free time, acquiring a mastery of health, education, and transportation. Unforeseen problems we create will then spur solutions, an upward cycle of ingenuity. Luxuries will become standard issue. After all, when viewing history in retrospect, yesterday’s leaps and bounds are now quite obvious and taken for granted.
Cowen has a more modest time horizon. Sure, he admits, the superhuman space children of tomorrow-land will scoff at antiquated menial labor, like toll collectors and Walmart cashiers. But what will our children and grandchildren face? In the next few decades, American prosperity might have more variance than we’ve priced in, since most of innovation’s low hanging fruit has already been picked. The benefits of Big Data, though vast, may become Balkanized, with the wealthy hoarding today’s free information. The privileged will fast track to success, gaining early access to the best tools and data, while the disadvantaged subsist on increasingly scarce part-time and temporary jobs.
I feel it’s prudent to adopt Cowen’s view, if merely as a downside case for Tech’s impact on the future. There is evidence in recent labor trends supporting it. The growth of part time labor has increased notably since the 2008 recession, and the Labor Force Participation Rate has dropped nearly 3% in the past twenty-five years. Most new jobs are originating in the service sector, which on average pays less and requires less skill than the manufacturing sector. As service sector jobs migrate to emerging markets, structural unemployment may rise. Online tools and education ought to speed up this trend, since Internet access gives international workers a more level playing field.
I also believe creative destruction is speeding up. What if automation replaces those fast food workers currently striking for higher wages? Increased leisure time won’t be much consolation to a hungry family. Yes, the wealthy may get cheaper services, but the majority of the population will rely more on the social safety net. We currently run large deficits to support those on the wrong side of the inequality gap. But the feasibility of deficit spending may change, especially as interest expense on debt outstanding grows.
To be fair, I think Mokyr is accurate on a global scale. Technological innovation will create a better world, assuming we don’t blow ourselves up first. My children will live in a better world, but perhaps not a better country. They might be less averse to live and work abroad, and the value of their American passport may carry less weight than it would today.