Friday, March 11, 2016

This Year’s Book: Are the Big Changes Over? – Part 1

More than four-fifths of 2016 still remains, but we already have a strong candidate for the book of the year.   Northwestern professor Robert J. Gordon, cited by Bloomberg Markets as one of its most influential 2013 thinkers, has issued a massive but remarkably welcoming-looking hardback on a topic affecting almost everything in public or private business policy.  Titled “The Rise and Fall of American Growth:  The U.S. Standard of Living Since the Civil War,” it develops the thesis that, from a variety of standpoints, we have not continued the improvements to our lives which were greatest in the 100 years ending 1970, and cannot expect to.  It is a three-pound counterweight to the Moore’s Law-fueled projections of rapidly improving computing capabilities driving enormous lifestyle improvements, in which Gordon maintained that the changes we have seen since 1969 have almost all been incremental instead of fundamental, and have not approached the value of “electric lighting, indoor plumbing, home appliances, motor vehicles, air travel, air conditioning, and television,” all of which were in place over 50 years ago. 

For something not mentioned much in print (though I did pass along David Bodanis’s observation that the home lives in the movie E.T. seemed hardly changed 25 years later, and expressed doubt that computer speeds doubling every 18 months meant similar improvements elsewhere, in 2013’s Choosing a Lasting Career), Gordon’s theory has real merit.   What more can we say about it?

First, the end of fundamental innovations is not from lack of possibilities.  On only one area of those, not covered by Gordon, consider the following quotation, from R. Buckminster Fuller’s 1970 I Seem to Be a Verb:  “By 1988, says a federal report, the biggest businesses in the U.S. will be:  (1) The manufacture and service of cars, and (2) the manufacture, insertion, and service of artificial hearts.”  We were on that pace through the early 1980s, until the most advanced such device, the Jarvik-7, proved inadequate, and successors fared little better.  Since then, the leader in artificial hearts has become the American company SynCardia, which in 2013 said proudly that its devices had been installed, as temporary pre-transplant stopgaps, in 161 patients.  As for those transplants, only 2,332 took place in the United States in 2011, which would be a fundamental gain if it were closer to the 610,000 annual American heart disease deaths.  Our general lack of fundamental progress is summarized well in another quotation, passed along by Gordon from author Peter Thiel:  “We wanted flying cars, instead we got 140 characters.”      

Second, as I have observed publicly for five years, new technology never employs more than a tiny fraction of what the likes of cars, modern houses, and air travel did and continue to do.  As of 2010, Twitter, used by tens of millions of Americans, employed a total of 300 people, half the number working in single AT&T buildings I worked in decades ago.

Third, although Gordon emphasizes slower gains (not a drop) in per-worker productivity, one explanation I did not see in the book.  A high proportion of jobs added since the Great Recession have been low-level – at one point, fully one-third of them were with temporary help agencies – and have inherently small productivity.  Cleaning and retail counter positions are necessary, but are never going to contribute the dollar values once added by now obsolete manufacturing or even office jobs, not to mention their management. 

Fourth, I have three quarrels with what Gordon called “headwinds,” or factors preventing larger economic growth.  Education levels flattening out, which they are doing in this country, is not a problem, as, consistent with what Gordon himself wrote, most of the truly life-altering improvements going into widespread service between 1870 and 1970 were invented early in that time, when the high school graduation rate was less than 5%.  Baby boomers leaving the workforce as they reach retirement age is not a demographic obstacle, it is a permanent jobs crisis effect, since, as my 2006 doctoral research showed, even before the Great Recession the massive majority wanted to work into their 70s and beyond.  And inequality is not a cause of issues with technology or anything else, it is an effect, a natural result of higher and higher scalability in which products are reproduced almost without cost and so must benefit ever more limited sets of people; in contrast, cars provided money for millions, as they required not only designers and investors but factories full of people to be paid to actually make them.

Fifth, is it possible that, with the amount of business innovation always in progress, that we are in nothing more than a 50-year lull?  That, which I have not assessed in detail, is a real potential explanation for what this author has wrought. 

If what Robert J. Gordon is saying is true, how can we best deal with it?  Be here next week. 

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