No More Industrial Revolutions!

Dear Commons Community,

The New York Times has a review by Thomas B. Edsall, professor of journalism at Columbia University, of a paper by Robert J. Gordon, an economist at Northwestern University. Entitled, Is U.S. Economic Growth Over?  Gordon predicts a dark future of “epochal decline in growth from the U.S. record of the last 150 years.”

“The greatest innovations, Gordon argues, are behind us, with little prospect for transformative change along the lines of the three previous industrial revolutions:

IR #1 (steam, railroads) from 1750 to 1830; IR #2 (electricity, internal combustion engine, running water, indoor toilets, communications, entertainment, chemicals, petroleum) from 1870 to 1900; and IR #3 (computers, the web, mobile phones) from 1960 to present…

Over most of human history, in Gordon’s view, the world had minimal economic growth, if it had any at all — and “there is no guarantee that growth will continue indefinitely.” Gordon’s paper suggests instead that “the rapid progress made over the past 250 years could well turn out to be a unique episode in human history.”

The United States faces “headwinds” that could cut annual growth in Gross Domestic Product to as little as 0.2 percent annually, which is one tenth the rate of growth from 1860 to 2007.”

The review has counterpoints by a number of major economists.  For example:

Lawrence Katz, an economist at Harvard, wrote that the Gordon essay “is a wise and thoughtful piece but a very, very speculative one. The historical evidence presented is quite reasonable.” Katz noted that projections of “what new ideas will be discovered and their potential impacts on economic growth” are “highly uncertain.” In the end, he said, “I am probably a bit more optimistic on the potential for innovation but I share Gordon’s worries about inequality and education and environmental issues.”

Edsall concludes:

“Affluent Republicans – the donor and policy base of the conservative movement — are on red alert. They want to protect and enhance their position in a future of diminished resources. What really lies underneath the ferocity with which the right currently fights for regressive tax and spending policies is a deeply pessimistic vision premised on a future of hard times. This vision has prompted the Republican Party to adopt a preemptive strategy that anticipates the end of growth and the onset of sustained austerity – a strategy to make sure that the size of their slice of the pie doesn’t get smaller as the pie shrinks.

This is the underlying and inadequately explored theme of the 2012 election.”




One comment