Will there ever be an economic boom like the one that occurred from 1942-1973? (benefits, unemployment)
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Not while there is such income inequality, and not while we are mediocre or even bottom feeding at many good quality of life indicators, and at or near the top on the poor ones. A generation ago, we were at the top on most of them...
That is the prime counterexample mustered in response to skepticism about innovation and growth. And by "innovation and growth", I don't mean GDP or wages or other financial measures, but technological innovation and scientific development.
There's a famous anecdote, recited in any high-school physics book. The young Max Planck is contemplating a career in physics, sometime in the late 19th century. His mentor, an eminent physicist, notes that Maxwell's equations had just been discovered, and the statistical theory of thermodynamics had just been verified. Surely, the great discoveries in physics had already been made? What sort of clever young man would bother with a "sunset" field like physics? But Planck went on to make foundational contributions to what became quantum mechanics, revolutionizing physics. The point of his heartwarming vignette is that doubters are always going to doubt, and sometimes these doubters are eminent people in their field – well-informed and intelligent. They're not Luddites or perfidious insiders seeking to stifle competition. So, teaches the story, it's stupid to be skeptical about innovation, even on the heels of heady discoveries that make us feel that the big questions have already been answered, and only the details remain.
The problem with this anecdote is that experience has proven its essential message to be exactly backwards. As an aerospace engineer – or if you will, an applied-physicist – I note that my own field is heavily rooted in knowledge that was already available in the 1880s. It's true of course that there was no viable airplane until 1903. Prandtl's seminal "boundary layer" theory dates to 1904. Methods of airplane aerodynamic analysis weren't codified until the 1920s or so. Nevertheless, the basic equations were well-known even in the mid 19th century, and the basic technology was in rudimentary form well-understood by the time that Planck supposedly received his infamous advice.
I say this not to pillory the high-school physics books, but to note that what constitutes "real innovation" is very much a matter of opinion and personal sentiment. Is the internet innovative? Of course it is, in terms of online games replacing face-to-face chess tournaments, Facebook replacing young men asking young ladies for a date, and radiologists in America getting terrified that $2/hour replacements in India will be interpreting X-rays e-mailed to them as png files. But I would argue that all of these features, however disruptive or socially significant, are more a matter of moving around responsibilities and economic activities, than generating new ones. They are nothing like mechanical engines (steam, internal combustion, gas-turbine, nuclear) replacing horses and oxen. They are nothing like medical diagnoses of diseases being caused by microorganisms, rather than demons or bad karma. They are nothing like using electricity to light our houses and refrigerate our food and so forth.
Barring some tumultuous abandonment of the essential human spirit, we'll never cease innovating. We'll never cease thinking of new ways to supplant the old, and entire new problems to address. But the strident pace of transformative inventions that so radically revised life from the mid-19th century to the mid-20th, is likely inimitable in history. Of course Max Planck went on to a brilliant career in physics, as did the successive generation of luminaries. But if I pick up a physics textbook from today, vs. one from say 1960, will I really see much that's different?
Gordon does discuss the internet. He notes that yes, in the late 90's, we got a temporary blip in growth/productivity but that is long gone now. I am not saying he is right or wrong...
I doubt it. If you look at history, once the capitalists leave a country, it is devasted at first, then gradually recovers back to mediocrity...
Jobs follow investments. Asian money in the US is not building new productive capacity, as the globalists' money did in Asia, it is buying up productive and existing assets. Sometimes they are buying up US factories, to shut donw their competitors, and other times they are buying up assets like real estate and profitable companies as a way of leveraging their positive balance of trade.
Thank you for your post. This is something I bring up a lot, but it is commonly ignored. Hiding in plain site apparently.
There are some very good reasons why the US middle class enjoyed great gains in the 1932-1975 period and we've been giving them back since. Assume for a moment that oligarchs basically get their way, and democracy is a useful sham (at least regarding large national and international policies and affairs). Egalitarian capitalist countries have greater productivity and aggregate wealth if they are managed decently. In the 30s there were obvious signs of a run up to world war, and afterwards communism and the Soviet Union needed to be crushed. A rich middle class has high moral and patriotism and provides the tax base and soldiers for an expensive war machine.
By the mid 70's the Soviet Union was in obvious decline, and US oligarchs had no real competition for world domination. Time to start a new phase. Use globalization, debt escalation (public and private), and deficit trade, to squeeze wealth out of the middle class and put it in their own pockets (profit). Escalating workforce participation (women) also contributed to masking the effects. This time the world oligarchs were on the same page; they were all getting rich from globalization. And in developing countries the general population benefited. But it was all at our expense.
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Jobs follow investments. The money never did belong to the American workers. The workers did not bring the money, and were not able to stop it from leaving.
In theory our government is supposed to serve the people. In practice it never has, not even when we prospered. That was just a side effect of a larger agenda.
This has much more dire consequences when we consider AI and what is likely to become of society in the future. If the oligarchs continue to get their way, what will happen to a large functionally unemployable populous?
From about 1929 to 1941 few could afford anything beyond basic needs. Then WWII diverted all production to the war effort. That meant nearly 20 years of pent up demand (yes, I know a former GM president said he fires anyone who uses that term). Then the baby boom added to that. Hard to see how that could be repeated, but you never know.
Thank you for your post. This is something I bring up a lot, but it is commonly ignored. Hiding in plain site apparently.
There are some very good reasons why the US middle class enjoyed great gains in the 1932-1975 period and we've been giving them back since. Assume for a moment that oligarchs basically get their way, and democracy is a useful sham (at least regarding large national and international policies and affairs). Egalitarian capitalist countries have greater productivity and aggregate wealth if they are managed decently. In the 30s there were obvious signs of a run up to world war, and afterwards communism and the Soviet Union needed to be crushed. A rich middle class has high moral and patriotism and provides the tax base and soldiers for an expensive war machine.
By the mid 70's the Soviet Union was in obvious decline, and US oligarchs had no real competition for world domination. Time to start a new phase. Use globalization, debt escalation (public and private), and deficit trade, to squeeze wealth out of the middle class and put it in their own pockets (profit). Escalating workforce participation (women) also contributed to masking the effects. This time the world oligarchs were on the same page; they were all getting rich from globalization. And in developing countries the general population benefited. But it was all at our expense.
In theory our government is supposed to serve the people. In practice it never has, not even when we prospered. That was just a side effect of a larger agenda.
This has much more dire consequences when we consider AI and what is likely to become of society in the future. If the oligarchs continue to get their way, what will happen to a large functionally unemployable populous?
I would tweak some of the details you mentioned. I think they are not quite accurate. The oligarchs didn't just transition into globalization after they saw the end of communism coming. Globalization started around the turn of the century in the late 1890s. Revolutions broke out when people were angry. Wars broke out when pizzas were not divided the right way. During the Russian civil war, the west sent soldiers to intervene, to prevent a Bolshevik takeover, because they worried about communism. Communism in many countries were actually nationalistic, anti-colonial revolutions in the name of Marx. It was against capitalist globalization and exploitation. In other words, before communism, the oligarchs had a global plan. They were trying to set up manufacturing in China then, but the infrastructure was so poor. The Cold War against communism was essentially an attempt to globalize capitalism and open markets of cheaper places. So when communism fell, no one in the west was interested in democracy. They wanted profit. They worked with some of the terrible regimes.
In all those years, globalization continued in Taiwan, Japan, Singapore, Korea, etc. It made them wealthy. Now China and India have joined the game. The effects are bigger now. More jobs gone to Asia. More capital invested in Asia.
But here is a glimpse of the future though. The Chinese have a different game than western oligarchs. They play with oligarchs but they have their national power as their goal. While your middle class are in a free fall, while your politicians gone crazy to bribe votes, while your society argues over political correctness, the Chinese are working on the essence of power, their national capabilities, their middle class, their industries and corporations. All that has a nationalistic and chinese purpose, unlike American corporations that are nation-neutral. The world isn't going to transition into just a global oligarchy. The Chinese still want their own power and nation state. And that will put into test western political wisdom.
The oligarchs didn't just transition into globalization after they saw the end of communism coming. Globalization started around the turn of the century in the late 1890s.
Global trade was a pittance until recently.
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But here is a glimpse of the future though. The Chinese have a different game than western oligarchs.
They all want power and wealth. They brokered a trade and investment deal with US oligarchs that incidentally resulted in the creation of their middle class and the decline of ours. It was only incidental.
AI is a game changer. Power and wealth will shift heavily to those oligarchs who pursue and embrace it fully. China's treatment of unemployable useless persons will likely be a lot more harsh than in the US.
But the strident pace of transformative inventions that so radically revised life from the mid-19th century to the mid-20th, is likely inimitable in history. Of course Max Planck went on to a brilliant career in physics, as did the successive generation of luminaries. But if I pick up a physics textbook from today, vs. one from say 1960, will I really see much that's different?
Very true. Even though many fundamental questions are still unanswered in physics, it costs horrendous amounts of $$$ to investigate further at the quantum level, and without it theories are difficult or impossible to verify. Our remote investigation of the cosmos is in a similar predicament. We need something like a Newtonian-Einsteinian-Quantum paradigm shift, but it is only "hope" that would lead one to believe it will happen.
An important factor that will inhibit growth is resource scarcity. Particularly energy. We are past the point where extraction and development tech more than compensated, and in the future energy will be more expensive in real terms. Unless of course we get a game changing invention in that field, and it doesn't look promising.
I believe AI will be the major economic force in the coming decades, but that isn't going to result in a boom for most of us, rather the opposite!
They all want power and wealth. They brokered a trade and investment deal with US oligarchs that incidentally resulted in the creation of their middle class and the decline of ours. It was only incidental.
AI is a game changer. Power and wealth will shift heavily to those oligarchs who pursue and embrace it fully. China's treatment of unemployable useless persons will likely be a lot more harsh than in the US.
I think you underestimated the Chinese.
Needless to say, everyone wants power and wealth. But if the Chinese elite simply wanted that, they would have created a nation much more like Brazil, the Philippines, or some other dysfunctional place where the rich lords part away and the nation crumbles. Look, they have done many things that strengthened their nation, protected their people's interests. Through globalization, they acquired world-class infrastructure, high-speed train networks, improved civic amenities (including accessibility features), and expanded their space programs.
These things are really unnecessary for the rich, but indispensable for a nation.
China has its own rich whose lifestyle resembles those of the western rich. But they do not fully run the Chinese government. The communist is indeed a partner of the business community and probably should be, but its leaders have the nation in mind while accumulating wealth.
My point is that China's rise isn't an accident, but a project carefully cultivated by ambitious Chinese thinkers whose goals are more than just their own profit. Perhaps, this bigger dream means even more profit in the long-term if China does become more influential.
The communist party isn't the one who sells out the nation. They do have many members of their society who are doing that. The authoritarian system has that under control. The western belief that the government is bad and people are good doesn't fit in China. Too many people in China are just looking to get rich, move capital overseas, etc. If they do not have an authoritarian government, if they are a mediocre democracy, they would crumble just like the West.
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