The Dismal Economic Vision of Robert Gordon

Benjamin Wallace-Wells has a good article in New York Magazine about the economic thought of Robert Gordon, which has been very much in the news lately.

Gordon's essential argument is the the high economic growth rate of the 1750 to 2000 period was the result solely of two waves of innovation, which we typically call the First and Second Industrial Revolutions. The first involved the mechanization of spinning and weaving, huge improvements in iron and steel manufacture, and the steam engine; it was powered by water power and coal. Along with it came huge improvements in ocean-born commerce, better organization of firms, and so on. The second industrial revolution involved the internal combustion engine, the automobile, oil, chemicals, and especially electricity, which revolutionized the home. Farm machinery, along with fertilizers and better seeds, allowed the number of farmers in the population to fall to 2 percent; low birth rates and electrical appliances allowed women to enter the workforce in long numbers; the great acceleration of wealth allowed many more people to go to college and acquire expensive skills.

Some people think we are in the midst of a third economic revolution, this one based on computers. Gordon is not impressed; he finds, as do most economists, that the productivity gains born from the computer and telecommunications revolutions are modest at best. Computers and cell phones are making our lives more interesting, but they are not changing the fundamental equations of income and expense.

So what now? Are we doomed to a century of low productivity growth? If so, what will that do to our politics, which were shaped by two centuries of rapid change and at least the hope that things were getting better for everyone?

If you buy Gordon’s story, then the effect of the second industrial revolution was to replace the specific entitlement of the Gilded Age (of family, of place of birth) with a powerful general entitlement, earned simply through citizenship. “Just the fact of being an American male and graduating from high school meant you could have a good-paying job and expect that you could have children who would double your own standard of living,” Gordon says. This certainty, that the future would be so much better than the past that it could be detected in the space of a generation, is what we call the American Dream. The phrase itself was coined only in 1931, once the gains of the second industrial revolution had dispersed and inequality had begun to dissipate. There is a whole set of manners, which we have come to think of as part of our national identity, that depends upon this expectation that things will always get better: Our laissez-faire-ism; our can-do-ism; the optimistic cast of our religiosity, which persisted even when other Western nations turned toward atheism; our cult of the individual. We think of the darkening social turn that happened around 1972 as having something to do with the energies of the sixties collapsing in on themselves, but in Gordon’s description something more mechanistic was happening. “The second industrial revolution had run its course,” he says, and so, in many ways, had its social implications.

Wallace-Wells offers this observation:

The prospects for African-American employment increased most dramatically during World War II and in the period just after: 16.4 percent of black men held middle-class jobs in 1950; by 1960 it was 24 percent; by 1970, 35 percent. Progressives will often describe the history of social liberation by quoting Martin Luther King Jr.’s line that the arc of the moral universe bends toward justice; the implication is that metaphysics are somehow involved. But this history has also taken place during unique economic times, and perhaps that is not coincidence.

If improvement in the lives of the downtrodden happened only because of the remarkable economic growth of the 20th century, how can we help today's poor without it?

I think the realization that ordinary people are not getting better off like they once did will certainly dominate our politics over the next decade -- you can see that happening already. Like Gordon, I don't see much dramatic change in our economy any time soon, just cooler video games, more renewable energy, and more fights about health care. I think the spread of Gordon's thinking might be a good thing in one sense, helping to beat back the nonsensical Republican gospel about taxes and growth.

But I think it is a real failure of imagination to think that meaningful innovation is over. Biotechnology, in particular, has enormous potential to change the world, and we are only beginning to understand how to use computers. The danger is that these new technologies may mainly eliminate jobs rather than create new ones, leaving us scratching our heads over what half our population will do.