It’s hard to know sometimes which is the greater threat to prosperity -- headlong technological progress that’s destroying decent jobs and hollowing out the middle class, or fading technological progress that’s causing persistently slow growth. With a little ingenuity, you could no doubt combine these ideas and worry that technological progress is both too fast and too slow.
On the other hand, you could consider both sets of arguments and be guardedly optimistic.
One of the main authorities on the diminished prospects for growth is Robert Gordon of Northwestern University. His view is straightforward: By now, he says, all the really valuable inventions have been invented. The amazing surge of progress from the age of steam to the arrival of cheap computers was a historical anomaly (for century after century before, there had been little or no growth), and this blip of momentous ingenuity may be over. Everybody is enchanted by the Internet and related innovations, but these aren’t in the same league as electricity and the internal combustion engine -- breakthroughs that powered growth for the better part of a century.
If you doubt this, Gordon says, look at the numbers. The productivity benefits of the "new economy" had more or less disappeared by 2004. And to Gordon that makes perfect sense. “Attention in the past decade has focused not on labor-saving innovation, but rather on a succession of entertainment and communication devices that do the same things as we could do before, but now in smaller and more convenient packages.”
In Gordon’s view, replacing human labor with machines is the key to growth in productivity and hence in living standards, and this is happening too slowly. The more common fear, of course, is just the opposite -- that networked automation is destroying jobs across an ever-widening front of occupations. Yesterday, factory workers; today, office workers; tomorrow, teachers, pilots, doctors, you name it. Before long robots will be doing everything. The capitalist elite will do fine, because they own the machines. How will the rest of us make a living?
On the face of it, one of these views must be wrong.
Taking some of these initial points one by one, persistently slow GDP growth has been caused by the credit crisis recession, not “fading technological progress”. In fact, look around and what we see is accelerating technological progress, as FT Money has long pointed out.
Governments are struggling with high debts and unemployment, but most corporate Autonomies are stronger and wealthier than ever before. They are the main beneficiaries of technological innovation.
The internet is still in its infancy but it has already connected the world, and very cheaply at that. We all communicate via the internet but many corporations are now benefiting from the industrialisation of the internet. This enables them to implant tiny sensors in large machines, enabling them to monitor component efficiency. We hear a great deal about smart phones and other exciting consumer products, but all important machines are becoming smarter and this will be an even bigger story.Back to top