In the RTP area it’s easy to become what economist Robert Gordon calls a “techno-optimist.” The Triangle’s many IT and biotech companies, its renowned medical centers and its distinguished universities suggest that the world is oozing with creativity and entrepreneurship. Even when some in the region attempt to raise cautionary flags, the worry is about the social dislocations caused by disruptive technological innovation rather than about the possibility that technology might not be changing fast enough.
In his unsettling new book, Gordon, who teaches at Northwestern, weighs in on the role of technology in the U.S. over the past century-and-a-half. He does so forcefully, so forcefully, in fact, as to wipe the smiles off the faces of most techno-optimists, myself included.
According to Gordon, the seemingly dazzling technological changes the U.S. has seen since 1970 are small beer compared to the technological breakthroughs of the previous hundred years, particularly during the half century between 1920 and 1970. However rapid and impressive post-1970 technological innovation seems, Gordon points out that the most important new developments affected a narrow range of activities – entertainment, communication and information technology – the total dollar value of which activities in 2014 comprised only 7 percent of the U.S. gross domestic product. And that’s just the half of it. As Gordon’s mentor at MIT, economist Robert Solow, a Nobelist, once quipped: “We can see the computer age everywhere but in the productivity statistics.” Solow made that quip in 1987, but it still holds up well.
As readers may remember from Econ 101, productivity measures how much labor and capital is needed to produce a given level of output. Economists consider it the single most important variable in understanding the performance of a given economy, and productivity increases are generally viewed as the key to economic growth and rising living standards.
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But for a short-lived rise in productivity between 1996 and 2004 – a spike often attributed to the diffusion of computers and IT – average rates of productivity growth in the U.S. have been far lower since 1970 than they were during the 1920-1970 period, Gordon’s golden age, a period so special in his view as to rank as a one-time era in world history. Moreover, Gordon is doubtful about the direction and welfare implications of many of the productivity gains that have been registered since 1970. Too much inventive energy has been narrowly focused in areas such as entertainment, to developing social networking sites, as it were, along with Web games and apps, and to increasing the speed with which people can download movies. Or as tech entrepreneur Peter Thiel put it, “We wanted flying cars, instead we got 140 characters.”
The bulk of Gordon’s mammoth book can be read as an elaborate demonstration of just how different technological change was during the “special century” (1870-1970), especially during the latter half of that century, as the “great inventions” became broadly diffused. Rather than Facebook and smartphones, the great technological breakthroughs of the “special century” included electricity, telephones, cars and airplanes, urban sanitation and sewage systems, vast improvements in food production/preservation methods and sulfa drugs, among other pharmaceuticals. Such technologies transformed American incomes and living standards, creating for most Americans what we would still recognize as modern, healthy and relatively comfortable conditions of life. As I said earlier, recent innovations seem like small beer, and, because of serious structural problems in the U.S. economy and the severe “headwinds” we are facing, Gordon is pessimistic about our technological possibilities going forward. If he is correct, little reason for techno-optimism, much less smiles, then.
Peter A. Coclanis is Albert R. Newsome Distinguished Professor of History and director of the Global Research Institute at UNC-Chapel Hill.
The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War
By Robert J. Gordon
Princeton University Press, 762 pages.