In yet another example of someone ignoring what's really going on with the Economy:
Economist Tyler Cowen says we haven't made anything significantly better in his lifetime besides the internet, and we should just learn to settle for less. Wikipedia says The Economist named him one of the most influential economists of the past decade...and after hearing his interview on NPR to promote his new book, I'm hoping this is one of those times wikipedia is making things up.
(Disclosure: I haven't read the book, so maybe Mr. Cowen says lots of reasonable things and doesn't leave out a huge chunk of the picture when drawing conclusions. If this is the case, he's fairly bad at verbal communication. Given his profile, I think it's more likely I heard him loud and clear.)
Hes an economist at George Mason University, and he argues that economic growth in the U.S. largely plateaued back in the 1970s. The resources - what he calls low-hanging fruit that fueled our progress for generations - are largely gone. And now, says Tyler Cowen, we need to adjust our expectations.
Economic growth plateaued in the 1970s? Labor productivity rose an average of 2.0% per year 1980 to 2007. Not amazing, but certainly not stagnant. That's more than 70% more productive in about a generation.
Also - Growth in per capita real GDP from 1980 to 2007: 2.0 percent per year.
So what is Cowen basing his assertion on?
Mr. TYLER COWEN (Economist; Author, The Great Stagnation): If I think of the life of my grandmother, who was born in 1905, when she was born most people lived on farms and didn't go to school. But by the time she reached adulthood, almost everyone had electricity, a flush toilet, automobiles were common. So there were some very large innovations which made people's lives much better off, and simply spreading those two most Americans is what I call the low-hanging fruit.
If I look at my own life, I was born in 1962. Other than the Internet, I have not seen comparable changes.
Hmm...I wonder why that is. It's the Inequality, Stupid.
To be fair, he has half the picture right:
Mr. COWEN: The typical American household has seen only minimal income growth since 1973. And, in fact, the income of the typical American household has declined slightly over the last 10 years. That's what I mean by stagnation.
He apparently doesn't connect the stagnation in real income growth and the limited sweeping technological changes in quality of life for the 'typical household' with the third thing - what was that again? Oh yeah, It's the Inequality, Stupid.
Cowen also reiterates the idea that government debt = YOUR taxes going up. Remember - we couldn't possibly tax the people whose lives wouldn't be measurably affected by it - after all, they run the joint! (Emphasis mine)
But let's say you have a money market fund and in your money market fund are treasury bills, you tend to think of that as your wealth and the treasury bills, theyre an asset. But the treasury bills also mean that someone's taxes will go up in the future to pay off those treasury bills, and there's a very good chance those taxes will be your taxes. So the more government debt you have in the system, the more you have a fiscal illusion where people think that they have a lot more wealth than they actually do.
So, got that, working Americans? You don't produce more than you used to (even if stats say otherwise), your lives aren't better in any meaningful way (except for the internet, which so far is just a toy), and they're not going to get better so just accept that you have to take cuts and austerity because there's no other way.
Perhaps I could paint a different (admittedly hypothetical) picture, since the reality I'm inspired by isn't missing half the frame. That plethora of innovations workers are supposed to to be missing? Suppose for a moment that our information revolution (still underway) was accompanied by a further democratization of our society's decision-making apparatuses and sustainable technology boom to match...instead of the shifting of the tax burden away from those able to bear it without a bit of discomfort, the commoditization of the American worker, and the acceleration of privatizing natural resources to maximize profit regardless of the true cost.
Suppose the American worker rightly shares in the productivity gains they have contributed to, and real median incomes rise proportionately. Government budgets remain adequately funded thanks to the continuation of fair tax policy, sensible national healthcare (reducing our costs like other developed nations), and citizen-centered regulation of industry and finance. Investment in sustainable technology and education drives massive energy efficiency gains in consumption, production, transmission and storage. It also keeps American workers well-employed with companies competing for their talents and skills and gives them discretionary income to spend on the fruits of our advances.
Now step back from this picture and see the American landscape with near-universal broadband and wireless, more efficient and cleaner public transport and wide adoption of affordable, long range electric cars. Homes that are nearly self-sufficient from an energy perspective because they take less to heat, less to cool, and less to power; and utilize intelligent systems and the alternative energy options available to them geographically. Add a better, healthier living environment and the ability to go to the doctor without worry. All of this made affordable by the government investment, economies of scale, and discretionary income from a labor market that is competitive for employers, and not just workers.
In other words - we could have seen similar widespread increased quality of life that he laments is part of a lost era. That we did not was not the result of happenstance, or the natural evolution of economies - no, it was the result of conscious policy choices that led us to a second Gilded Age.
Some may see my picture as rosy and overly-optimistic, especially as a contrast with Cowen's harsh assessment. I would assert that it's actually bleak, since it is an account of what might have been - a million moments of opportunity we failed to capitalize on that have led us to where we are. Mine is not a fairy-tale, but a cautionary one. Let's not miss a million more moments to create a future we'd all rather be in.