United States Economic Growth: A Boom of Technology Followed by a Doom of Technology?
Robbinsdale Armstrong High School
The largest economy in the world. Survivor of the Great Depression. The world’s economic powerhouse. As the U.S. moves further into the information age, some will maintain optimism for the future, seeing the States as an anomaly in the history of the world economy that will continue to grow at its previous, exorbitant rate. Realistically, the future looks bleak, with few major boosters to economic growth. The U.S. economy cannot continue to grow the way it once did, as what little technological innovation is occurring continues to have a lesser marginal effect on the economy as a whole and an aging population begins to take on the task of supporting an expanding dependent population.
According to Wolla, the three primary drivers of economic growth are physical capital, human capital, and technology. Physical and human capital tend to be relatively small factors in economic growth when compared to transformative technical innovation. It is difficult to quickly change the education level of the workforce, thereby increasing human capital, due to the amount of time education takes to achieve. Both further education and occupation-specific training have diminishing returns as we put more and more physical capital into them, as there are many things which only come from experience. Improvements in non-fixed physical capital (such as new machinery and methodologies) tend to be highly reliant on developments within the third primary driver, technology.
In the long term history of the human race, economic growth has been slow, with a relative lack of scientific and technological development when compared to the world in the past two centuries. Delong discusses how a relatively small population, paired with resource scarcity, limited the opportunity for even a small economic boom. 1500 BC to 1500 AD, there was relatively little economic growth due to technology, as any minor improvements would lead directly to a larger population, causing the world’s economy to grow at the natural rate of population increase, with few real gains. With a burst of technological development following the insights of the Renaissance, the First and Second Industrial Revolutions quickly outstripped population growth and brought visible economic growth, improving the standard of living for millions of people. This trend continued into the mid-20th century, but with no obvious transformative innovations on the horizon, it is unlikely to see growth similar to that that accompanied the introduction of railroads are the internet.
For a majority of the nineteenth and twentieth centuries, the U.S. was an example in technical innovation and economic development. Whether it was the Bessemer process or the micro transistor, the U.S. was at the forefront of what science could achieve. American’s lives were transformed by science. Looking at science, however, a majority of fields have reached a point of diminishing returns. During the boom years, most scientific development was directly applied for immediate gains in production efficiency or creating a new industry. Now, most science is searching for efficiencies within processes we already understand, not creating new processes. “The central argument of Gordon's book is that technological revolution, the kind that gave us indoor plumbing, the electrical grid, the automobile, and the Internet, is not a very common phenomenon in human history” (Matthews). Looking at aerospace engineering, the invention of the jet engine and large passenger airlines led to huge growth in the travel and tourism industries, creating significant economic growth in areas not largely affected by the manufacturing or computer revolutions. Now those same people are pushing for efficiencies and slight changes in design, with no significant changes on the horizon. Intel co-founder Gordon Moore predicted that the number of transistors per square inch on integrated circuits would double into the foreseeable future. Now, electrical engineers are spending years searching for tiny efficiencies as we rapidly approach the level of atomic computing.
Looking at the idea of human capital, the United States has just as bleak a future as they do in technology. The large section of the workforce made up by the baby boomers is rapidly approaching retirement, and the dependent population will put a rapidly growing hole into the economic ‘boat’ as they consume scarce resources. An increasing percentage of the federal budget will have to be dedicated solely to fulfilling guarantees made in the past. At the same time, the new, younger members of the workforce tasked with supporting these promises will be looking for a much more European (pronounced: less productive) lifestyle. The United States has a long history of getting the most out of every worker, especially when compared with Europe. According to Forbes, Americans work even more than the hardest working European country, the UK, by a fairly significant margin. Young people want more vacation time, fewer hours, and less overtime. These desires hurt economic growth, drastically reducing the availability of human capital. Europeans also tend to spend more freely and demand higher wages to accompany that spending, further increasing labor costs, which also results in less savings to flow towards investment.
As Chien says, “A country cannot maintain its long-run growth by simply accumulating more capital or labor. Therefore, the driver of long-run growth has to be technological process”. With no obvious source of great technological progress on the horizon, it looks like humanity is entering an era analogous to that prior to our relatively recent industrial revolutions. In a world context, rapid economic growth is a recent phenomenon and a defiant exception, not the rule. It may take hundreds of years for the U.S. to return to a similar set of scientific circumstances and resource abundance as it had then. Until those conditions return, the diminishing returns on investment provided by science and technology will continue to limit productivity, just as a changing workforce demographic eats into GDP and economic growth.
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