[Marxism] [Pen-l] Is growth over?

William Cockshott William.Cockshott at glasgow.ac.uk
Fri Dec 28 08:14:21 MST 2012

Krugman is begining to take some almost Marxian positions.
From: pen-l-bounces at lists.csuchico.edu [pen-l-bounces at lists.csuchico.edu] on behalf of Louis Proyect [lnp3 at panix.com]
Sent: Friday, December 28, 2012 3:03 PM
To: Activists and scholars in Marxist tradition; Progressive Economics
Subject: [Pen-l] Is growth over?

NY Times Op-Ed December 27, 2012
Is Growth Over?

The great bulk of the economic commentary you read in the papers is
focused on the short run: the effects of the “fiscal cliff” on U.S.
recovery, the stresses on the euro, Japan’s latest attempt to break out
of deflation. This focus is understandable, since one global depression
can ruin your whole day. But our current travails will eventually end.
What do we know about the prospects for long-run prosperity?

The answer is: less than we think.

The long-term projections produced by official agencies, like the
Congressional Budget Office, generally make two big assumptions. One is
that economic growth over the next few decades will resemble growth over
the past few decades. In particular, productivity — the key driver of
growth — is projected to rise at a rate not too different from its
average growth since the 1970s. On the other side, however, these
projections generally assume that income inequality, which soared over
the past three decades, will increase only modestly looking forward.

It’s not hard to understand why agencies make these assumptions. Given
how little we know about long-run growth, simply assuming that the
future will resemble the past is a natural guess. On the other hand, if
income inequality continues to soar, we’re looking at a dystopian,
class-warfare future — not the kind of thing government agencies want to

Yet this conventional wisdom is very likely to be wrong on one or both

Recently, Robert Gordon of Northwestern University created a stir by
arguing that economic growth is likely to slow sharply — indeed, that
the age of growth that began in the 18th century may well be drawing to
an end.

Mr. Gordon points out that long-term economic growth hasn’t been a
steady process; it has been driven by several discrete “industrial
revolutions,” each based on a particular set of technologies. The first
industrial revolution, based largely on the steam engine, drove growth
in the late-18th and early-19th centuries. The second, made possible, in
large part, by the application of science to technologies such as
electrification, internal combustion and chemical engineering, began
circa 1870 and drove growth into the 1960s. The third, centered around
information technology, defines our current era.

And, as Mr. Gordon correctly notes, the payoffs so far to the third
industrial revolution, while real, have been far smaller than those to
the second. Electrification, for example, was a much bigger deal than
the Internet.

It’s an interesting thesis, and a useful counterweight to all the
gee-whiz glorification of the latest tech. And while I don’t think he’s
right, the way in which he’s probably wrong has implications equally
destructive of conventional wisdom. For the case against Mr. Gordon’s
techno-pessimism rests largely on the assertion that the big payoff to
information technology, which is just getting started, will come from
the rise of smart machines.

If you follow these things, you know that the field of artificial
intelligence has for decades been a frustrating underachiever, as it
proved incredibly hard for computers to do things every human being
finds easy, like understanding ordinary speech or recognizing different
objects in a picture. Lately, however, the barriers seem to have fallen
— not because we’ve learned to replicate human understanding, but
because computers can now yield seemingly intelligent results by
searching for patterns in huge databases.

True, speech recognition is still imperfect; according to the software,
one irate caller informed me that I was “fall issue yet.” But it’s
vastly better than it was just a few years ago, and has already become a
seriously useful tool. Object recognition is a bit further behind: it’s
still a source of excitement that a computer network fed images from
YouTube spontaneously learned to identify cats. But it’s not a large
step from there to a host of economically important applications.

So machines may soon be ready to perform many tasks that currently
require large amounts of human labor. This will mean rapid productivity
growth and, therefore, high overall economic growth.

But — and this is the crucial question — who will benefit from that
growth? Unfortunately, it’s all too easy to make the case that most
Americans will be left behind, because smart machines will end up
devaluing the contribution of workers, including highly skilled workers
whose skills suddenly become redundant. The point is that there’s good
reason to believe that the conventional wisdom embodied in long-run
budget projections — projections that shape almost every aspect of
current policy discussion — is all wrong.

What, then, are the implications of this alternative vision for policy?
Well, I’ll have to address that topic in a future column.
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