[Marxism] Is growth over?

Louis Proyect lnp3 at panix.com
Fri Dec 28 08:03:56 MST 2012


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

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 
contemplate.

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

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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