The Great Stagnation

I read an interesting and worrying ‘comment’ article by Will Hutton in my Sunday newspaper. The article was based around a review of a Kindle book by an American economist, Tyler Cowen, entitled The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History… Since I don’t possess a Kindle, this is one book I will not read in the near future. The basic argument, if I have understood it correctly, is that, although technologies are incrementally advancing, there are no longer any step-change revolutionary innovations (for example, electricity, the internal combustion engine, television and radio, the transistor, the refrigerator, the washing machine) to be industrialised and hence provide employment and wage increases and life changes; we have plucked all the low-hanging fruit. As a result, productivity advances in the ‘West’ are being made primarily through unemployment and the shifting of production to low labour cost countries in the East. Our recoveries are, increasingly, jobless. The other drivers – land and education – are drying up. Yes, the vision is Malthusian and surely exaggerated, but Hutton’s concluding observation is surely spot-on; the importance of innovation as a driver of growth and the imperative to exploit it. Enter the European Union’s Europe 2020 Strategy…

2 Comments

  1. Steve Lindsey

    16/02/2011 at 0:30

    Martin, if your summary is correct then it must be a very poor book. No revolutionary inventions when in the last 15-20 years we’ve gained the Internet and the mobile phone? These two alone have changed not only economics but also politics. Another technology,3D printing, is becoming widespread – this will be another enormous game-changing advance.
    It would be easy to list innovations that are on the horizon but, quite frankly, we can’t even imagine the things that will be available to us within fifty years.
    You’re right when you say that innovation is a driver for growth, but the pace of change is quickening, and an equally difficult challenge will be coping with such rapid change.

    As for the EU, most people I know will not take any strategic planning seriously while we still using half the budget for the CAP. Get similar amounts moving into science and technology and things might happen.

  2. Martin

    16/02/2011 at 12:39

    Thanks, Steve. If you read Will Hutton’s article (the link is in the post) you will see that he deals with the web – indeed, the title of his piece is ‘Don’t be blinded by the web’. I also read that fascinating Economist article about 3D printing and agree with you that it may radically change things – but not necessarily by creating new jobs. As I wrote, since I don’t have Kindle this is one book I won’t be reading but my understanding of the argument is that the internet and mobile telephony may create growth but do not create jobs in western economies in the way that the steam engine and the internal combustion engine once did. As to the future, see this January post: http://www.martinwestlake.eu/some-futuristic-stuff/ All best wishes, Martin

Leave a Reply

Your email address will not be published.

*

© 2017 Martin Westlake

Theme by Anders NorenUp ↑