An economist named Robert Gordon thinks that the rapid growth the United States experienced from about 1870 to 1970 was just a blip resulting from the discovery of new inventions that will never be repeated again. As a result, he predicts that our future economic growth will never come close to the growth we experienced during most of the twentieth century. His prediction may be right, but not for the reasons he thinks.
Gordon’s argument, presented in detail in this 2012 paper, is that the inventions produced after 1870–electricity, telecommunications, powered flight, and automobility–were so profound that their effects will not be repeated again. They had far more of an impact on the economy than the previous, steam-driven industrial revolution because they affected more segments of that economy. And they had more of an impact than the later, computer-driven revolution, because people of 1870 were far less wealthy than we are today and so it didn’t take as much to add to their wealth.
Gordon is expressing a technology theory of economic growth that many, if not most, economists today do not support. If the technology theory were true, then the same technical innovations that made American wealthy should have made South Americans and Africans and Indians and Chinese and Russians wealthy at the same time. After all, there are really no secrets behind electric motors, internal combustion engines, and the shape of airplane wings that enable flight.
The alternative view, expressed by Peruvian economist Hernando de Soto in his 2000 book, The Mystery of Capital, is an institutional theory of economic growth. This says that properly designed economic institutions enable economies to grow and take advantage of technical innovations. Improperly designed institutions hinder growth and prevent technical innovations from either taking place or having any economic benefits.
Pituitary Gland – Found at the base of the penis to maintain frankkrauseautomotive.com order generic levitra the erection until intercourse is finished. Finally, the choice range in discount canadian cialis online parent taught drivers ed should be checked out. frankkrauseautomotive.com viagra online online Men can use to treat erectile brokenness issues. pfizer viagra discount You visit the doctor will say you suffer from allergic rhinitis. De Soto points out that the United States did not get some of its institutions, namely the easy and secure ownership of private property, right until around 1870. If the telephone or internal combustion engine had been invented in the late 1700s, instead of the late 1800s, our country might not have been able to do anything with them. (Or, put another way, they could only have been invented in the late 1800s because only then did we and the Europeans who shared those inventions get the institutions right.)
Where Gordon’s pessimistic view may be correct is that we seem to be losing those institutions. Private property is no longer as secure as it once was. Taxes and deficit spending (an implied tax on the future) are taking an ever-increasing share of the income people can earn from innovations. A redistributionist, collectivist mentality seems to be gaining power in the United States, the same sort of mentality that stifled economic growth in other parts of the world when we were the world’s economic powerhouse.
The Antiplanner is nevertheless optimistic about our future. I believe we will overcome the above institutional trends and rebuild an era where innovation, wealth creation, and individual initiative are celebrated rather than demonized.
For what it’s worth, I am sure there are many technological innovations that can continue to improve our world, from nanotechnology to improved methods of power generation to increased crop production (including, yes, genetic modifications but also such techniques as hydroponics and more efficient distribution of irrigation water). But having economic institutions that can take advantage of these innovations is far more important than the innovations themselves, something that Gordon seems to have forgotten.
Gordon’s thesis may be popular today because it fits the Progressive agenda, which depends on the notion that there is only a limited amount of wealth in the world and so the only fair thing to do is redistribute it. But if wealth depends more on institutions and human ingenuity than on resource limits, then the best policy is to create institutions that reward that ingenuity. Some might say that I support this notion because it fits my free-market agenda, but in fact it is the other way around: I support the free-market agenda because everything I know about history and my own personal experiences show that the institutional theory of growth is correct.
Was it technology or willingness to use it. We can debate but the fact that other countries didn’t understand the tech is not the case. America’s economic growth was the byproduct of a few things. One Immigrants and second Post-War survival. We emerged from World War II largely unscathed while the rest of Europe and Asia were left to ruins giving America a near 20 year head start. And third and foremost of all, class systems. 20th century Socialism and Communism did more to damage the economies of the third world. Russia at the time was so incompetent they couldn’t even master the art of farming. They stole and copied Western technology to develop their own. The RBMK reactor that led to Chernobyl was a hunk of shit when it was new and had no containment dome. Science and technology served as an important part of national politics, practices, and identity regardless of the science being credible. Such as rejection of established science and the emergence of Lysenko genetics “will produce more harvests per year and act as a model to export to the rest of the world.” As a rejection to Mendelian genetics when applied to agriculture resulted in crop failures and the starvation deaths of millions of Chinese peasants. A confiscation of resources or property. Massive public works projects are built more for impressing people than serving an economic purpose. The Three Gorges Dam for one and look what it did to the Chinese countryside.
Another thing, culture. We think it’s about religion, or we think it’s about culture. No it’s about cultures and one culture simply can’t live next to another culture that appears to be thriving. Because their culture is stagnant, rigid and conformist and can’t accept innovation or change. They won’t accept the importance or flexibility of women in society, the roles of science and technology and expanding markets. It’s okay for them to come to the US for work but if you open a McDonald’s in proximity to their holy lands (which is apparently every acre) they’re pissed off. Even with all their oil and money much of it’s people still live in squalor by developmental standards. They’re envious, resentful and jealous of our success and then get shamed. And, when you get shamed, there’s two things you can do with shame. You can be shamed and go “I better get my act together”, or you can be shamed and go “I’m gonna tear that guys stuff down”. It’s like the kid who tramples over the sand castle of another kid for building a better castle or the kid getting harassed in school for actually raising his hand first and answering correctly. So they blow up schools, spray acid in the face of girls learning to read/write. That’s the culture that holds back progress.
If geographic isolation or being a small nation is the prerequisite for economic disparity, how did the Mormons get rich living out in the Utah desert? How did the Amish get rich in rural Pennsylvania rejecting modern tools and electricity. How did Hong Kong, Manhattan or South Korea get rich in the abscence of crude natural resources. Israel went from desert berg to industrial powerhouse in just 50 years all without the huge petroleum reserves of it’s neighboring countries. How did the Cayman Islands get rich, cause they have simple laws that make doing business a snap. When the mortgage market crashed, the President said their new law, Dodd-Frank, would create a “new financial system” so such things would never happen again. Dodd-Frank, instead of stopping fraud, added layer upon layer upon layer of incomprehensible laws atop already incomprehensible banking laws. Simple rules in the Cayman Islands not only stop fraud, but they also create prosperity. Despite our myriad of rules and regulations, they didn’t stop Charles Keating, Tyco, Enron, Bernie Madoff and others who continued to scam the system for years before they were caught. They would not have gotten away with their financial misdeeds in the Caymans.
I agree that the institutions have to be correctly designed for growth, but all must be able to share in the increased wealth created. This does not just mean the ability to own property but a share of the increased wealth generated by, for example, ones employer, the stock market, etc. The troubling fact is that in the last 30 years we have seen enormous gains in productivity but most of that wealth increase has gone to the top 1% of earners. These top 1% of earners also seem to have gained more political influence, witness both Democrats and Republicans bailing out the financial services industry and allowing corporations to act as “people” and donate as much money as they like to political campaigns. Another example is Congress continuing to push the farm bill giving away large amounts of taxpayers money to large farming corporations. The fact that Republicans threw away their contract with America in 2000 by not passing a balanced budget amendment, then deficit spending while allowing the financial services industry to fraudulently issue falsely labeled AAA bonds and at the same time effectively shutting down the SEC (which protects shareholders) is particularly troubling.
One could make the argument regarding technology for economic improvement with any era of history. The automobile, the steam engine, the windmill, God forbid we have to grind grain by hand. The path to economic growth has always been determined by freedom. The level of which permits people to engage in business. You cant have democracy without capitalism, you cant have capitalism without democracy. When the founding fathers wrote the Constitution they didn’t write much regarding how the economy would run. A major source of objection to a free market economy is precisely that it … gives people what they want instead of what a particular group thinks they ought to want. Underlying most arguments against the free market is a lack of belief in freedom itself. Most of the energy of political work is devoted to correcting the effects of mismanagement of government.
Remember, history is not a simple straight line with societies constantly progressing (whether at a faster or slower rate).
The ancient Egyptians were much more advanced than any Egyptian culture fr thousands of years until the late 20th century (and the latter was basically borrowing all modern technology from the West). Remember the Dark Ages in Europe. China goes from a world power to a vassal state following closing itself to the world after the 15th century. We must remember the Mayans and other groups whose ancestors live a backward existence many centuries later. There are numerous other examples.
With many cultural problems and the increasing collectivist control by governments that seeks to exacerbate the same, there is a real possibility that our society will move backwards for a while–if that hasn’t already begun.
One major empirical clue to how things work, and highly contrary to libertarian ideology, is the fact that relatively advanced technology such as jet engines, many modern high tech materials, and modern electronics simply would not have happened as quickly as they did without massive government spending on war technology during World War II and during the Cold War. If the US hadn’t been drawn into World War II by the Japanese ill-advised attack on Pearl Harbor, the “Jet Age” et al may not have happened until the 1980’s if at all.
On the other hand, if the US hadn’t been drawn into World War II and Hitler hadn’t impertinently and abruptly declared war on the US and worked Churchill and Roosevelt into considering the demise of the Nazis to be the first aim of their war strategy, the white people left in North America over probably would be goose-stepping, Zieg Heiling in German and singing the Horst Wessel song after being conquered by that paperhanger’s minions. Without the destruction of Nazi Germany there is no doubt that the massive Nazi government-funded advanced weapons projects such as the A-bomb, jet fighters and bombers and intercontinental V-3s, V-4s, etc. would have come to fruition, and Hitler would have captured the entire planet.
The point is that the fundamental research and projects that government chooses to spend its resources on is as important–in many cases, more important–than the also important institutions identified by Hernando de Soto. Without the technical impetus of government spending in such affairs as World War II, a lot of the technological innovations simply would not have occurred or would have taken far longer to occur when affairs aren’t so urgent (Einstein would have still written his letter to Roosevelt about the potential for nuclear weapons, but the sense of urgency would not have been there in Isolationist America except for the War).
Stick to geography or take a historiography class. You could also use a remedial writing course.
I think msetty needs to study up on WWII. The German atomic bomb program took a wrong approach early on and was never anywhere near success. Even had it been on the right track the Germans did not seem to be willing or able to expend the Manhatten Project level resources needed. The V-2 was an amazing piece of technology for the time, but was a very long way from an ICBM. The German jet program was also first rate, but the British and American programs were also making excellent progress. The Germans did not have world conquering weapons in the works. I realize this isn’t critical and it certainly isn’t what this blog is about, but it just bugs me to see these errors.
Much of the 20th century was humans suddenly being able to use oil/coal/electric energy to multiply productivity. Probably half the world still doesn’t have that capacity, so even that advance has a long way to go to increase global wealth.
The information age has huge efficiencies that will increase wealth, but will it be as the energy revolution completing its advance. Where can wealth go anymore? Even the middle class in the US can see and travel to an amazing range. Now are problems are being fat and expelling too much CO2, not a shortage.
There will always be a shortage of some food, some places, some experiences, that make them expensive. But what obstacle is truly limiting the middle class, or even the low middle class, today?
If the US hadn’t entered the war when it did there was an excellent chance that the Nazis would have had the time to develop those weapons. This is what I said. Given the breathing room they would have had the resources to defeat the Russians decisively if they also didn’t have to fight on the Western front, and could have allocated those resources to the various weapons programs I mentioned. They did amazingly well considering they were under constant bombardment 24 hours per day from mid-1942 on. And at some point without US help and entry into the war, the British would have collapsed.
I suggest you check your history again. There are any number of points in the history of World War II where it could have ground to a total stalemate and the Nazis would have survived as a regime and would have had time to develop those weapons. Examples: If Hitler hadn’t reversed Rommel’s decision to send a few extra Panzer Divisions towards Normandy immediately following D-Day…or if he had not interfered with the Luftwaffe and let them use the ME 262s as a fighter rather than as a fighter-bomber which they really were not suited, thus significantly delaying production and deployment. These are just a few instances when luck or a seemingly minor quirk of Hitler’s personality saved the Allies’ ass.
Frank, you’re a teacher? Odd. No one here seems to be familiar with the literary genre of “alternative history” e.g., what if? Some extremely interesting and thought-provoking stuff.
Historiographers have written off counterfactual “history” as a big “what if?” game and as being of little value to the serious historian. This “methodology” would fit right in on the “History” Channel with its quality shows like Ancient Aliens.
Notice not a single link in any comments so far on this post, characterizing the low-wattage pontification of the participating characters.
Let’s give 20th century government its due, with sources.
First, in the 20th century, government murdered hundreds of millions of its own citizens; the term is Democide and has been extensively researched by R. J. Rummel, Ph.D., Professor Emeritus of Political Science, University of Hawaii.
This doesn’t include genocide or the wartime deaths of civilians or hundreds of millions conscripted by force to defend nationalistic ideology and arbitrary lines on maps.
Since 1870, the frequency of state wars increased, and this frequency is directly related to the increasing number of governments. And of the 3,168 conflicts during this time, the United States government started the second highest percentage of conflicts.
By the way, precursors to jet engines were developed in the first century BC, and the first patent on related technology was granted in 1791. Jet engines were under development pre-war. The war slightly accelerated their development, but it’s a guessing game as to how much. Was the acceleration of the technology worth upwards of 85 million deaths and untold trillions of dollars and costs that linger for 100 years? We report, you decide.
A fine rebuttal, Frank, my hat’s off to you. “Low wattage” is exactly how I would characterize the spew of inept propaganda peddlers like msetty. According to his version of government involvement, the Wright brothers could never have developed their flying machine without the billions of dollars the government invested in their enterprise.