We have all become accustomed to economic growth. We expect our GDP / national income to grow year after year (leaving aside the odd blip). However, the stagnation of Western economies since the 2008 crisis has resulted in some economists suggesting that long-run economic growth has ground to a halt. In particular, Robert Gordon has argued that in the grand scale of human history economic growth has been a temporary phenomenon lasting nearly two centuries. His explanation for this temporary growth is simply that technology revolutions (steam, railways, electricity, chemical engineering, combustion engine, household sanitation) raised productivity. He is less sanguine about the ability of computer technology to raise productivity. For one, the IT revolution isn't reflected in the productivity figures. Why? It could be that it eventually will - technology can be slow to raise productivity. On the other hand, maybe the IT revolution isn't such a big deal and doesn't make us more productive. In fact, some gadgets may make us less productive.
Many economists are now asking the question: where is the next big invention coming from? Without a technological breakthrough, we could be looking at near-zero growth being the new normal.
You can read a post by Robert Gordon on this here. The Daily Telegraph's coverage of the debate is here and the Economist's is here.
|Growth in Real GDP per Capita, 1300-2100 - from Robert Gordon, "Is US Economic Growth Over? "|