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Krugman Wonders ‘Is Growth Over?’

Paul Krugman begins to discuss our new economy — the Postnormal — but he doesn’t call it that, at least not yet. Mostly it seems like he is responding to an economic hand grenade thrown by Robert Gordon of Northwestern University, who suggests that the last era of industrialism — electrification — ran from 1890 to the 1960s, and since then we have been floundering, because the information technology revolution hasn’t had as big as an impact:

Is Growth Over? - Paul Krugman via NYTimes.com

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.

[… a discussion of the state of AI… smart machines…]

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 Krugman doesn’t say — and perhaps doesn’t see — is that the ephemeralization of labor due to information technology has been going on for decades, and that may be it’s biggest impact: ending jobs. Remember all those jobs were people typed in data based on insurance, medical, and government forms sent through the mail? All those secretaries that used to manage people’s travel, appointments, and business meetings? Telephone operators? The expediters that would figure out the best route for a fleet of UPS trucks to make their deliveries? That’s all gone now, slurped up by information technology.

Consider only a few breakthroughs likely to have an impact in the near future. Autonomous vehicles are on the immediate horizon, and their biggest impact won’t be on hipsters in urban centers: it will be on truck transport. In 2010, there were 1,604,800 truck drivers in the US, making an average of $18.15/hour (Bureau Of Labor Statistics). The number of drivers is growing, and there is a unmet demand because the work is so awful: long hours, not great pay, and dangerous work.

So, imagine autonomous trucking systems taking over freight, at least long haul freight: 33% of those jobs. Bang. Gone.

239,900 taxi drivers and chauffers. Bang. Gone.

67,100 Train engineers and operators. Bang. Gone.

100,000 airplane pilots (another industry with a looming talent cliff, because more than half are over 50 and must retire at 65). Bang. Gone.

A couple of million semi-skilled workers on the street, with nowhere to work.

And that’s only one breakthrough. Imagine if there were 10 others, that each erased 10 million jobs. 

How many Blockbuster jobs were lost when Netflix and Redbox came along? 60,000, and innumerable other chains and mom-and-pop video stores likely tripled that.

What about a Redbox in a Subway? What if you walked in, typed what you wanted into a touchscreen, and swiped your credit card, and left? A store could be managed with one person per shift — to deal with the machinery — and Subway would save a fortune, and maybe drop the price a bit. And you’d still get a fresh, made to order sandwich. There are 4 million people working in the fast food industry, as of 2011.

I project that we will see over 25 million more people out of work because of these advances. Permanently.

It’s the Postnormal, and — among other activities — US and state policies should be directed toward shorter work week for the same pay, which would share the bounties of ephemeralization with the working people and not just to the folks that own the machinery. More important: If we share the work that is left, so that people worked, say, 25 hours a week, what are they supposed to do? 

Of course if things just keep on as is at present, these people will be shit-canned, and join a permanent underclass of people who cannot find work in a world where there isn’t enough to go around.

I will dig up more on Robert Gordon’s thesis, and await Krugman’s next piece with interest.