Yet another academic is prophesying gloom for the United States. A new paper by Robert Gordon picks up a theme that GDP-enhancing new science and technology has thinned over the past half-century and future consumption growth will therefore be slower.
Instead of the material standard of living doubling every 30 years or so as it did from 1930 to 1990, doubling will slow to 100 years, the nineteenth century pace, Gordon says.
This comes as finally the government here may be getting the innovation message, at least in rhetoric. In the small print of its innovation report last month was a target to lift its investment in science and technology from 0.6 per cent of GDP “towards” 0.8 per cent, “as fiscal conditions allow”. The OECD average is 0.73 per cent. Spending this year will only just top spending in the Clark government’s last year in dollar terms, which means it is still behind in real terms.
Sir Peter Gluckman also got written into the report a declaration that “science and research can provide the evidence to improve policy decisions”. That raises some possibility the government may move “towards” action on early childhood, which the science shows clearly is the most effective time to intervene to save people from not getting educated and so joining the not-workforce.
Those are topics I will return to. Meantime, Gordon and others highlight an issue for the United States and in consequence for the world economy and politics — and us.
But first, others contest his thesis and point to potentially transformative technologies. “We are poised to enter a new era that will come from the convergence of three technological transformations that have already happened: big data, the wireless wired world and computational manufacturing,” Mark Mills, chief executive of Digital Power Group, wrote in The American on August 25.
Second, it may be that new technologies now do more for quality of life (entertainment, health interventions) than quantity and thereby double living value for future generations, already materially well off.
For now, however, the prevailing United States mood is gloom. That is evident in the continuing influence of the Tea Party, a populist movement that harks to a mythical white, frontier-like America: anti-immigrant (especially that Kenyan-Muslim-Socialist Barack Obama), anti-Washington, anti-tax, anti-welfare.
The Tea Party continues to win some nominations for Congress off mainstream Republicans. Mitt Romney’s vice-presidential candidate, Paul Ryan, is a Tea Party favourite for his strident small-government, low-tax views and the leading role he played in wrecking the cross-party fiscal compromise.
Ryan argues an intellectual base to his position. The Tea Party is a populist movement. Such movements are common in times of stress — stress in the 1930s gave us Social Credit. Populist movements have been gaining ground in Europe as stress there grows. In the past some have turned nasty, as in Germany in the 1930s.
Populist movements demand radical, not rational, policies. It is that dimension that worries moderate conservatives.
Martin Wolf of the Financial Times on August 17 dismissed Ryan as “incredible”. New York Times conservative columnist David Brooks worried on August 30 that the Republicans are now “hyperindividualistic” when for real conservatives “individuals are embedded in webs of customs, traditions, habits and governing institutions” and bother about “community”.
Three days earlier Brooks wrote a contemptuous pseudo-profile of Romney. Stephen Roach, former Morgan Stanley chair, on August 28 wrote a “history” of Romney’s presidency that charted a global economic contraction as a result of his promise to declare China a currency manipulator and thus risk precipitating a trade and finance war.
All of these are serious conservatives who would normally far prefer a Republican to a Democrat President. The Economist in its 25 August editorial contorted itself to stick with that preference but only after awarding Romney an Olympic gold medal for flip-flopping on myriad policies and evasiveness over tax. He is “a man who does not really know his own mind. Americans won’t vote for that man; nor would this newspaper”.
Is this a bother for us? Yes. There are two serious risks: that a Romney-Ryan crew will drive the United States economy into a stall which affects the world and further fuels populism; and that in foreign policy he will heighten tensions, especially in the Middle East, and destabilise the fragile balance Obama, for all his large faults, has largely maintained. (Add the risk of a trade and finance war.)
Of course, Romney may be different in office. At heart he does appear to be a moderate conservative and he, not Ryan, will be President (if he wins). He might flip-flop into sense once through the gruelling grind to the White House.
Conservatives in the United States and abroad clearly hope so. So might a world looking for peace and progress. That includes us.