http://www.ted.com/talks/robert_gordon_the_death_of_innovation_the_end_of_growth
Professor Robert Gordon
is a famous macro-economist. He gave us this talk in 2014 and claimed
that the growth of the U.S. economy is going to over. He believed that people
were over-estimating how innovation will drive U.S. economy in the future. To
further support his argument, he gave us four key headwinds which he thinks
would slow down the U.S. economy. They are demography, education, debt and
inequality. From his viewpoint, the only thing to offset the decline is
innovation.
The
first headwind is demography, he showed a diagram which illustrates the decline
in labor force. One of the root causes of this decline is the retirement of
baby boomers. The other cause is that young people cannot find a decent job.
The second headwind is education. There is growing amount of student debt which
changes young people's lives after they graduate. Also, people in U.S. has high
school dropouts rate. The third headwind is national debt. He argued that if a
country has a rising debt compared to its GDP, to prevent debt from infinity rising,
the government has to either raise taxes or reduce social welfare. These two
measures would slow down the growth of economy because it reduces disposable
income from citizen. The last headwind is the rising inequality. In current wealth
distribution model, most of the gain goes to the top one percent. Over the past
15 years, the growth rate of 99 percent was slower than the overall national
average.
He
then talked about the only thing to reduce these major headwinds, that is
innovation. The inventions today do not continue the rate as they do in the
past. For example, the speed of transportation was increased from horse(1
percent of sound) to Boeing 707. Urban environment makes people more productive
than on the farm, but the transition from rural to urban in the U.S. could only
happen once. Also, electricity could only be invented once. The invention of
electricity created a set of innovations such as light bulbs, TV, internet,
washing machine. Especially for washing machine, Robert said it is a great innovation
for women liberation. He said in 19th century, women spend two days
a week on handling laundry routine. The invention of washing machine actually
increased women's labor force partition rate.
To
the conclusion, the inventions created today could not match what our
predecessors created in late 19th. Robert argued the drop of innovation could
not offset the decline of the four major headwinds.
My
opinion:
We
all know the U.S. economy performs very well in 2015, one of the main reason is
the drop of global oil price. But I think it is unfair to say that Robert's
forecasting about the future is incorrect. Sometimes the decision made by OPEC
is politic issue, not economic issue.
But
I disagree with his prediction because I firmly believe technology. Technology
is not only the key to drive economic growth, sometimes its' progress
exceed human's imagination. In 19th century, citizen in New York depended on
horses for transportation. People faced a great manure issue, all these horses
produced huge amounts of manure per day. Therefore, the streets in New York
were covered by horse manure. During that period, economists predicted that the
economic growth would stop because more and more people moved into New York
city. At the same time this city needs more horses for transportation. The more
horses, the more manures. The cost of feeding horses and manure sweeping increased dramatically. People predicted that the city would be buried under eight feet of manure. This great crisis was vanished because the invention of automobile. Ironically, cars were considered as a green invention at that time. Nowadays, they were connected with pollution.
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