The Great Reversal

Gordon is less impressed with the third revolution: computers, starting around 1960 when big companies first used “mainframes.” True, they automated airline reservations, banking transactions and clerical work. Secretaries “began to disappear.” More recently, e-commerce has exploded. But Gordon sees the Internet, smartphones and tablets as tilted toward entertainment, not labor-saving. High productivity gains from cybertechnologies “had faded away by 2004,” he argues.

Technological innovation, though faltering, will continue, Gordon writes. Think more driverless cars and new cancer drugs. But he argues that the effects on average American living standards will be muted. Less-skilled workers from lackluster schools will cut productivity and wage growth further. Greater inequality will steer some gains to the wealthy. Higher taxes to cover budget deficits and transfers to the elderly will squeeze take-home pay. Health insurance costs (which he does not mention) would do the same. Though not preordained, Gordon’s prophecies suggest a long era of stunted economic growth.

Robert J. Samuelson

Samuelson writes a weekly column on economics.

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Economic progress — progress that people can feel and that feeds hope and optimism — favors political stability. If progress shrinks or vanishes, stability may suffer. People lose faith and feel betrayed. The role of economic growth in advanced societies is increasingly to satisfy the many claims from different groups. People can (or think they can) pursue their self-interest without harming the common good. When the system reduces or rejects many of those claims, as is now happening in Europe, the pursuit of self-interest becomes more contentious and destructive.

What’s happening in America is different in degree, but not in kind, from what’s occurring in Europe. Stalled economic growth there is straining the political system’s ability to meet all expectations. People take to the streets; extremist parties expand. To avoid Europe’s fate, we should reduce people’s claims on the system and strive for faster economic growth. That’s the lesson. If we ignore it, history may slip into reverse.

Read more on this issue:

Robert J. Samuelson: The sources of the global economic stalemate