http://www.economist.com/node/21538699THE rich world’s crisis of unemployment would be painful enough on its own, but it comes on the heels of a generation of labour-market stagnation. Growth in inflation-adjusted incomes in the rich world slowed sharply as early as the 1970s. In America, median household income has actually fallen since 1999. Economic growth continues, but not all see the rewards. By some estimates, the top 1% of American earners captured 58% of the country’s economic growth between 1976 and 2007.
Scapegoats, from crony capitalists to foreign-currency manipulators, are in no short supply, but technology is increasingly fingered as a culprit. Some economists reckon the problem with technology is that there is too little of it. Tyler Cowen, an economist at George Mason University, says in a recent e-book that a “great stagnation” is under way. The gains from the big inventions of previous eras—electricity, jet engines and antibiotics, for example—are now exhausted, and new, comparable innovations are exceedingly rare. Fewer grand inventions mean less productivity growth and a slower improvement in living standards.
It is a troubling diagnosis, but not the only one available. Erik Brynjolfsson, an economist, and Andrew McAfee, a technology expert, argue in their new e-book, “Race Against the Machine”, that too much innovation is the bane of struggling workers. Progress in information and communication technology (ICT) may be occurring too fast for labour markets to keep up. Such a revolution ought to be obvious enough to dissuade others from writing about stagnation. But Messrs Brynjolfsson and McAfee argue that because the growth is exponential, it is deceptive in its pace.
Progress in many areas of ICT follows Moore’s law, they write, which suggests that circuit performance should double every 1-2 years. In the early years of the ICT revolution, during the flat part of the exponential curve, progress seemed interesting but limited in its applications. As doublings accumulate, however, and technology moves into the steep part of the exponential curve, great leaps become possible. Technological feats such as self-driving cars and voice-recognition and translation programmes, not long ago a distant hope, are now realities. Further progress may generate profound economic change, they say. ICT is a “general purpose technology”, like steam-power or electrification, able to affect businesses in all industries.
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