The American Spectator : America's Slowdown

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America’s Slowdown

By James Piereson from the May 2011 issue

Tyler Cowen has given us a provocative and highly controversial assessment of the U.S. economy — and it’s an e-book.

The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better
By Tyler Cowen
(Dutton/Penguin, Kindle Edition, $3.99)

With The Great Stagnation, Tyler Cowen has given us a provocative and highly controversial assessment of the U.S. economy. Cowen, a professor of economics at George Mason University, the co-proprietor of the popular blog Marginal Revolution, and the author of a monthly business column for the New York Times, argues that the U.S. economy has been stagnating for more than a generation due to a slowdown in technological invention and progress. The slowdown in invention is behind several current adverse trends, among them rising inequality, stagnating wages and income for the middle class, rising government debt, protests against government spending, and, even, the recent financial crisis. His case is worth pondering even if in the end the reader may not be convinced that he is right.

The Great Stagnation is an e-book available only on the Internet at a modest price, with a condensed argument set forth in a mere 15,000 words. While the author is a skilled economist, he presents his case with a minimum of academic jargon and technical proofs. The intelligent layman can proceed through the book in a few hours of attentive reading and come away from the experience with a new way of looking at old problems. The presentation of the argument in this form is ironic in that the author proceeds to argue that the revolution in computers has done little to change our ways of living.

Cowen argues that the rapid increase in incomes and living standards that occurred through the 20th century and especially during the quarter century after World War II was propelled by a series of technological breakthroughs that were rapidly commercialized and made available to nearly everyone. These included electricity, indoor plumbing, railroads, the combustion engine and the automobile, the telephone, radio and television, and aviation. These developments with their various offshoots produced millions of jobs for Americans, generating rising incomes and living standards and changing the ways people lived. The growth in incomes allowed for increasing shares to be siphoned off by government to pay for services (education) and infrastructure (highways and airports) required by these far-reaching innovations.

Yet the pace of growth in incomes and standards of living has slowed down substantially since the 1970s. Indeed, Cowen identifies 1973 as the precise point at which growth and progress began to slow and incomes began to stagnate. During the postwar period from 1947 to 1973, real household income doubled from a median of $22,000 to $44,000 (measured in 2004 dollars), or an increase in real terms of about 3 percent per year. Afterward, during the 31-year period from 1973 to 2004, real (median) household income grew by just 22 per cent in real terms to about $54,000, or an average of less than 1 percent per year. If incomes had continued to grow at the earlier rate during this latter period the median household income in the U.S. today would be more than $90,000 per year. This slowdown in progress is a major factor behind our increasingly acrimonious political debates and the growing resentment over the costs of government.

Cowen’s explanation for this slowdown is intriguing and counter-intuitive, since most people think that we are living in a period of rapid technological progress driven by computers, cell phones, and the Internet. Yet Cowen cites technical studies suggesting that the pace of invention has actually slowed since the 1970s, a conclusion also echoed by prominent figures in the investment and technology fields such as Peter Thiel and Michael Mandel. Thus Cowen argues that our current living standards are built upon innovations and breakthroughs produced a century ago. Until we produce innovations comparable to electricity and the automobile, the stagnation will continue.

The United States has already harvested the “low-hanging fruit” that propelled the growth in living standards during the first two-thirds of the 20th century. Our abundant free land has been settled and put to commercial use. We have educated our population to a near maximum extent. We have exploited the technological breakthroughs of the early part of the century. It is now hard to identify new sources of growth. At the same time, we are now spending much more than in the past on government, whose contributions to economic growth are hard to measure. Government controls large sectors of the economy where costs have gone up but productivity and measured outcomes have declined. We spend growing sums in health and education but do not receive returns commensurate with those investments. Conservatives and liberals are mistaken to think that growth can be revived through tax cuts or by more public investment when the real source of our trouble is the slowdown in technological progress.

Cowen anticipates the criticism that the current revolution in technology will propel a rise in living standards comparable to the breakthroughs of the past century. He argues, first of all, that these industries employ very few people compared to the numbers employed in the past by firms like General Motors or AT&T. Google, for example, only employs about 20,000 people, eBay about 16,000, and Facebook only 2,000. These companies, while highly profitable, produce very few jobs and thus cannot produce improvements in living standards. The jobs they do produce go to the highly skilled and educated, thereby further widening income gaps in the society and weakening the economic position of the unskilled and less educated. While they make our lives more interesting by allowing us to surf the Internet and play video games, these innovations have done little as yet to generate widely shared economic benefits.

According to Cowen, the financial blowout of 2007 and 2008 occurred because Americans, taking prosperity for granted, thought that they were wealthier than in fact they were. Thus they borrowed against their homes and stock portfolios and governments made extravagant promises to public workers and future retirees in the belief that asset values and incomes would continue to rise. They were wrong because, due to the great stagnation, the U.S. economy was not creating the real wealth required to sustain those asset values or to support the vast amounts of credit leveraged against them. The crash served as a system-wide reminder that our economy is not growing as rapidly as we thought it was.

COWEN CERTAINLY has a point. The great innovations of the past changed a rural and agricultural society into an urban and suburban civilization in a span of just 50 or 75 years, while current breakthroughs in computers and cell phones are unlikely to have such far-reaching effects.

The Great Stagnation encapsulates many insights drawn from “growth theory” suggesting that economies surge ahead through technological innovations and continue to grow by the accumulation of human capital. Looking forward, Cowen sees a remedy for “the great stagnation” in more and smarter investments in scientific research and in a more sophisticated appreciation among the public of the crucial role played by technology in driving economic growth and rising standards of living. In this sense he thinks that current battles between conservatives and liberals over taxes and public spending are beside the point and do not address the real source of our financial problems.

Against his case, one might raise the following objections:

First, Cowen is correct to point to 1973 as a pivotal year for the U.S. economy but perhaps not for the reasons he cites. That was the year in which OPEC was formed and when Middle Eastern countries unleashed the “sword of oil,” driving up gasoline prices and ending the era of cheap energy for the U.S. economy. It was also about this time that West Germany and Japan reemerged as players in the global system after their economies were leveled in World War II, thus bringing to an end an era in which U.S. producers dominated the world’s supply of quality consumer goods. To complicate matters further, it was also a time when the expenditures required by Lyndon Johnson’s Great Society programs began to kick in so that public programs began to siphon resources previously allocated to private investment and production. One can see that growth may have slowed in the U.S. economy at this time for several intersecting reasons.

Second, the case implies a secular stagnation in growth rates since the 1970s but in fact there have been sub-periods of fairly rapid growth within that time frame. Between 1983 and 2000, the years of the Reagan “boom,” real GDP grew at an average rate of 3.7 percent per year, not as rapidly as the 4.5 percent rate of annual growth achieved during the 1960s but impressive nonetheless, and a rate of growth sufficient to support rising living standards. This period of expansion was bookended by two periods of sub-par growth during the 1970s and the early 2000s. Indeed, our current fiscal troubles may arise from the subpar growth of the years from 2001 to 2009 when real GDP expanded at an average rate of just 1.6 percent per year. Thus the case for secular stagnation dating back to the 1970s is not as strong as one that places an emphasis on the recent period of disappointing growth as the real source of current troubles.

Third, if the case is correct, then why did we see a boom in financial assets that produced a 20-fold increase in stock market averages between 1982 and 2000? Investors certainly did not see a great stagnation taking place during these years — quite the opposite, they saw a booming economy generating rising corporate profits and, in turn, rising stock valuations. Is it likely that sophisticated investors, focused on the short run, missed the long-term weaknesses in the U.S. economy? I for one doubt it. Interestingly enough, the stock markets have been generally stagnant over the past decade of subpar growth, which again suggests that our troubles are of more recent origin.

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About the Author

James Piereson is president of the William E. Simon Foundation and senior fellow at the Manhattan Institute. He is the author of Camelot and the Cultural Revolution: How the Assassination of John F. Kennedy Shattered American Liberalism (Encounter Books).

Letter to the Editor View all comments (65) | Leave a comment Leave a comment

John| 5.9.11 @ 6:44AM

The USA is still the most innovative nation on the earth. The missallocation of capital is towards the military industrial complex. Most nations would love to have the problems faced by America. Now thar Ladin is dead perhaps America can now turn to domestic issues.

Patrick| 5.9.11 @ 2:07PM

We are actually losing that innovative edge, and today's "second world" is closing that gap, and may well eclipse us within this decade. While China is happy with outproducing us in material goods, India may well be laughing last.

As for the MIC, its contribution to our dismal present and future is trailing much larger burdens.

SpiralArchitect| 5.9.11 @ 3:01PM

The missallocation of capital is towards the military industrial complex.

Presumably you mean this is unequal and unjust toward the MIC not the reverse.

Military budgets in the USA are not a large part of the budget and should be revised in favor of being more in tune with the modern military requirements of todays global society - we need to move out of the military needs of the distant past.

Yes, reform would be nice too, too bad we are likely to see neither in our lifetime.

emo| 5.9.11 @ 2:59PM

Nice except that military spending is 3% of GDP down from 5% in the mid 1980s and 7-9% in the period 1945-1970 when growth rates and living standards were rising faster then today. So clearly the "military industrial complex" (there is a hackneyed term) is not responsible for the decline in the growth rate of living standards.

The culprit can be found in the Solow (Endogenous) Growth model. Technological change has slowed because capital accumulation has slowed. Capital accumulation has slowed because domestic savings has fallen. We've attempted to make up for it by borrowing from abroad but instead of investing foreign borrowings, we have used foreign inflows to artificially elevate consumption.

emo| 5.9.11 @ 3:02PM

John:

The one point I would agree with you is that government spending results in a misallocation of capital. Whether or not that spending is social or military doesnt matter. However at 3% of GDP it is unlikely that the problem is the military. More so increasing Fed Spending from 15% of GDP in 1955 to nearly 30% today is the problem. A massive misallocation of capital away from the private to public sectors. Thus one reason there is less technological advancement. Money taken from the ACME Corp and spent on Medicare will invariably result in slower economic growth.

Alan Brooks| 5.12.11 @ 4:13AM

The world isn't a laboratory! you guys sound like 18th century scientists who thought the world cosmos was a Newtonian machine.
Irony is, your materialism is almost Marxist in tone, tinker with economics and you will somehow change the human-- mold a capitalist man as the Soviets tried to build a Communist Man.
The Soviets were far more violent, but it derives from the same principle.

figusja| 5.9.11 @ 7:19AM

No you are talking like a liberal. Yes we spend alot on our military but remember you said capital not taxes. The major difference is that Capital is spent by businesses to invest in the private sector. Taxes is what the government drains from its citizens to feed it's own bloated body.

Regulations is what is destroying the U.S.A. When businesses have to check pricing to satisfy the communist in our midst. When we can not build due to some small mouse living in a field. Having to promise to pay for renewable energy instead of what is cheap. Government propping up sectors like ethanol, solar and wind farms where there is no market. These are just a few of the problems we are facing. And I am not even getting into our spending.

Bob K.| 5.9.11 @ 7:24AM

An E-book, huh?

He better get out a hard copy soon before this one ends up in the great electronic "memory hole" that George Orwell wrote about but never envisioned quite in this manner.

Gordon W.| 5.9.11 @ 8:01AM

Figusja, what about the government propping up the steal industry, the auto industry, the oil industry, the agricultural sector and the financial sector. You act as if liberal initiatives are the only ones getting government hand outs.

One thing that isn't mentioned, most likely the bias of the cite, is the financial boom from 1982-2004 is because of deregulation of the financial sector. We had more recessions since 1980 then 1945-1980 and the income gap has increased as well.

And the tax burden is the same as it was before taxes were initially raised by FDR. You cannot claim taxes are the bane. You have the facts, make a logical conclusion from them.

buckeyeman| 5.9.11 @ 10:36AM

The government IS the "steal" industry.

figusja| 5.9.11 @ 12:17PM

I did not want to keep going with all of the subsidies. I just wanted to give just a few examples. And yes many of these are not liberal initiatives as you say. But anything that is artificially propped up is a useless program totally at odds with the free market system.

emo| 5.9.11 @ 3:08PM

""We had more recessions since 1980 then 1945-1980 and the income gap has increased as well."

ABSOLUTELY INCORRECT:

We've had 4 recessions since 1980. (1981-82, 1990-91, 2001 and 2008-09). Before 1980 we had recessions in 1949, 1953, 1957, 1961, 1970, 1974. In fact until the Great Recession of 2008-09, recessions were becoming less frequent and less severe, so much so that the 2001 recession didnt even qualify as a recession in the traditional sense (2 consecutive quarters of negative growth) and the 1991 recession was probably the second mildest of the post war period. What has made recessions maybe seem worse since 1980 is that the recoveries are U-shaped instead of V shaped (1982 was the exception as it was the sharpest V recovery in modern history). 1953, 1957 were very severe recessions but were followed by equally sharp recoveries.

PolishKnight| 5.9.11 @ 8:25AM

I have a truly politically incorrect reason (on both sides) the author doesn't mention: feminism and women's equality.

Much of the growth in the economy is a keynsian style artificial spurt produced by working women: Divorce lawyers, fast food, daycare, the welfare state and retail (lots and lots of retail!) along with much of the stagnation (men haven't left the workplace as women have flowed into it. That means about twice as many people out on the local commute in the morning. Think about that next time you're stuck in a traffic jam.)

During WWII, Rosie the Riverter was portrayed as a hero for doing a blue collar job to help America compete in the war effort. Today, "Rosie" is a vassal of the welfare state insisting only upon high income or office jobs and going on welfare the rest of the time.

Of course, that's just one factor that has helped kill the American economy but it's a big one. Less so in Europe, perhaps, because women there haven't bought into the laughable pretense of equality that has been pumped into them here.

JLong| 5.9.11 @ 8:27AM

A possibility to increase economic growth would be to free up (i.e. sell) some of the raw land owned by the Federal Gov. and by some states. About a third of Western Massachusetts (an economic desert) is owned by the State, and they are buying more!

richard ryan| 5.9.11 @ 8:41AM

I would like someone to explain to me how inflation will NOT run away and ruin this country.

Gordon W.| 5.9.11 @ 9:09AM

http://www.inflationdata.com/i.....lation.asp

According to this inflation is at a desirable rate economically. If you are merely talking about oil and the the commodities that rely on it, the question should be what are we going to do about either controlling the price of oil or heaven forbid an alternative? A simple reaction would be to prohibit speculation on crucial commodities, but that would be regulation and regulation is bad.

richard ryan| 5.9.11 @ 9:57AM

The federal government is basing its assessment of inflation on a variety of things. Yes, commodities like oil have an impact. Gas prices are a much larger part of the lower and middle class budgets (up to 25%) But the number is affected greatly by housing prices. So tell the average struggling consumer: "Don't worry about the 10% more for groceries, your house is worth 25% less than it was 4 years ago." The Fed is not about the make major moves on interest rates with the economy as it is, and a democrat in the WH, so inflation will get much worse. If they correct it, the economy and equity markets will tumble. We are stuck.

Patrick| 5.9.11 @ 2:14PM

Actually, energy (including oil) and food are NOT included in official inflation figures.

If decisive correction isn't made, and it won't be until at least 2013, we will only be making the inevitable tumble deeper.

emo| 5.9.11 @ 3:11PM

You realize that when airlines and trucking companies hedge fuel, that is speculation. The best way to "control" commodity prices is STOP printing money.

Ken (Old Texican)| 5.9.11 @ 9:05AM

Mr. Piereson
you touched on it, but not nearly deeply enough, and the author of the book is literally blinded by the elephant in the room sitting in his lap.

See, energy EXTRACTION culd be a huge profitable export, as well as refined products. If we did not spend hundreds of billions in energy imports at inflated prices.
Add to that the the ready availability of modest energy prices here at home, and we get TWO grand slam home runs.
Then add a couple of million jobs building and exporting modular nuke plants for electricity, (plants that cannot produce weapons). Then add jobs extracting uranium from our hugundous ore reserves, while we utilize "breeder nuke plants" for our own nuke fuel.
NO SIR!
Mr. Cowan misses the whole point.
For one simple spin-off instance, think about if you only spent $100 per month heating or cooling your home instead of the $300 you spend today.
That's a pretty good net income bounce for every homeowner.
Second, think about quitting wasting fossil fuels, (asphalt), paving our roads when producing concrete, (dirt for crying out loud), cheaply using cheap nuclear electricity to make the rebar and run the dirt processing plants.

No sir!
It all comes down to stupidity.
We could be the energy supplier for half the world. God blessed us with those resources and the minds to implement them.
We have allowed a government and Gaia pagans to disrupt it all in a million ways.

Everything begins with energy, and the will to "energetically" put it to work.
I hope you will check out my own book. It is about the world war we are engaged in, but it also outlines a whole different paradigm of productivity caused by "free-hold" economic production units, (unleashing small independent business.)
www.americaalonesaidno.com

Then throw in building a national infrastructure of super-conducting electric power transmission to allow for even more profitable energy exports.

Pecos Pete| 5.9.11 @ 9:38AM

Ken, would you think that your "It all comes down to stupidity." above equals Gordon W, vtwin and other similar ilk?

Ken (Old Texican)| 5.9.11 @ 10:05AM

Pecos Pete
Well......not so much. Vitwit et al. are always going to be around, but they are merely the lunatic fringe.
In my best view, the killing stupidity is on the part of our so-called leaders and the vast middle of our voters across the country.
For instance,
Sarah Palin stands firm on energy development and exploitation, and she is screamed out of the room.
"Drill baby drill" by Newt seems to only have benefitted his private fund-raising... a mere slogan.
I'm seriously believing now that the car wreck of our national economy is like the "perceived" slow motion one experiences in a real car crash.

I'm beginning to believe our national "car" is in an extended skid as if on black ice, and no major improvements will occur until we hit the proverbial wall and come to a crashing halt.

Whoever can survive that crash "might" then roll up our sleeves and say "screw You guys", repair the "car", and set it on a different road.

The only way that is going to happen is when Americans get off their butts and demand the right kind of candidates for office, then vote them in with a mandate.
Sadly, the crash seems to have to happen first.

Gordon W.| 5.9.11 @ 11:56AM

If you think I represent the lunatic fringe, I think you are either talking to yourself too much or don't have a grasp on reality. The monetorist economics you spout isn't really taught much in the US and not at all in the rest of the world.

You energy talk doesn't mention infrastructure. Yes we have a lot of energy potential. But no party has endorsed building up infrastructure because it would be "socialist." No company will do it, because the ROI wouldn't be high enough for investor expectations in the post deregulation world we live in.

You can say what you think the country needs, but if you are unable to say how we get there it is only "hopey dreamy, I want changey." The world is a lot more complex then you lead one to believe. But maybe that is because arm chair philosophy can only get you so far.

Ken (Old Texican)| 5.9.11 @ 12:41PM

Gordon,
you have a buttinsky understanding of ... CAUSE and EFFECT!
You put the butt leading the head.

We don't seem to have enough legislators who can get their heads out of their butts.
Simple regulation:
"hurt people and you go to jail". end of law.

"Sell people spoiled meat...go to jail." (end of regulation)
Gordon, you ARE part of the lunatic fringe.

You have never made payroll. You have never been regulated because you add nothing to our country.
Nobody wants to regulate how often you masturbate in your mother's basement, so you are happy.

Occam's Tool| 5.9.11 @ 4:54PM

There's plenty of opportunity for growth---1) don't treat entrepeneurs as people only good for bleeding, and 2) open up the shale oil and natuaral gas and 3) open more refineries in climatic and geologically stable areas.

Occam's Tool| 5.9.11 @ 4:56PM

Natural gas---sorry.

Bob Grant| 5.9.11 @ 3:08PM

Everyone at this post is missing the obvious answer to our economic woes:

Comprehensive Immigration Reform.

Why not allow tens of millions of illegal people to "step out of the shadows" so they too can compete in an ever-decreasing job market?
It makes perfect sense at this time to increase the supply of labor when demand is plummeting.

Why NOT provide government services to an additional 10-20 million people when the government is bankrupt?

I'm sure those new folks wont cause any problems so surely we wont have to add additional law enforcement.

I'm sure those tens of million "shadow people" are all multi-millionaires and eager to openly spend their money to help get us out of "the great stagflation".

ronlsb | 5.9.11 @ 9:34AM

Perhaps the professor might have thought to take a look at the size of government (especially at the federal level) in seeking explanations for our slowing growth over the last fifty years. It doesn't take a trained economist to see that the mammoth growth of the federal beaucracy just happens to coincide with the time period for staganation of growth. On a smaller scale, just look at how the costs of health care has balloned since the 60's and see that it matches perfectly with the intrusion of the government into that sector of the economy. Doesn't take a rocket scientist to see where a large part of our problem is coming from.

Kurt| 5.9.11 @ 9:43AM

My life savings is worth 2/3rds of what the same amount of money was worth 3 years ago! To me, I find this unacceptable but in another 2 years it will be worth about half what it was worth 5 years before. Yes, if inflation is a good thing, then let those printing presses chug away until our money is worthless and our debt is inflated away so we can provide for all the lazy worthless non producers and government workers with a wheel barrow full of worthless cash!

Patrick| 5.9.11 @ 2:20PM

Our debt is sold in bonds that are "protected" against inflation. The only way they can inflate away the debt is to lie about inflation.

Ryan| 5.9.11 @ 3:09PM

If that's the case, then inflation isn't your problem. Inflation rates haven't been substantial for quite some time until recently.

Tom| 5.9.11 @ 10:07AM

Both authors raise valid points, but there are more:

1) Consider the Antonio Gramsci / Frankfurt School "cultural Marxism" and its "long march through the institutions" (academia, media, government bureaucracy) that has taken root in this country since the 1960's -- welfare and illegitimacy is no longer a stigma, but a lifestyle. The role of a work ethic, upward mobility ("the American Dream") and the nuclear family have been denigrated from being expectations and role model behavior to being "backward."

2) The rise of public sector unionization since the 1960's, and in particular teachers unions, including the union-fostering of mediocrity via tenure and seniority, with the resulting massive deleterious impact upon education (and thus our workforce and its ability to create the technological innovations Cowen seeks).

3) As to the first two items, consider the impact of "colleges of education" that turn out teachers inculcated with a William Ayers designed curriculum. Concurrently, colleges "dumbing down" curricula to push politically correct "studies" of one sort or another instead of classics, history and critical thinking.

4) Environmentalism hijacked to provide "green camouflage" for anti-capitalism, and an effort globally to use environmental regulation to redistribute wealth from advanced economies and/or achieve "equality" by bringing down standards of living in advanced economies.

5) The maneuvering to the 1960's "Great Society" programs to create a permanent underclass of Democrat voters, rather than a means to "lift people out of poverty" by inculcating a combination of work ethic and insertion of initial opportunity so that they can participate in upward mobility.

Darn, in all that, didn't I also just summarize the unannounced by actual regulatory and legislative agenda of the Obama administration? (READ Stanley Kurtz's well-researched book "Radical in Chief" if you want insight as to the "non reform reforms" being pursued by this administration, and what the end-game._

Padoux| 5.9.11 @ 12:06PM

Comparing advancements now to pre 1973 is misleading. Of course electricity, the auto, the telephone, were giant leaps from a relatively primitive agrarian society. The bar was set low. To make equivalent leaps now we would have to invent super conductors that work at ambient temperature, small generators that could supply a home with all the electricity needed using no fossil fuel and cars with unlimited range using no fossil fuels, or teleportation. The bar we have set in the last century is very high and quantum leaps will be hard to come by. Also consider that even the marvels we enjoy in this country are not available in much of the world.

CT Yankee| 5.9.11 @ 12:18PM

Having not read the book, I can only speculate from your review that Cowen embraces centralized planning and collectivism and believes such a system is conducive to economic growth. He also seems to have a penchant for the industrial age. Well it seems innovation and economic advances have passed the author by unnoticed. Large factories and assembly lines filled with workers are so last era.

Peppermint Tea| 5.9.11 @ 1:00PM

When 42% of American babies are born out of wedlock; when 1/3 of American men don't marry; when divorce is half of all marriages...
Then we ignore THAT elephant and talk about how families are getting poorer.

Occam's Tool| 5.9.11 @ 4:55PM

PeppermintL:

Dead on. People, READ Ted Dalrymple on the British mess.

jgo| 5.9.11 @ 1:04PM

What I don't see mentioned is the many ways which local, state and federal regulations discourage invention and entrepreneurship.

What Tom wrote.

And, we've got hundreds of thousands of bright scientists, engineers and computer wranglers who are unemployed, and more who are under-employed (not using that knowledge and those skills).

Meanwhile, the government has been admitting over 1M, mostly low-skilled, under-educated, illegal aliens (many from cultures which do not hold academic achievement in high regard), and a similar number of at best moderately skilled legal guest-workers and immigrants every single year and giving them privileges and preferential treatment as compared with citizens.

figusja| 5.9.11 @ 2:55PM

Are you asking for examples or saying that he did not put them in the book?

axbucxdu| 5.9.11 @ 1:05PM

Hmmm...1973. Isn't that the year Nixon closed the gold window? And lo and behold, the Aaaayrabs then decided to demand something substantial for our purchase of their real assets-oil.

The source of the problem is staring back at both Cowen and Piereson, but they fail to recognize it. Follow the fiat money, and trouble will not be far behind. The reviewer can be excused, he's only a journalist, but what's Cowen's excuse?

DILLON| 5.9.11 @ 3:08PM

THE FEDERAL GOVERNMENT UNDER RICHARD NIXON/ARTHUR BURNS, CLOSED THE GOLD WINDOW IN 1971; THIS ACT EFFECTIVELY ENDED THE BRETTON WOODS AGREEMENT AND PROMOTED UNCONSTRAINED FIAT CURRENCY GENERATION. TAKING THE USA's LEAD THE WORLD HAS GONE ON AN INFLATIONARY BINGE THAT HAS ABATTED AT TIMES , BUT HAS NOT STOPPED AND HAS TAKEN US THE THE EDGE OF AN ECONOMIC DISASTER (FOR THE LITTLE GUY, SOME HAVE PROFITED OFF THIS FIASCO). I SUGGEST THAT ALL THAT MR. COWEN DISCUSSES ARE BUT SYMPTOMS OF THIS PROBLEM. FIAT CURRENCY AND EXCESSIVE PROGRESSIVE TAXATION ALONG WITH INCREASING REGULATION HAVE RUINED INNOVATION IN THE US. THE BOTTOM LINE, GOVERNMENT LOVES POWER AND THE UNRESTRICTED EXSPANSION OF MONEY IS ITS MOST POWERFUL TOOL, IT WILL NOT GIVE THAT ATRIBUTE UP EASILY

proreason| 5.9.11 @ 4:13PM

One of the characteristics of the new technologies is that they provide jobs for thousands, not millions of people, and the thousands have to have mental abilities that can't be taught. Anybody could be trained to work an assembly line but only a fraction of humanity can be trained do maintain websites and support computer and telecom applications. Even your cable guy nowadays has to be a pretty smart cookie and what he needs to know changes all the time. This may be a key element of the seething rage of the underclasses and unions in America. They can see that the new technological wonders are beyond their ability to understand and that the acquisition of the necessary skills to thrive is beyond their abilities.

Christopher Holland| 5.9.11 @ 10:04PM

As an economist, I think a lot of this stagnation can be put down to the law of diminishing returns. You can not expect high rates of growth, income and productivity to continue for ever. Soon or later, growth will slow down, or maybe stop or go into reverse, until new factors such as improved technology come along to change things. A liberal would try and predict the future and promote changes - invariably these turn out to be wrong, but a conservative would prefer to leave out the interference and leave people to make the choices that best suit themselves.

GENE HAUBER| 5.9.11 @ 11:07PM

WHO ARE AMERICA'S HEROS?
WHO STANDS WITH THE FOUNDERS?
WHO ARE THEY?
WHERE ARE THEY HIDING?

Dee See| 5.10.11 @ 12:16AM

"The Americans came just like a whore,
all dressed up and knocking at our back door."
-Chou En Lai
(Nixon/MAO summit 1972)

"America better watch it or in a couple
of decades we're going to be a minstrel
show for RED China."
-Gore Vidal
1985

In this the 11th hour of POST America the Globalist (CFR/RIIA/Rockefeller Foundation
et al) RED China sellout and TREASON op eclipses all other issues.

"Understand, almost to a man, the Globalists
are inbred, interbred, inter-generational,
international genocidal psychopaths."
-ALAN WATT

-----HUAC meets NUREMBERG with all possible speed.

BackToBasics| 5.10.11 @ 1:17AM

from the aricle - "As we eat our seed corn without replenishing it..."

And also let illegal immigants and too many legal immigrants eat it as well.

And I've said it here once before and will say it again; if we do not stop the discrimination against white males in employment and in other ways we will never be as great as we were in the past. Most of this innovation spoken about came from the hard work of white men and eferyone else benefited as a result.

Now youbg white men are not even motivated to study the sciences as much as in the past since quota hiring of minorities and women, very often although not always, take precedence over education, experience and ability. But it takes precendence enough so that white males are now less motivated to excell.

Good luck on righting the ship of state with the current quota policies and also illegal and overdone legal immigration!

BackToBasics| 5.10.11 @ 1:19AM

typos - and everyone else

Now young white men

PolishKnight| 5.10.11 @ 9:27AM

A spelling flame, what a surprise. It's ok if we have 5 dollar gas, er, gasOLINE, while green energy fails to provide a fix provided the dogma is written correctly.

This reminds me of well educated monks of the 14th century hypothesizing in latin how many angels fit on the head of a pin. How can such smart men be wrong?

It's one thing to be an illiterate or ignorant man and believe nonsense and quite another when well educated men use their considerable mental assets to make a fool of themselves.

Ok, that said, the racism and sexism against white males is not being addressed by the Republican party even as the left is having a field day running unopposed scapegoating white males to get votes from "women and minorities."

I find it amazing when I see so-called conservative households with women who are getting quota university slots and degrees and then gripe that men aren't "chivalrous" anymore and don't ask them out and pay their way. Chivalry has come to mean men slashing their own throats in order to please women. Perhaps it always meant that and now we're looking at the logical conclusion of the thinking.

Dee See| 5.10.11 @ 1:32AM

Putting the Globalist RED China sellout, set-up and TREASON op aside for a moment

CHECK OUT yesterday's Alan Watt 'Cutting
Through the Matrix' for a breakdown on the
underway destruction and GMO buy-out of
India.

-----------------------------------------------------WOW!

JasonC| 5.10.11 @ 1:38AM

Economic growth in the US has not slowed. It has remained strong throughout, with growth since 1973 as strong as before then.

Wealth creation is the US has not slowed. Tens of trillions in new wealth has been created in the past generation, in fact dwarfing the wealth creation of the previous generation.

Productivity increases have not slowed, as the author's thesis suggests. In fact measured productivity growth has increased, from 1.5% average annual rates for total factor productivity down to about 1980, to more like 2% in the 1990s, and 2.5% in the past decade. It has remained high throughout the recession even, as companies have reached their pre recession levels of output using far fewer workers.

The author's choice of *medians* rather than *means* as his statistical benchmark obscures all of the above facts. And what the relatively lagging of medians (still increasing in real terms 1% a year, just slower than in thepast) reflects is not any lapse in innovation or the wealth creation engine.

Instead it reflects less of that new wealth falling to *labor*, and especially labor in the lower half of the income distribution, than in times past.

And the reason labor isn't getting as large a share of the new increased output is it doesn't deserve any larger share of it. Labor did not make that increase. Capital did, and brains did. Tech fortunes have mushroomed because brains are creating wealth. And financial fortunes have mushroomed because finance is creating wealth.

"Outrageous! Finance is a parasite, only labor creates value, the virtuous yeomenry are the backbone of..." - all a load of populist tripe. Indulged by politicians of both parties intent on flattering the mass of the voters and straining every nerve to skew economic realities in favor of mediocrity and against accomplishment.

But without success.

If you want to get wealthy in the new economic order introduced by Reagan and Thatcher and modern capitalism, you need to be a capitalist. You need to be an investor. You cannot expect to earn that wealth just by being a worker and sticking your hand out and making demands. You need to think like an owner, and act like an entrepeneur, or the gains of modern productivity, inventiveness, and information technology, will pass you by.

Know why? Because unless you act like an entrepeneur and a capitalist, you don't deserve anything more than that. Labor is dirt cheap; it can be had anywhere on earth; men in India and China work harder than you do and are better at it; you aren't God's gift and you aren't entitled to anything.

Nobody tells this to the American people because reality is too harsh and uncomprising for practical politics in a democracy, where every pol is a flatterer of the masses above all. But it is the truth.

Conservatism ought to be ready willing and able to live in the truth, at all times.

PolishKnight| 5.10.11 @ 9:42AM

" men in India and China work harder than you do and are better at it"

Hahahaha! Apparently, Jason has little experience trying to get his PC fixed via an "outsourced" call center!

So much of this outsourced labor is bad that there's even a Discovery commercial making the rounds making fun of it. Have you seen the "Peggy" call center commercial? It's based in Russia (which is where the PC ad execs had to place the call center) and "Peggy" lies on the phone about his name and then treats the customer badly but it doesn't matter since his labor is so cheap? If you want AMERICANS to answer the call center phone, Discovery hints, call them.

Want cat food that kills your cat? Buy it from China! Indeed, all the "innovation" in China and India is the same stuff that gave capitalism a bad name here in the states but we don't see (most) of it because they dump most of the pullutants on their own people. At least with outsourced labor.

When they come here as immigrants and "work harder" than the "lazy" American, they make up for it by engaging in identity theft, shoplifting, and going on welfare the microsecond they qualify then demand preferential hiring treatment and reduced hours under Democratic racial policies.

Regarding "created" wealth by the finance industries. Yeah, like the housing bubble. All of a sudden, the USA was full of multi-million dollar suburban 1 bedroom condos. Until... people stopped believing that they could be guranteed a buyer for them. Now we've spent Wall Street's great gift to America and then some with trillions in bail out debt. THANKS WALL STREET!

This statement infuriates me:
" You cannot expect to earn that wealth just by being a worker and sticking your hand out and making demands"

Such contempt for the worker as a kind of peasant. I hope his coffee barista spits in his coffee. Most people are not innovators but they still produce wealth especially if they're in private industry. Indeed, when so-called innovators (whose primary innovation is looking for corporate welfare, bailouts, and setting up monopolies such as Microsoft and making lousy operating systems) treat most of humanity like sub-human chattel, it's little wonder that socialism is popular.

Most of the ultra wealthy have inherited it and probably have done little more innovation than going to some ivy league school and passing meaningless exams and then meeting with their financial advisors. If they were taken with the Romanov's and shot in the basement, the world wouldn't miss them. Same goes for their "innovative" middle managers buying poison Chinese baby food to save a buck.

Don't worry, you'll get all the cheap labor you like to clean your hotel room and man the call centers. Then they'll vote socialist and kill you (and probably me too.) But somehow... it's almost worth it!

JasonC| 5.11.11 @ 3:16AM

"If they were taken with the Romanov's and shot in the basement, the world wouldn't miss them"

Right populist finance haters are the new communists and agree with them in every important respect, above all in their morals. That is, they don't have any.

The reality is average ordinary wage workers in the US enjoy a standard of living higher than 90% of the world population due almost entirely to positive externalities from the wealth, productivity, and innovation of others, that said average wage earners have done absolutely nothing to earn or deserve. And the graditude they show for it? They want to murder those who have made them rich...

PolishKnight| 5.11.11 @ 9:38AM

Hahaha! Jason, you have a point. It was wrong of me to suggest taking the ultra wealthy to the basement and shooting them with the Romanovs. We should take them to India and then have the Indians enslave them and then shoot them in the basement with the Romanovs. There? Better? Now am I "moral" like a proper blueblood Republican?

Bottom line sir, one word at a time:
What's
In
It
For
Me?

The left sells their agenda to their special interest group with that question in mind. When I ask them that question, they tell me that I'm being selfish. Telling me I'm not "moral" is little different than what they do. I'm "selfish" because I don't thankfully let them toss me under the bus to please their special interest electorate. Now I'm "selfish" because I don't vote for McCain who sells me out on every agenda other than keeping those rich tax cuts going because that would be just awful!

Whether it's leftist cool aid or right winger cool aid, it's still cool aid. Indeed, you see more "immoral" people like me because we're the core of the party now WHEN we choose to show up! Give us a REASON!

Finally, let's address your claim that I should be so grateful to my Romanov masters. For starters, in the last 40 years or so, the biggest innovation they've made has been to destroy American cities and make them into congested hellholes where it costs 30 years salary to buy a condo. Study after study shows the USA lagging behind mostly Europe, Canada, Japan. You know, socialist places. So it's hard to sell me on the "love your rich overlord" when you're deliberately indicating that the 90% of places we're better than are the hellholes we're "outsourcing" to when we don't H1B them in.

And innovation? Indeed, the average US worker does have to "innovate" in their own way and work harder than the 5% of the 10% world population you refer to in order to pay taxes for the welfare state and deal with racial discrimination that the wealthy republicans don't mind because it keeps hotel room and restaurant rates down by a few percent. Oh, and cheap lawncare. Would it kill the ultra rich to maybe mow their own lawn sometimes?

If our work is so worthless, then why does Bill Gates cry for H1B's? Why is it that it's hard for him to find "skilled" (namely cheap) labor? Ahhh, the FREE MARKET at work indicates that Bill might have to PAY for his labor so he wants to import labor from outside hte system. Fine.

Hey Bill Gates, how about if I just buy some pirate copies of lousy Vista and MSword from China? You won't see any of the money but I'll save some. So it's ok. There, I've learned how to be MORAL!

PolishKnight| 5.11.11 @ 10:01AM

Doh! I want to add to your observation that us "ungrateful" serfs don't want to reward our rich, innovative overlords but rather murder them:

1) The H1B's they're bringing in order to save a few bucks will do that too. Chai ho! Tee hee, it's just so unfair when a jerk trying to save a few bucks stabs loyal workers in the back and then he's stabbed in the back, eh? I've seen rich VP's of companies kicked out by new hire Indians who then hire only Indians! Then they lose their McMansion! HAHAHAHAHA! Great!

2) Innovation. Indeed, most of the ultra wealthy don't innovate. They take their great grandparent's money, go to Harvard, take a few exams on "business analysis" which is really little better than stuff taught a community college, and then hang out with their financial advisors who make ugly crony capitalist decisions to keep their portfolio healthy.

YOU haven't answered my question/point: WOULD THE WORLD MISS THESE JERKS IF THEY WERE SHOT IN THE BASEMENT?

How come when these guys tell us to "take it like a man" and let Indians take our jobs, it's ok but when we don't protect them from the same groups they helped create, we're selfish? Why should I send a SON into war to protect them? If they don't care about me, why should I care about them? What are THEY doing to justify themselves? Maybe Grandpa cut a business deal with IBM to get a lousy OS made into the world standard, but what they done for ME lately?

Wayne| 5.10.11 @ 8:08AM

It would seem to me that American economic expansion would pick up pace if Washington politicians would stop their lust to engineer a better social order through regulation and draconian tax schemes. That goes for both republicans and democrats.

Two thoughts on the article.

It would be interesting to see where population growth - or lack of -fits into this theory of economic decline.

The other thought is - in my opinion - if the US were to open up exploration and production of its' own energy resources we would see the economy expand in unbelievable ways... thanks in no small part to environmentally responsible advances in technology in the field of exploration and extraction.

PolishKnight| 5.10.11 @ 11:37AM

Wayne, I shock a lot of the readers here because I'm willing to grind a lot of sacred cows on both sides.

One of them is the notion that the conservative right can ever quell the populaces' desire to "engineer a better social order through regulation and draconian tax schemes."

Although the left is disingenuous, dishonest, and sometimes even incompetent, most people sympathize with them because the alternative: A world of dog-eat-dog where people and children just die on the streets if they're not economically viable is unacceptable. Want to see it? Go to the place where big business is outsourcing!

And the wealthy don't mind regulation when it works for them. Sonny Bono doubled copyright lengths just to prevent Snow White from hitting the public domain. Big corporations secretly love the FDA and other regulators because they keep the small upstarts from competing with them. (I love to remind leftists of this and watch them grind their teeth.)

Perhaps we should accept that a limited welfare state, like limited government, is necessary and bite the bullet rather than leaving a moral vacuum where the left gets control of the ball. The welfare state is now a tool for the left to buy votes and destroy two parent families (these feed on each other.) So-called welfare reform was on the right track, but short sighted. Anyways, back to the slowdown.

The right has been reactionary for some time and fighting stalingrad issues such as gay marriage while totally ignoring big ticket issues such as racist and sexist affirmative action policies, family destroying welfare and divorce courts, and cities being taken over by leftists who drive their own elites out in the suburbs and then gripe about surburban sprawl. OH, and don't forget illegal immigration which the right is just only slightly less in favor of than the left!

The tea party is attacked viciously by the left because it represents a point of view largely unrepresented in the Republican party which is now just a lite version of leftism. And they know it. "Extremism" is defined, by them, as anything less a moderate leftist.

Regarding energy extraction: The recent disasters in Japan and the Gulf along with problems with fracture natural gas extraction suggests this is not an easy, simple choice.

Bob Grant| 5.10.11 @ 10:09PM

SSsooo your point is there's no easy solution sssssoo what solution would you offer? ...your point about a "dog-eat-dog" world where children die on the street due to outsourcing seems a bit exaggerated. Obviously that scenario has not and would not occur in this country.

You tend to exaggerate the "evils" of conservatism with more vigor than your critiques of the other side.

A lefty in disguise perhaps?

PolishKnight| 5.11.11 @ 9:23AM

Bob Grant, I'm no leftie in disguise as is obvious from my posts and opinions many of which would enrage most leftists.

In any case, in respond to your claim that children don't die on the street in the states, google up "dumpster baby." I'm ASHAMED to take visitors around DC because we have homeless on the streets all around the major monuments. Of course, that's in the "nice" section of DC because in the ultra-democrat region, you don't just endure eyesores but also gunshots added to the mix (althought they have gun control so that's impossible.)

There! Does THAT sound like something a leftist would say or even possible conceive to think?

Logic 101: If the current recipients of the welfare state aren't in a mood to work and have made most large US cities into copies of Calcutta and Mexico City, what makes you think a direct import of similarly minded political thinkers are going to be ANY different? Hmmm?

I believe in looking at things honestly. It is an "evil" of conservativism when most people find the shortcomings of the philosophy unacceptable including RINOs that infect the party. Either you address the gorilla in the room or you deal with his feces being thrown into your face. Better me than them because I'm at least not using the agenda just to advance big government for it's own sake. At least the left TRIES to pretend like it cares about it's electorate. That's why they're so fiercely loyal. But the right openly treats it's working class (literally "working" class) electorate with contempt and tells them: "Hey, we'll send your job over to India to save a few bucks so that a rich billionaire can increase his portfolio size by 1% but hey, you benefit from cheaper hotel rooms even as you'll probably not have any money to travel anyway. Oh, and don't tax the rich you jealous sod. And don't forget to pay YOUR taxes so that these workers will have welfare when they decide to not work anymore!" Amazing. Then thye wonder why they stay at home and watch NASCAR when McAmnesty asks them to vote for him.

Dee See| 5.11.11 @ 12:37AM

NOT UNTIL the architechts of world cultural
subversion, globalism and EUGENICS are
called out from their TAX FREE, ultra-rich
redoubts, foundations, NGO's and proxy fronts
will ANYTHING change, much less 'get better'.

AS the 'EUGENICS friendly' 'RED China fortuitous' greatest nuclear disaster of all
time is buried by the corporate media

AS national monitoring centers are siezed
and shut off around the world

AS off the charts radiation has been picked
up as far away as Kent England

AS Obama prepares to blow the borders

AS the currency and our pensions are dissolved

AS soviet style police state surveillance etc.
is all but completed across America

AS not a single investigative report, much less
prosecution, has been initiated in the matter
of our 4 decades of RED China sellout and
TREASON from the top

AS David Rockefeller walks free and unchallenged
while publicly calling for RAPID and MASSIVE
'depopulation' (ie genocide) 'by any and all means'

AS Bill Gates and so many others giggle------

"Come out from among them,
do NOT partake of their sins."

MARCH on the New York Fed and
'benny violent' globalist, TAX FREE,
ultra-rich 'chair-IT-Abel' foundations
this July 4th.

HUAC meets NUREMBERG for 2012

ALLLLL else is -----------DIS-----traction.

digger | 5.11.11 @ 2:49AM

Shit, And also let illegal immigants and too many legal immigrants eat it as well. Plate Heat Exchanger

marker | 5.11.11 @ 8:33PM

Good luck on righting the ship of state with the current quota policies and also illegal and overdone legal immigration! aluminum profile

marker | 5.11.11 @ 8:38PM

Of course electricity, the auto, the telephone, were giant leaps from a relatively primitive agrarian society. aluminum profile

James| 5.12.11 @ 9:06PM

Political bull. There is no way that productive, and profitable inventions, in technologies and other sectors are going to cause a stagnation and a bad economy. What has caused it is the mountain of bad debt accumulated by the banks (sub-prime loans), the bailout and huge money flows that went into propping up those zombie banks. The theft of wealth from the productive class by the political class, and the over taxation and regulation of the American people and American businesses to pay for it.

Add to that the paralyzing class warfare and polarization created by the Obama administration to use the situation to accomplish his political agenda, and it's a recipe for disaster.

Nicholas Sackett| 5.13.11 @ 3:57PM

Excellent points - but there are other key points that add to the decline.
(1) debasing the money supply - has occurred to a huge extent since 1973 and a much lesser extent prior to that. Debasing money distorts all sorts of economic signals from investment to huge hidden taxes on the elderly and middle and lower classes. Much of the income inequality may be from debasing the money supply.
(2) government regulation now reaches into every corner of the economy. Railroad innovation was huge from 1908 (deregulation) to 2000 but has slowed greatly since. Want to use new electric brakes? need to ask permission/waiver from USDOT-FRA. Want to automate track insepction? need a waiver from the FRA. Want to extend engine maintenance cycles using new technology? Need a waiver from the FTA.

Want to know why technology cannot be implemented quickly - its because in nearly every field ossified government regulation prevents and hinders its implementation.

John Galt| 5.13.11 @ 6:49PM

73 to 80, and 92-now have all been periods of increasing regulation, be it for the environment, safety, etc. It is easy to see that these increased regulations have sucked 2 to 3% of growth out of every year. So we have gone green by spending all of our greenbacks.

dick| 5.13.11 @ 10:52PM

"CEO of Caterpillar Gives President Obama an 'F' on Job Creation."

No kidding! Is there a grade lower than F? How about a zero or a minus something.

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