Prosperity:
The Coming 20-Year Boom and What It Means to You
by
Bob Davis and Davis Wessel, Times Books,1998) |
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from NewsLink, Vol. 2, No. 3, Spring 1998
M IT's Nobel Prize-winning economist Robert Solow once remarked, "You can see the computer age everywhere but in the productivity statistics."
Despite the hype surrounding the arrival of the computer memory chip, the nation's average productivity growth since 1973 has been a mere 1 percent. By conventional measures, the computer revolution that today has made Intel, the Internet and Microsoft household names, hasn't brought about a noticeable rise in living standards.
In fact, most Americans are working harder and longer hours but are seeing their incomes increase slowly.
As Paul Krugman reminds us about productivity, "In the long run it's almost everything." However, economists have been baffled about the much delayed return on investment from all those desktops and ATMs.
The dismal scientists should start seeing the glass as half full rather than half empty. That's because as a nation, we are on the fast track of a 20-year boom that will even tempt the likes of Robert Reich to stow away their income inequality tables.
With Prosperity: The Coming 20-Year Boom and What It Means to You, Bob Davis and David Wessel have ushered in the age of "broadly-shared prosperity." Davis and Wessel, veteran, award-winning Wall Street Journal reporters, are bold -- perhaps cock-eyed -- optimists in an age of anxiety.
The cornerstone of their argument is threefold. Americans will enjoy economic progress because the $2 trillion invested in computer and communications technology will finally pay off. This trend is already under way in manufacturing where, combined with a new culture of worker independence, productivity is rebounding at a clip of 3.5 percent annually.
In addition, this new prosperity will be widely shared in part because community colleges, "the unheralded aid stations of American education," will respond to local labor markets with targeted retraining programs. Community colleges will benefit the downsized and those on the bottom rung of the wage ladder. They present the best chance for African-Americans and Hispanics to close the wage gap. A new equality is on the horizon.
And lastly, argue Davis and Wessel, globalization, that favorite straw man of both the left and right, will benefit Americans because the rest of the developing world will finally be able to buy high-quality goods made in the United States. Following free-trade theory, the shifting of some manufacturing work overseas allows Americans to focus on higher-paying, higher-value projects involving computer networks and advanced computer languages.
The resultant technology-driven half-percentage-point gain in productivity "won't return the United States to the pace of productivity gains in the Golden Age," say the authors, "But it would be the biggest economic story in a generation." Policy makers should take note: a dose of such good news is what the nation needs as it solves the Social Security crisis. By the authors' measure, that kind of growth would cut by a third the price tag for fixing the nation's retirement system.
Why have productivity gains taken so long to appear? Using history as a guide, Davis and Wessel note that it took electricity 30 years to begin to transform the American workplace and home, and another 20 years to complete the job. F. L. Maytag only realized the power of electrifying his washing machine plant in Newton, Iowa decades after Thomas Edison's experiments.
Today, we stand on the same ground as Maytag. All the time office workers spend making computers work correctly - 5.1 hours a week by one estimate - will improve production as innovators triumph over the "tortuous process of hype and disappointment."
It takes time to spread progress throughout the $8 trillion U.S. economy and for people to master technology. Interestingly, Davis and Wessel think the U.S. Army's devotion to simplifying tasks and minimizing training for weapons has wide application in the civilian world. Instead of displacing workers, simplified technology can allow less educated workers to apply for jobs for which they had been previously unqualified.
History and hardware illustrate the point. At the turn of the century the tinkerers (yesterday's analog to today's software programmers) used Maytag's motor design "to run butter churns, milking machines, ice-cream makers, and even printing presses." These innovations freed up time, eliminated back-breaking work and re-dedicated brainpower elsewhere. Today, truck drivers for Schneider National Inc. keep in touch via a satellite operated system on their dashboards rather than the time consuming task of pulling over to make a phone call. The reward: the company saves on fuel costs while providing on-time deliveries.
It helps the authors to have Alan Greenspan in their corner. The Fed's chairman has been reluctant to raise interest rates because he sees productivity improvements around the corner. "Either we are spinning our wheels for a lot of this frenetic activity and going nowhere," Greenspan told Congress in July 1996, "or - and this is what I expect is really the case - the productivity acceleration is being delayed in a manner not dissimilar to the way the productivity gains from the development of the electric motor were delayed at the early part of the twentieth century."
Prosperity isn't without flaws. The emphasis on job re-training overshadows the severe problems facing elementary education. The authors fail to underscore the education reform movement spawned in part by business leaders driving the new productivity growth.
The authors' solutions to some of the problems border on the irrelevant: indexing the minimum wage, expanding the influence of unions (a culture mostly at odds with the pro-free trade, high-tech sector) and a passing defense of progressive income taxes.
However, as honest neo-liberals, Davis and Wessel criticize the White House for subsidizing more higher ed for the middle class - ignoring the help needed by families who earn less than $40,000. They also emphasize the need to establish a voucher system for retraining.
Overall, Prosperity serves as a valuable resource for the optimists.
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