First proposing speech
For 2010, GDP growth of USA is estimated at 3% and for 2011 and 2012 is planned at 3% or 4% and it has been the case for several years and this is around the sum of the inflation rate and the population growth. And so, this growth isn’t synonym of less unemployment or of a better life for American, just of a stagnation of the American economy because they consumed all the low hanging fruit, like European countries.[...]
by MLM
First opposing speech
The basis of Tyler Cowen’s thesis about the economic stagnation is that there are no more lowhanging fruits to eat. So we are starving waiting for a new ladder that will allow us to eat more fruits.
At the beginning, America was a new world. The lands were fertile, many people were immigrating, technologies were imported from Europe and the government started a massive education program to have skilled inhabitant. Thanks to its geographic insulation, America has been also protected from all the damages from the two world wars and the crisis that came by. Back then the economic growth was amazing.
According to Tyler Cowen, nothing changed since 50 years, and since everything has an expiration date, here comes the stagnation! [...]
First proposing speech
For 2010, GDP growth of USA is estimated at 3% and for 2011 and 2012 is planned at 3% or 4% and it has been the case for several years and this is around the sum of the inflation rate and the population growth. And so, this growth isn’t synonym of less unemployment or of a better life for American, just of a stagnation of the American economy because they consumed all the low handing fruit, like European countries.
The choice to relocate manufacturing, with hard and repetitive work, in China has been made a long time ago, to have a lower price of products. But, actually, it is these industries that receive the benefits, in term of employment, of innovation and new technology. It’s the case of Apple with the Iphone where it’s the same numbers of people who design the Iphone4 that the Iphone1, and the factory that makes it in China recruited 400000 workers. And, so hopes to break the stagnation, America must take back the difficult work, and lose low-price labor.
And for industries that stayed in America, they, actually, have to show a lot of creativity not to growth but just to survive. It’s the case of the car industry where profits are low like the growth. We are at a bearing technology, we didn’t find a new technology to boost the employment, like oil motor or computer in their time, and these technologies aren’t anymore business sectors creators of growth.
There aren’t actual sectors that can make it even Internet and e-commerce. Yes, this business economically growth but their impact in terms of employment is low (in 2009, revenue of Google was of 23 billion $ for 25000 employees and Renault 15 billion $ for 130000 employees). E-commerce is just a commerce of the same product that usual commerce but selling differently, so their impact is low.
And so, the low handing fruit of technology was consumed. To fight against unemployment, America has to find a new way of making products and accept that the golden age with low price technology, high growth and easy works are gone and adapted them.
MLM
First opposing speech
The basis of Tyler Cowen’s thesis about the economic stagnation is that there are no more lowhanging fruits to eat. So we are starving waiting for a new ladder that will allow us to eat more fruits.
At the beginning, America was a new world. The lands were fertile, many people were immigrating, technologies were imported from Europe and the government started a massive education program to have skilled inhabitant. Thanks to its geographic insulation, America has been also protected from all the damages from the two world wars and the crisis that came by. Back then the economic growth was amazing.
According to Tyler Cowen, nothing changed since 50 years, and since everything has an expiration date, here comes the stagnation! All the fertile lands have been exploited, immigration has been monitored and everyone has a basic education. He also explain that “apart from the seemingly magical internet, life in broad material terms isn't so different from what it was in 1953”, meaning that only internet is an important breakthrough since 1953 (he explain later that internet is an important innovation but it doesn’t create economic growth). The old technologies reach their limits and are no more source of growth: only a new radical innovation could be able to restart an economic growth.
Well, that is kind of rude. I will try to explain to you why I don’t really agree him. Starting by moderating his idea and convince you that nowadays fruits are getting ripe slower than they used to.
Tyler Cowen claims that there are no technological differences since 50 years, same cars, same phones, same lamp… But, do we really have the same cars? The same phones? And more importantly, is there as many users as there were 50 years ago? Cars were originally created for elite, now there are usual and so do many technologies. That is what created so much economic growth. What could happen if you remove cars from middle class people who have to go to work every day? What could happen if you disable the entire cell phone network? I’m not sure that the global economy would be able to endure such a crisis. As a French band sang “Le téléphone est devenu bien plus que pratique” (Tryo), the economy wouldn’t survive such a back to the past situation. There are many technologies which have been created for personal gain and appeared to be necessary to the economy.
That is another point of Tyler Cowen’s development: “Recent and current innovation is more geared to private goods than to public goods”. According to him internet is modifying our ways of life but is not creating economic growth. Once you buy a computer with internet you are not really spending a lot of money thanks to this. But this is a personal vision of using a computer and using internet. From years now, many firms have been created only because of internet! They are popping like mushrooms all over the world. These are making money thanks to internet, and they are part of the economic growth. Internet also radically improves the way of working of many firms, especially international ones: data transmission has never been faster and easier. I am pretty sure that new technologies will appear thanks to internet which can provide a global sharing of international knowledge.
Tyler Cowen thinks that only a major innovation can save the economy from stagnation. I think we have to live in the present, and not compare our actual growth to the exceptional one in the middle of the 20th century. There will be new technologies that will change the world and generate a lot of money. But we can’t wait them and suffer from stagnation during all this time. That’s why incremental innovation is more popular: it keeps a little growth! Sometimes it takes time to realize that a discovery will change the world. For example, 9 years after the death of Faraday who discovered the principle of electricity, a British community off scientist said: “We still don’t know what remains to be invented but there is no reasons to believe that electricity will be used as a convenient energy”. What If they had stopped the research about electricity?
My advice? Be glad to have few percents of growth and if you are lucky you will see the next revolutionary discovery that will change the world!
TJ
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