Air conditioners have to shoulder some of the blame for slowing US economic growth. Americans have been moving south and west as the cooling devices have made the hot summers more bearable.
That is terrible news for global warming. It has also been bad for productivity. Americans used to move more for work; now they move for weather. Big coastal cities — New York, San Diego, Seattle — are where workers are the most productive, so the move into the sunbelt cities is lowering growth in output per head.
Eventually these southern and western cities may grow into high-productivity metropolises, but for now it looks like Americans are opting to earn a bit less and be a bit happier in the sunshine. That, according to Dietrich Vollrath, a professor of economics at the University of Houston, is a very small part of the explanation for the slowdown in economic growth since the 2000s.
His book Fully Grown is an impressive survey of the economics literature on US productivity. For those interested in the subject, it is a must-read — a shelf companion to The Rise and Fall of American Growth by Robert Gordon — to reference and consult. He covers everything from competition, planning policy and inequality, to China, ageing populations and the role of government regulation.
Along with the newly published Slowdown by Danny Dorling, a professor of economic geography at the University of Oxford, Vollrath’s book provides valuable context to the debates over what comes next when the coronavirus shutdowns end. The world never regained pre-crisis growth rates after the previous financial crisis, and Dorling and Vollrath imply this is what we can expect from the next recovery too. Even more radically, they say we should welcome this economic stagnation.
Vollrath’s explanation for the growth slowdown is economic success. The legacy of the industrial revolution changed population patterns: Americans had fewer children and spent more of their time in education and retirement. Since the turn of the millennium, this has meant there have been fewer young and fit workers joining the workforce and gradually gaining experience.
Technological progress has also made us very effective at making things. This has freed up labour for services: healthcare, education and professional services. It is a lot harder to make productivity improvements in services than manufacturing. A worker in a pin factory can be replaced by a machine that can be made more efficient. It is far harder similarly to improve the output of a nurse, lawyer or teacher.
In Slowdown, Dorling argues that slowing growth trends hold for debt and data as well as demographics and national income. Everywhere, he argues, society is decelerating. We have passed through what he calls the great acceleration of globalisation and industrialisation. Now comes the time for humanity, like those Americans heading for the sunbelt, to opt out of the rat race and choose happiness over “progress”.
It is an attractive idea, and it might be true, but it is impossible to tell from Dorling’s book alone. Slowdown relies on a somewhat idiosyncratic set of data to prove its case, including the number of new Wikipedia articles, the value of all car loans in the US and books published in the Netherlands.
You get the feeling that he could have made the opposite case had he chosen another set of indicators, or made different methodological choices. He uses the total stock of loans (unadjusted for inflation) to prove debt is no longer accelerating, but the median level of wages in real terms to prove the same point for income growth. Had he used median real household debt and the total US wage bill, the story might look very different.
Still, Dorling is on firm ground when he talks about population and economic growth. The same trends that Vollrath sees in the US are evident everywhere: people are living longer and having fewer children. When people feel insecure, whether through famine, disease or war, they tend to have more children. Humanity has increasingly tamed these horsemen of the apocalypse and we are, therefore, having smaller families.
The risk these books face now is that Dorling and Vollrath end up looking like the economist Irving Fisher, who famously said that stock prices had reached a “permanently higher plateau” on the eve of the Great Depression. The spread of coronavirus may shake something loose in the economy (pandemics have previously driven greater equality), ending the long slowdown. The reminder of our mortality — or long periods confined with our partners — could end the decline in fertility.
They are probably safe on some aspects. English birth rates are unlikely to rise again to an average of six children per woman as they did in the 19th century. Rich countries cannot repeat the entry of women into the workforce or the spread of mass literacy that delivered rapid growth in the skills and numbers of workers — although it is an option open to many poorer countries.
Forecasting productivity growth, meanwhile, is a mug’s game. We cannot reinvent antibiotics or chemical engineering, but many of the most productive inventions are not about big new breakthroughs; they are about working out how to use old inventions better. Machine learning — of which Dorling is rightly sceptical — is just the latest way we have discovered of using electronics and probability theory. Washing hands to prevent the spread of disease in hospitals, for example, was only popularised in the mid-19th century and required no great technological breakthrough.
If we cannot repeat the same trick of improving living standards through ever greater productivity, that will mean more attention on the kind of things we are producing and who gets them. Dorling paints an optimistic picture of contented workers in secure jobs cycling to work and holidaying locally as stagnation forces us to confront inequality and our effect on the environment. Vollrath is more pessimistic and thinks nothing is inevitable. Instead the debate about taxation, regulation and spending must be refocused on equality, rather than the small effects of these policies on growing the overall size of the pie.
However these predictions age, the economic disruption caused by the coronavirus is already causing many of us to re-evaluate our priorities. It remains to be seen whether that will lead to authoritarianism and demands for the state to provide more security; a new appreciation for precarious, low-paid workers; an intensification of the turn against globalisation and the desire for the simpler life; or some hybrid of all of these things.
For now, Dorling and Vollrath have reminded us of everything we stand to lose, or gain, depending on the choices our societies make next.
Fully Grown: Why a Stagnant Economy Is a Sign of Success, by Dietrich Vollrath, University of Chicago Press, RRP$32/RRP£20, 296 pages
Slowdown: The End of the Great Acceleration — and Why It’s Good for the Planet, the Economy, and Our Lives, by Danny Dorling, Yale, RRP£18.99, 400 pages
Gavin Jackson is an FT leader writer
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