The U.S. economy has been slogging through the doldrums. Growth has slowed to an average of less than two percent annually over the past decade. The sluggish pace frustrates workers who are unable to advance and earn higher incomes and puts further strain on the federal budget because of lagging tax collections.
The Wall Street Journal reported this week that two stubborn obstacles stand in the way of spurring growth to or above three percent; “The workforce isn’t producing enough new workers and the productivity of those workers isn’t growing fast enough.”
“Workers output per hour in the nonfarm business sector has been increasing only by 0.7 percent a year since 2010,” the Journal reports, while the population aged 25-54, the prime working age, has risen just 0.1 percent annually.
These factors have led many to issue gloom and doom projections that this economic stagnation is the new normal as the digital revolution peters out. However, what if we are just on the front end of the technology economy and dramatic breakthroughs are dead ahead?
Michael Mandel, chief economist at the Progressive Policy Institute, and Bret Swanson, president of the technology research firm Entropy Economics, have co-authored a story for the Technology Council where they paint a much more optimistic future.
They argue the key to a new era of economic growth is greater utilization of powerful technologies that will fuel a boom in productivity. “Just as networking computers accelerated productivity and growth in the 1990s, innovations in mobility, sensors, analytics, and artificial intelligence promise to quicken the pace of growth and create myriad new opportunities for innovators, entrepreneurs and consumers.”
Mandel and Swanson write that despite all the advancements in technology there remains an information gap. “Three-quarters of the private sector—the physical economy—is operating well below its potential, dragging down growth and capping living standards.”
Full utilization of existing and new technologies will make manufacturing far more efficient, boosting productivity and demand. Those advancements create jobs and “allow American factories to compete more effectively against low-wage rivals.”
For example, the 3-D printer is now moving from a technology novelty to mass producing parts. The Wall Street Journal reports that Adidas is now making a running shoe with a 3-D printed sole. “The radical innovation of 3-D printing techniques means we are finally going to see some previously impossible designs creep into our consumer goods,” the Journal reports.
Mandel and Swanson believe the more widespread use of these still-emerging technologies could boost annual U.S. economic growth by 0.7 percent over the next 15 years. “That may not sound like much, but it would add $2.7 trillion to annual U.S. economic output by 2031.” Wages and salaries would rise by $8.6 trillion and federal revenues would grow by $3.9 trillion.
Public policy makers relentlessly focus on job creation, but that puts the cart before the horse. As Mandel and Swanson point out, the critical factors are innovation and applying new technologies to improve productivity. The jobs naturally follow.
If they are right, the best days of the American economy are still ahead.