Robert Gordon: The death of innovation, the end of growth

Summary

The presentation explores the decline of American economic growth, attributing it to four key headwinds: demographics, education, debt, and inequality. It contrasts historical innovations that significantly improved living standards with current stagnation. The speaker argues that if innovation does not match the transformative power of past inventions, future growth will dwindle to 0.2 percent annually, challenging the prospect of improving living conditions for future generations. The discussion emphasizes the urgency of innovation to overcome these barriers and recalls the achievements of past inventors, posing a challenge to contemporary creators.

Takeaways

• 😀 Economic growth in the U.S. has significantly slowed since the mid-20th century, raising concerns about the future.
• 😀 Key factors hindering growth include demographics, education, debt, and inequality.
• 😀 Demographic shifts, such as retiring baby boomers, are shrinking the labor force.
• 😀 The U.S. education system faces challenges like high student debt and low college completion rates compared to other countries.
• 😀 Rising consumer debt prior to the financial crisis contributed to sluggish economic recovery.
• 😀 Inequality has widened, with the top 1% capturing a disproportionate share of income growth.
• 😀 Historical growth patterns show a stark contrast between past achievements and current forecasts.
• 😀 Innovations of the past, like electricity and the internal combustion engine, dramatically transformed living standards.
• 😀 The challenge ahead is matching the transformative inventions of the 20th century to sustain growth.
• 😀 The future growth rate could dip as low as 0.2% if current trends in innovation do not improve.

Q & A

What are the four headwinds affecting the American economy?

The four headwinds are demographics, education, debt, and inequality.

How has American economic growth changed over the centuries?

American economic growth was nearly stagnant for the first four centuries, then improved significantly, peaking in the mid-20th century, but has been declining since then.

What is the significance of the 0.2 percent growth figure mentioned in the transcript?

The 0.2 percent figure represents the historical growth rate of the UK over the first four centuries, which serves as a cautionary benchmark for potential future growth in the U.S.

Why is demographic change a headwind for economic growth?

Demographic changes, particularly the retirement of baby boomers and a decline in prime-age male labor force participation, are reducing the number of hours worked, which impacts overall productivity and growth.

What issues exist in the U.S. educational system?

The U.S. educational system faces rising costs, high student debt, and lower college completion rates compared to other countries like Canada.

How has debt influenced economic recovery since the financial crisis?

High levels of consumer debt from the 2000-2007 period have hindered economic recovery, as consumers are focused on paying off debt rather than spending.

What role does income inequality play in economic growth?

Income inequality has slowed the growth rate for the bottom 99 percent of earners, meaning a disproportionate share of growth has gone to the top 1 percent.

What are some key inventions that have driven economic growth in the past?

Key inventions include electric lighting, the internal combustion engine, and the electric washing machine, which collectively improved productivity and quality of life.

What prediction does the speaker make about future growth rates?

The speaker predicts that if innovation does not match past achievements, future growth could drop significantly to as low as 0.2 percent.

How does the speaker compare modern conveniences with past inventions?

The speaker emphasizes the challenge of matching past inventions, illustrating how foundational technologies have drastically improved living standards, suggesting future inventions need to be equally transformative.