In this article from a recent Wall Street Journal the “experts” continue to examine and correct their fatal miscalculations that led to the Great Recession. Overenthusiasm for and overconfidence in the new technology has led to the dispossession of hundreds of thousands of workers and professionals.
Then and now
“The Great Unravelling,” by Jon Hilsenrath and Bob Davis continues:
At the Massachusetts Institute of Technology, Erik Brynjolfsson is looking at unexpected ways technology has reshaped the economy by sharply reducing jobs and adding to the pool of disillusioned workers. In the 1990s, he was among the first economists to show computer technology was finally boosting worker productivity, a crucial ingredient in economic growth.
His view about workers’ gains from technology has turned gloomier. Measured productivity growth has slowed dramatically. He and co-author Andrew McAfee, an MIT business-technology specialist, found that as computing power transforms society, it swallows more jobs—a development they say is accelerating.
Software investment doubled to 1.6% of GDP in the 1990s, as factories and offices added computers that helped firms manage with fewer workers. The shift started hurting workers whose skills computers could replace.
For a time, those with bachelors’ degrees in science seemed safe from automation-prompted layoffs—their knowledge was tough for computers to duplicate—as did less-educated workers in personal service, such as home health aides. Economists argued more education was crucial to future success.
That advice, says Mr. McAfee, turned out to be “way too narrow.”
“Information technology today represents only 10% of American jobs, but is responsible for 30% of our economic growth…rifling through every sector of our economy, increasing the power of American firms and individuals to share broadly in its prosperity.” —Bill Clinton, April 2000
Between 2000 and 2012, estimates Harvard economist David Deming, the hollowing-out of work spread to professions including librarians and engineers. Those with the right skills came out ahead, a big reason the income gap widened. The top 20% of American families accounted for 48.9% of total income in 2014, Census figures show, versus 44.3% in 1990.
The U.S. is on the cusp of a new innovation wave, Mr. Brynjolfsson says, represented by Google’s self-driving car. Look for demand for Uber and taxi drivers to expand, he says, then crash, eliminating another job with a middle-class salary—adding still more workers to the ranks feeling betrayed by old economic models.
Most presidential elections turn on voter perceptions of the economy, from Ronald Reagan’s 1980 invocation of a “misery index,” which combined readings of inflation and unemployment, to Barack Obama’s call for a powerful government response to the 2008 financial-sector collapse.
Something similar is happening today, only more dramatically. Until Mr. Trump’s successful primary run, Republicans cast themselves as the champions of free markets and low marginal-tax rates. Democrats have been the party of activist government that tries to tweak the economy so it shifts in a desired direction.
The economy’s long underperformance has scrambled the debate. Old prescriptions, such as tax cuts by Republicans in the early 2000s and government spending by Democrats, haven’t delivered prosperity, leading voters to cast about for alternatives.
Those alternatives narrowed to Mr. Trump, who promised to rip up trade deals and deport millions of illegal immigrants, and Mr. Sanders, who would break up big banks, tax stock trading and match Mr. Trump as an opponent of free-trade deals.
Technology would lead to rising incomes and broadly shared prosperity.
Productivity and output growth have slowed and technology has been polarizing the workforce.