By now we're all very familiar with the minute causes of the Great Recession - credit default swaps, mezzanine CDOs, greedy mortgage brokers, clueless borrowers, and so on. But do those minute details tell the whole story? Tyler Cowen, the always-prolific economist behind the world-conquering blog Marginal Revolution, says that we're missing the big picture. His new book, The Great Stagnation, argues that the real problem is actually very simple: over the last three hundred years, the United States has been gathering the "low-hanging fruit" of economic growth; now, that fruit is gone, and our economy is slowing down.
Manifest destiny: free land was low-hanging fruit for American growth.
According to Cowen, the story of American history over the last three centuries is all about easy growth, which has now ended. "It's not," he writes, "that something specific caused the slowdown." Instead, "we started to exhaust the benefits of our previous momentum without renewing them."
That momentum came from three kinds of "low-hanging fruit." First, there was free land: In the 1800s, "American land was plentiful and there for the taking," and millions of hard-working immigrants who'd been underutilized at home came to America to take it. Next, there was the Industrial Revolution, organized around better management techniques and "advanced machines combined with fossil fuels": A host of inventions, all derived from the same root, came in one great flood. Finally, there was education. Whereas in 1900 only six percent of American kids graduated from high school; in 1960, 60 percent graduated. A lot of geniuses were discovered.
In all three of these areas, Cowen argues, it was relatively easy to make huge progress very quickly. And these three kinds of growth combined to power a huge expansion in the American economy. Everything got bigger: incomes, corporations, and government. The growth of business and government doesn't have to do with policies on the left or the right, but with the larger, contextual fact that growing was easy.
Unfortunately, Cowen writes, that low-hanging fruit has been gobbled up. Things might still be improving, but improving them is more difficult, and less valuable. Every year, we try to eek a little more greatness out of yesterday's breakthroughs, by making our companies a little more efficient, or our schools a little bit better. But we just can't repeat the huge gains of the 19th and 20th centuries, when we could invent the steam engine and open the public schools. We're on a "technological plateau," Cowen says, until the Next Big Thing comes along to power another expansion.
Cowen isn't a pessimist - the Next Big Thing, he writes, will eventually come along. In the meantime, though, we have to come to terms with our situation. Politicians, in particular, have to stop creating the impression that some policy or other, whether it's tax cuts or progressive spending, can bring back the explosive growth of the last few generations. Instead, we need to look to countries that have learned to live with slower growth, like Japan. We also need to make sure that young people are encouraged to become scientists and inventors. The goal is to be prepared. "I am optimistic about getting some future low-hanging fruit," Cowen concludes. "It's just not low hanging yet."
(Cowen's book is interesting not just because of its argument, but because of its form: The Great Stagnation is a Kindle Single, a short book which, as Amazon puts it, presents "a compelling idea... expressed at its natural length." It costs four dollars, is only 15,000 words long, and is available exclusively as an e-book. That has costs and benefits: one of the benefits is that the endnotes are stuffed with links to articles you can read online. You can read the whole thing in an evening!)
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Leon Neyfakh is the staff writer for Ideas. Amanda Katz is the deputy Ideas editor. Stephen Heuser is the Ideas editor.
Guest blogger Simon Waxman is Managing Editor of Boston Review and has written for WBUR, Alternet, McSweeney's, Jacobin, and others.
Guest blogger Elizabeth Manus is a writer living in New York City. She has been a book review editor at the Boston Phoenix, and a columnist for The New York Observer and Metro.
Guest blogger Sarah Laskow is a freelance writer and editor in New York City. She edits Smithsonian's SmartNews blog and has contributed to Salon, Good, The American Prospect, Bloomberg News, and other publications.
Guest blogger Joshua Glenn is a Boston-based writer, publisher, and freelance semiotician. He was the original Brainiac blogger, and is currently editor of the blog HiLobrow, publisher of a series of Radium Age science fiction novels, and co-author/co-editor of several books, including the story collection "Significant Objects" and the kids' field guide to life "Unbored."
Guest blogger Ruth Graham is a freelance journalist in New Hampshire, and a frequent Ideas contributor. She is a former features editor for the New York Sun, and has written for publications including Slate and the Wall Street Journal.
Joshua Rothman is a graduate student and Teaching Fellow in the Harvard English department, and an Instructor in Public Policy at the Harvard Kennedy School of Government. He teaches novels and political writing.