In this article from the NYT on digital disruption in industry I found an interesting paper by Robert J. Gordon of the National Bureau of Economic Research on forecasted economic growth in the U.S. In the paper Gordon describes the three industrial revolutions that followed one thousand years without any economic growth. The point to note is perhaps that significant, sustained economic growth requires an industrial revolution.
The three industrial revolutions, according to Gordon, are:
- Steam and railroads 1750-1830
- Electricity and the combustion engine 1890-1972
- Computers, the web, mobile phones 1960-present
The most significant industrial revolution was 2 and the least significant in economic terms was 3, the one we know the best. 3 really only generated a growth revival in the economy from 1996-2004 and will not be able to sustain the economy at satisfactory growth rates going forward. Gordon thinks that growth rates in the U.S. may be sub 1% for the forseeable future given the lack of stimulation from the current industrial revolution.
Why has the current industrial revolution been short lived and not much of an economic impetus? In my opinion, much of the benefit of the new technology manifest itself merely in productivity improvement that allowed lower levels of production to sustain us. Effectively, the major benefit of this industrial revolution in many ways has reduced industrial production..so no growth revival.
Image credit 1: industrial-revolution.org
Image credit 2: cepr.org