Robert Gordon has an op-ed in the New York Times talking about productivity growth, inequality, and the Presidential candidates’ stated policy positions.

Rapid productivity growth in the dot-com era of the late 1990s originated in computer manufacturing — information and communication technology equipment — but this manufacturing has vanished since almost all such equipment is now imported.

This effect of that new technology was another important source of growth. Out went typewriters and calculating machines, replaced by personal computers, spreadsheet and word-processing software, web browsers and e-commerce. Productivity also boomed in retailing, as Walmart and other “big box” stores revolutionized retail selection, layout and supply chain management.

But by 2004, the digital revolution had achieved most of its transition in business methods. Not much has changed in offices and at retail stores since then.

His basic thesis is that we are past the peak of this particular wave of technological progress, and he doesn’t see another wave on the horizon. So technology is not providing that slow but relentless underlying trend of productivity growth right now, and the shorter-term underlying cyclical factors are also on a downward trend (size of the skilled labor force, income inequality, uncertainty over health care, retirement and education). Tax and infrastructure investment policies suggested by the candidates could help somewhat with these shorter term factors. He generally supports socialist policies like we see in “Canada, Australia, and the Nordic countries”.

My own thoughts: It’s tough for politicians to support policies that advance long-term productivity growth, like great education and a level playing field for businesses of all sizes to innovate and compete. First of all, the costs of these policies come due during their terms in office while the benefits accrue long afterward. This is a basic problem of democracy – elected officials can be punished by voters for taking on those short term costs, and solutions can involve voluntarily transferring more power into the hands of un-elected technocrats, which they have little incentive to do. (Nonetheless, many other democratic countries manage to do better than us.) Second, the interests of a few big businesses (finance, fossil fuels and the military-industrial complex) have outsize, undemocratic influence over our (U.S.) politicians allowing them to write laws unfairly in their favor and at the expense of everyone else, even businesses in other industries. This problem could be solved by a courageous amendment to our constitution, but again politicians have little incentive to cut off their own sources of funding.

Politicians can talk about infrastructure because that creates short-term jobs while also helping the economy in the long-term. We need good planning though if we are going to build the smart infrastructure that can really reduce friction in the economy while minimizing environmental impacts and improving our living environments. We don’t have that currently, just some vague ideas about building lots of roads and bridges and maybe some power lines and we’re not sure about pipelines.

Gordon rails against “defined contribution” pension plans, but I still think there is a place for them. While social security is reasonably well run at the federal level, pension plans at the state, municipal and corporate level are terribly run. So I would say either get rid of all those in favor of an expansion of social security, or go to defined contribution. Plans could be designed to help individuals manage risk more effectively (using life cycle funds and annuitization, for example). In Singapore, the system is nominally defined contribution, but the government “tops up” individuals’ contributions – everybody contributes a similar amount as a percentage of their income, then the government matches contributions from lower-income individuals at a higher rate so they can end up with similar retirement savings as higher-income individuals. This could work in the U.S., but we would have to first prevent the finance industry from hijacking the rules to siphon off money for itself.

Of course, we can also hope that the wave of technological progress is in fact not past, we are just in a momentary lull before it continues to pick up in an exponential (but episodic) fashion as it has throughout history. I am 100% positive that the history of technology is not over. The only question in my mind is whether, if we are in fact in an episodic lull, it is going to last long enough to ruin a generation or two for us puny individual humans who only live 70 years or so.