It’s 2013 and we’ve spent the last five years in a constant state of economic fear. Domestic and global economies were crushed by recessions and struggle to recover. Unemployment is lingering at unproductively high levels and central banks are using every tool in the kit (including some brand news ones) to drive economic activity, causing fears of long-term inflation. To many, the world seems stagnant and some are happy to proclaim that economic growth was a thing of the past and we live in a “post-growth” world.
Here’s what most of us are ignoring: something huge will rock the global economy for the better. Maybe it is something we’re aware of, or something completely new. The fact is that innovation drives global social and economic change and it has for centuries. The easiest example of this is farming:
- In 1900, 41% of the US population was involved in farming.
- in 1930, this figure had dropped to 21.5%.
- in 1945, it dropped to 16.5%.
- In 1970, the figure was JUST 4%.
- By the year 2000 it had dropped to 2%.
- Throughout the 20th century, agriculture dropped from over 7% of U.S. GDP (in 1930) to 0.7% of US GDP (in 2002).
Imagine being told that something 40% of the population does today to earn a living will be practically obsolete as a vocation in 100 years. We would most likely panic. But this change is part of economic growth over the long term. Consider this from The Atlantic:
Farming and manufacturing jobs moved into the service economy as we became more efficient and global trade changed the landscape of the US workforce.
I don’t know what this economic game change is going to be, or how it will affect the shape and structure of economy. But here are just a few examples of things we know are already happening:
- Self-driving cars. If you haven’t seen this video of Google’s car, leave right now and go watch it. Self-driving cars could be much more than a “neat” technology. Efficiencies will come from fuel economy and safety, just to start. Consider also how much productive capital is tied up in the value of automobiles that spend most of their working existence parked in a garage at home or at the office. Now consider a world where a self-driving car can be scheduled to pick you up at home, take you to the office, then leave to pick up another passenger. Suddenly, car ownership may become unnecessary, freeing up useful capital to be invested elsewhere. Time spent in the car would also suddenly become productive, from (safely!) working in our cars, reading, emailing, and taking care of coworkers, clients and customers.
- Dramatic increases in energy efficiency and renewable power. It is inevitable that cheap, renewable energy is in our future. The cost and efficiency of solar power cells is improving at an exponential rate, and will eventually surpass coal and natural gas. Improvements in fuel cell technology for rechargeable batteries will bring electric cars and other transportation into reality. Energy is a race to the bottom now between these improvements and a steep improvement in drilling and extraction technologies for traditional fuel sources.
- Others might include advances in medicine (including cheaper and more accurate diagnosis, cheaper and more effective treatments), business and personal communication that can reduce the amount of time we must spend traveling and continued advances in personal technology, for work or play. If you’re the type who enjoys podcasts, I’d recommend this episode of EconTalk with Kevin Kelly discussing many of these topics.