Cowen essentially advances a single proposition in The Great Stagnation, rather a portentous title for a long article, one might think. He argues that the US (and this is a very US-centred analysis) has become more prosperous over the past century through the exploitation of a series of technological advances which generated rapid productivity gains, and thus great wealth, but that those great leaps forward have now run out. That explains, in Cowen's view, the stagnation in real incomes for the average US family over the past 20 years. He believes the prospects for continued growth in GDP per head are poor, unless a new technological revolution can be catalysed. At the end, he explains how this can be done.
I will come to his recommendation later, but what of the central thesis? How well argued is it and how persuasive?
The single image he uses, which is repeated ad nauseam, is of the harvesting of low-hanging fruit. The phrase is one beloved of consultants in their PowerPoint presentations. It is an uninspiring metaphor at best and misleading here. Technological advances are not harvested. They do not grow on trees. Metaphors should enhance one's understanding of a phenomenon, through likening it to something else one understands better. This one is a failure on that measure. So far, so uninteresting.
The writing I find tiresome, but others may respond better to chatty, intrusive prose, peppered with abbreviations and down-home references. There are regular interjections addressed to the reader - 'are you worried yet?'. If you like that sort of thing, this will be the sort of thing you like.
But the substance is what should detain us for longer. Cowen's book has the merit of advancing a clear proposition to explain a phenomenon which has puzzled many. He argues that 1973 was the key year, when us incomes began to stagnate. Between 1947 and 1973, family incomes doubled in real terms; between 1973 and 2004 they went up only a further 22%. He thinks the reason is in the earlier period the US benefited from plentiful land, technological breakthroughs and the expansion of education.
But, there is no more land, technological advances have dried up, and the education system has failed to produce further increases in attainment. So growth in GDP per head has slowed down. QED.
There is something in this, but it is an oversimplification. The past two decades have seen remarkable advances in IT, but, Cowen argues that even the internet generates very few jobs - only 300 people work for Twitter, for example. But surely IT has created new needs, just as other technology has done? What about all the website designers, or manufacturers of iPads and iPhones? The twin problem for the US is that many of these jobs have been created elsewhere and the IT revolution has increased the productivity of knowledge workers, and especially those at the top of the pile, far more, so greatly increasing inequality. Many Americans, and Cowen is among them, are squeamish about acknowledging the challenges for their tax and benefit system this poses.
So The Great Stagnation has a point, but it is half a point and comes from a very American perspective. Perhaps I would think differently had I read it in Ohio rather than Guangxi, but I doubt it.
And what of his proposed solution? Once again, he is commendably clear: 'My recommendation is this: raise the social status of scientists.' He thinks that scientists are unloved. 'Few women or men dream of dating or marrying a scientist,' he says. That strikes me as one of the more fatuous sentences I have ever downloaded. Do people really dream about the occupations of the putative objects of their affections, rather than their characters or the way they might look? DSK, to take a case at random, dated economists, but was also interested in chambermaids, it seems, and perhaps a scientist would have done equally well. And is Cowen really suggesting that scientists would be more productive if they had sexier partners?
So, Cowen has clearly described an interesting phenomenon, advanced a partial explanation of it, and identified a frankly daft solution. That's what you get for £2.99 in these straitened times.
The Great Stagnation: how America ate all the low-hanging fruit of modern history, got sick, and will (eventually) feel better
Dutton £2.99 (Kindle) Dutton Books £8.00
- Howard Davies was the first chairman of the Financial Services Authority and is a non-executive director of Morgan Stanley