Let us now try to tackle this very thorny measurement problem from a very different angle. If meaningful scientific and technological progress occurs, then we reasonably would expect greater economic prosperity (though this may be offset by other factors). And also in reverse: If economic gains, as measured by certain key indicators, have been limited or nonexistent, then perhaps so has scientific and technological progress. Therefore, to the extent that economic growth is easier to quantify than scientific or technological progress, economic numbers will contain indirect but important clues to our larger investigation.
The single most important economic development in recent times has been the broad stagnation of real wages and incomes since 1973, the year when oil prices quadrupled. To a first approximation, the progress in computers and the failure in energy appear to have roughly canceled each other out. Like Alice in the Red Queen’s race, we (and our computers) have been forced to run faster and faster to stay in the same place.
Taken at face value, the economic numbers suggest that the notion of breathtaking and across-the-board progress is far from the mark. If one believes the economic data, then one must reject the optimism of the scientific establishment. Indeed, if one shares the widely held view that the U.S. government may have understated the true rate of inflation — perhaps by ignoring the runaway inflation in government itself, notably in education and health care (where much higher spending has yielded no improvement in the former and only modest improvement in the latter) — then one may be inclined to take gold prices seriously and conclude that real incomes have fared even worse than the official data indicate.
This dismal and straightforward conclusion tends to be obscured by a range of secondary issues, which are important but do not really change the larger point about trends since 1973:
Mean incomes outperformed median incomes (inflation-adjusted in both cases), and there was a trend towards greater inequality. Median incomes rose by only 10 percent. Mean incomes rose by 29 percent, which works out to a glacial pace of only about 0.7 percent per year — much slower than in the preceding four decades.
Non-wage benefits, mostly health care, increased by about $2,600 per worker, for an additional 0.2 percent per year since 1973. So if the U.S. government has underestimated inflation by only 0.9 percentage points per year, then mean wages and benefits have been completely stagnant.
Corporate profits increased from 9 percent to 12 percent of GDP — again, a significant but easily exaggerated shift.
Women were hired in the 1980s and men were fired in the 2000s.
College graduates did better, and high-school graduates did worse. But both became worse off in the years after 2000, especially when one includes the rapidly escalating costs of college.
The era of globalization improved living standards by making labor and goods cheaper, but also hurt living standards through increased competition for limited resources. Free-trade advocates tend to think that the first effect dominates the second.
Economic progress may lag behind scientific and technological achievement, but 38 years seems like an awfully long time.
The economic future looked very different in the 1960s. In his 1967 bestseller The American Challenge, Jean-Jacques Servan-Schreiber argued that accelerating technological progress would widen the gap between the United States and the rest of the world, and that by 2000, “the post-industrial societies will be, in this order: the United States, Japan, Canada, Sweden. That is all.” According to Servan-Schreiber, the difference between the United States and the rest of Europe would grow from a difference of degree into a difference of kind, comparable to the difference between Europe and Egypt or Nigeria. As a result of this steady divergence, Americans would face less pressure to compete:
In 30 years America will be a post-industrial society. . . . There will be only four work days a week of seven hours per day. The year will be comprised of 39 work weeks and 13 weeks of vacation. With weekends and holidays this makes 147 work days a year and 218 free days a year. All this within a single generation.
We need to resist the temptation to dismiss Servan-Schreiber’s space-age optimism so that we can better understand how the consensus he represented could have been so terribly wrong — and how, instead, for many Americans, the Fourth Commandment (“Remember the Sabbath day, and keep it holy”) has been effectively forgotten.