Aughts Better Than We Thought?
George Mason economist Tyler Cowen argues that, “It may not feel that way right now, but the last 10 years may go down in world history as a big success.”
That idea may be hard to accept in the United States. After all, it was the decade of 9/11, the wars in Iraq and Afghanistan, and the financial crisis, all dramatic and painful events. But in economic terms, at least, the decade was a remarkably good one for many people around the globe.
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Putting aside the United States, which ranks third, the four most populous countries are China, India, Indonesia and Brazil, accounting for more than 40 percent of the world’s people. And all four have made great strides. Indonesia had solid economic growth during the entire decade, mostly in the 5 to 6 percent annual range. That came after its very turbulent 1990s, marked by a disastrous financial crisis and plummeting standards of living.
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Elsewhere in South America, Colombia and Peru have made enormous progress and Chile is on the verge of becoming a “developed” country; it will soon be joining the Organization for Economic Cooperation and Development.
To be sure, in Africa, there is still enormous misery. Nonetheless, overall standards of living rose in a wide variety of countries there, with economic growth for the continent as a whole at more than 5 percent in most years. Many basic essentials, like water, sanitation, electricity and especially telephones, are more commonly available.
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One lesson from all of this is that steady economic growth is an underreported news story — and to our own detriment. As human beings, we are prone to focus on very dramatic, visible events, such as confrontations with political enemies or the personal qualities of leaders, whether good or bad. We turn information about politics and economics into stories of good guys versus bad guys and identify progress with the triumph of the good guys. In the process, it’s easy to neglect the underlying forces that improve life in small, hard-to-observe ways, culminating in important changes.
In a given year, an extra percentage point of economic growth may not seem to matter much. But, over time, the difference between annual growth of 1 percent and 2 percent determines whether you can double your standard of living every 35 years or every 70 years. At 5 percent annual economic growth, living standards double about every 14 years.
Nonetheless, despite the positive news in much of the world, it’s questionable whether the decade as a whole has been good for Americans, economically speaking. Median wages have not risen much, if at all, and the costs of the financial crisis and irresponsible fiscal policies have become increasingly obvious. Those facts support a pessimistic interpretation.
Still, most economic models suggest that the fundamental source of growth is new ideas, which enable us to produce more from a given set of resources. To the extent that the rest of the world becomes wealthier, there’s more innovation, as my colleague and co-blogger Alex Tabarrok, professor of economics at George Mason University, argued recently. China, for instance, is moving toward the research frontier in areas such as solar power, scientific instruments, engineering and nanoscience, all of which can benefit the United States. Unlike the situation of just a few decades ago, a genius born in Mumbai now stands a good chance of becoming a notable scientist, whether at home or abroad.
It occurs to me that, at this time in 1960, the previous decade must have been looked upon rather unfavorably. We were, for the first time in the history of mankind, under serious threat of annihilation from man-made weapons. People were building bomb shelters in their back yards. We had spent three years fighting a war in Korea to a stalemate. We’d had two presidents, Truman and Eisenhower, universally viewed as lackluster. Politics could not have been more divided; it was the era of McCarthyism and Brown vs Board of Education. Toward the end of the decade, the scourge of rock and roll music was creating generational rifts and stoking racial tensions.
By the early 1970s, however, we were looking back upon the decade fondly and it remains fixed in our minds as a halcyon age.
Whether we’ll look back on the aughts (or naughts, or whatever we’re calling the decade) as fondly remains to be seen. But I doubt we’ll think of it as a horrible time once we gain some perspective.
It was, after all, the decade that gave us Wikipedia, Gmail, iPods, iPhones, wireless internet, ubiquitous GPS, and myriad other technological wonders. In 1999, Google barely existed and most people were relying on public libraries for their information — which is to say, they generally weren’t getting much information, since it was so much trouble. Blogs had been around for a couple years but they were the province of computer geeks; the mass media was still writing articles explaining — usually, incorrectly — what blogs were in 2004 and 2005.
Tyler makes an odd argument. He suggests, perhaps rightly, that the world perspective will be positive. This does not disprove a bad American decade.
I mean, should American auto workers be happy that at least Hummer is now a Chinese brand?
Tyler asks us to look at the bright side … Chinese Hummers.
Well, the negative feelings about the Aughts is coming mostly from those who’ve not experienced a down economy and are basing their opinions on the last couple of years experience. If you were aware of the world in the Seventies, you’ll know that the Aughts aren’t as bad as then. And of course, few of us have real experience with the Thirties and early Forties.
America in the world economy was touted as pretty bleak in the Eighties with the rise of Japan. Of course, Japan had a misstep and failed to consume the world while the US built the information economy.
Here at the end of the Aughts there are things to be pessimistic about but they are not what has happened but what may come from developments in the Aughts. The Aughts could be the beginning of the end with continued socialist buildup but they could be the match that lights an American resurgence of freedom.
Of course, if the 2010s are marked by recurring terrorist attacks on the US homeland, then well, the Aughts are going to look positively optimistic.
Google, in concert with the iPhone, means that data — virtually all of recorded knowledge — is available everywhere to anyone at any time, and that it can be shared in real time with as many people as you like. This is a staggering change. It’s a Gutenberg level change, a telegraph level of change, maybe even more profound.
The discovery that there is water on the moon, water on Mars, and that there are apparently quite a number of planets with water is another jaw-dropping advance. The question of whether there is life in other places in the universe just shifted to a probability that there is life scattered all through the universe.
That’s one huge change in our present and one huge promise for our future. Housing prices rise and fall, unemployment goes up or down, but these are revolutions.
As Cowen points out, the decade as a whole had a worse economic performance for most people, worse than the 70s, unless you were in the top 0.1% of the population. Savings were wiped out by the crash. If having a job and a family that stays together is important, the &0s beat the 00s. If social unrest bothers you, then the 70s were worse, especially if you are a white male.
Steve
Michael, with my morning coffee I have been watching refresher lectures on basic electronics … from India. Strange loops.
The rest of the world should be better off, after all, we sent our jobs overseas and we sent our money and blood to Iraq. While we are better off with electronic gizmos, they are made overseas. It was a decade of failed ideology. We saw the worst of the far right. Our government neglected science, our country, and has done nothing to propel us into the future. We are stuck in a hole developed over the last decade. Good Riddance.
Michael Reynolds says:
“Google, in concert with the iPhone, means that data — virtually all of recorded knowledge — is available everywhere to anyone at any time, and that it can be shared in real time with as many people as you like. This is a staggering change. It’s a Gutenberg level change, a telegraph level of change, maybe even more profound.”
………….
I was having a conversation with my wife and daughter about tech change. My daughter (and wife) asked what a slide rule was, as we discussed the intro of calculators. (Many moons ago I was an engineer) I observed that a calculator (and in fact all of computing power) was a major – a huge – advancement, but nothing more than a faster way to do calculations. We then pondered others…. And I noted..
I simply cannot agree more stridently with Reynolds’ observation. The “pipes” that have allowed information flow – with all the noise we all know exists – is simply the single greatest tech advancement of my lifetime.
It is not even close, or as they used to say in Indiana – not by a country mile.
American Power tracked-back with, ‘Jules Crittenden Rings Out the Old…’.
I’ll have to third what Michael and Drew have pointed out. The sheer scale of the revolution in communication, information distribution, and so forth brought out by the expansion and use of the information technologies is more staggering the longer you look at it.
Hell, I’m a fairly young guy (early twenties), and I remember what it was like before that was the case. I remember how it was before cell phones were widely owned, when dial-up was universal in the US, and when a Windows 95 was hot stuff. The change is just monumental.
By the way, that’s one of the problems with futurism – futurists tend to take some trends and project them outwards, which is why we got a lot of predictions of space colonies back in the 1960s. But few people predicted what actually occurred.
Heh, I remember when a terabyte disk drive meant something. I did not foresee the day when owning one would be boring.
You might like this presentation on exponential growth curves.
Tobacco helped to launch the original colonies, alcohol (sugar) fueled the transatlantic trade to and from the Caribbean, opium opened China for western merchants and pornography supported the internet.
Clearly if we’re going to build space colonies we’ll need some new lunar vice. I’m thinking low-G bordellos.