Proponents of the hypothesis about the end of the period of sustainable economic growth have not yet provided convincing evidence

The crisis in the global economy has dragged on for so long that the voices of skeptics are increasingly heard, doubting that in the foreseeable future the current fluctuations will be replaced by an upturn. A striking example is the work of Robert Gordon, a professor at Northwestern University in Illinois, “Is the End of Economic Growth in the United States?” . According to the professor, unless urgent action is taken, the growth rate in the world's largest economy will soon fall to the level characteristic of the stagnant centuries - the historical period before the mid-18th century when the world developed at an extremely low rate.

Gordon's work contains a fascinating description of the life of American cities at that time. The streets are littered with horse waste products: after all, horses were then the main means of moving people and goods. Women carry water on themselves, managing to walk 148 miles and carry 35 tons of water in a year. Heating in houses is localized; entire rooms are left without heat during the cold season. There is hardly anything that can save you from the heat in the summer. It is difficult to refrigerate food, so gastrointestinal diseases are much more common than in modern times.

However, two scientific and technological revolutions managed to overcome these and many other problems.

The first of them resulted in the steam engine and railways, the second - electricity, the internal combustion engine, sewerage, water supply, and the development of chemistry. As a result, houses began to be heated and lit much better, transport became faster and more load-bearing, and women’s life became much easier.

Against the background of impressive technical achievements of the 18th-19th centuries. Gordon is clearly disappointed with what the third technological revolution has given the world. Of course, computers, the global network and mobile phones have made our world even more comfortable and productive. However, these inventions, according to the author, did not give the world the same impact as the first two revolutions. This is especially true of new products and services in recent years: tablets or social networks have hardly improved people's lives as much as railways or electricity have done. It is much more difficult to cope without a warm toilet in winter than without a new post on a social network. The last revolution did not produce a fundamental increase in the level of productivity.

And Gordon concludes that there are 6 reasons, not directly related to the innovation sector, that could return the US to low growth rates: 1) worsening demographic structure, 2) high levels of social inequality, 3) problems with the US education system, 4) globalization, 5) high debts of the authorities and the population, 6) global warming.

However, while all these problems do exist and can reduce the level of consumption of American citizens, it remains to be seen how they might slow down the long-term growth rate of the US economy.

For example, let's pay attention to the demographic factor. If the population does not change, but the proportion of older people increases, then the labor force decreases. As a consequence, other things being equal, per capita output decreases—after all, while the population remains the same, fewer people participate in creating GDP. Accordingly, there are fewer goods and services available for each person.

However, due to a one-time decrease in the level of per capita GDP, it does not follow that in the future the level of GDP will grow more slowly.

Suppose that in some family the husband lost his job and now the family lives on the wife’s income. Of course, both spouses became poorer. But if the wife's salary has long been increasing at 5% per year in real terms, then why will it increase more slowly because the husband loses his job? It is quite possible that the wife is now forced to support her husband and save, for example, on paying for German language courses, and therefore her career growth, and therefore the increase in income, can no longer maintain the same pace.

If we return to the macro level, too high long-term social spending to maintain the standard of living of retirees can persistently reduce investment in research, leading to a reduction in the number of innovations emerging over a period of time. But Gordon does not mention this mechanism anywhere in his work, so it is difficult to judge whether he had it in mind or confused a one-time shift in the level of per capita GDP with a decrease in long-term economic growth rates.

In addition, if the decrease in the number of economically employed persons is compensated by an increase in their labor productivity, then a fall in the per capita level of output can be avoided.

And in this case, there will be no need to reduce research costs.

You can also try to solve the problem of a declining population through immigration, significantly simplifying immigration laws, which Gordon mentions at the end of his work. Finally, this is not a very pleasant decision for the United States, but it is possible to give scientific leadership to some other country (though this requires that a country ready to accept this leadership emerge), and to copy other people’s inventions for less money, thus avoiding way of falling growth rates.

High government and consumer debt also may or may not be associated with long-term growth. If a household has to pay off its own debts or the government's debts by paying higher taxes, their level of consumption may decline. The latter will happen if, for some reason, households did not prepare for these payments in advance, reducing consumption in the past and accumulating resources to pay off debts, both their own and government ones. But even if they did not prepare for debt and tax payments in advance, the immediate effect of the increased debt and tax burden will be to reduce the consumption and family investment of debtor households.

However, if the majority of debts are internal, that is, some US citizens owe other American citizens, then we are talking about the redistribution of resources within the country. And then an important role is played by from whom and to whom this redistribution occurs. Will this redistribution have a negative or positive effect on investments in the education of the younger generation? The government paid off with its creditors, but if the main sponsors of technological progress are the creditors, and not the government, then what is the damage to science? The total assets of 800 American universities in 2010 amounted to $400 billion, part of which was invested in government securities. If the government pays off debts to universities, then we are talking only about the redistribution of university assets and there is no harm in this for science. It's quite possible that the situation is actually much worse, but Gordon doesn't say anything about it.

The low performance of American schoolchildren, which the author talks about, referring to the results of the PISA test, regularly conducted by the OECD among high school students, would seem to be sure to undermine US leadership in science. Poorly prepared school graduates are able to master university programs with great difficulty; the opportunities for selecting scientists due to the decline in the quality of university graduates will be much lower. However, this is not a necessary result either. Let's remember again that the total assets of American universities 4 years ago amounted to $400 billion. Moreover, the United States is not isolated from the outside world and American universities have an excellent opportunity to hire scientists on the international labor market. Even with a poor school system, universities' significant financial autonomy and openness to the world allow them to maintain global scientific leadership. Another thing is that leadership in science may have a harder time converting into higher growth rates if the school system is weak.

Ultimately, working with relatively complex technology requires specialists, and if there are too few of them, the technology may not be widely adopted. The economy may face monopolies and high salaries for rare specialists. But this problem can also be solved through immigration, training foreign students in the United States and then providing them with a residence permit.

The next problem identified by Gordon is income inequality.

There are many mechanisms linking high inequality to low economic growth. It is possible that income inequality is related to educational inequality. For example, due to low income, poor families cannot afford to pay for their children's education. Or the wealthy elite may become too powerful and change the political system, resulting in the degradation of institutions and, as a consequence, a steady decline in economic growth. Or inequality may cause an increase in crime, which will also reduce the level of investment in the economy. But Gordon, again, does not mention these effects, only pointing out that the benefits of economic growth largely accrue to the rich. But why does the latter fact, even if true, slow down future growth?

Similar issues apply to the two remaining problems—globalization, which reduces the incomes of American workers due to competition with labor in poor countries, and global warming, which could result in an environmental tax on gasoline that raises its cost and reduces the wealth of American households. But in 2014, the cost of gasoline falls due to cheaper oil. In addition, in the future, the demand for traditional fuel may drop significantly due to technological progress in the automotive industry.

Let's summarize. Gordon's paper explains why the benefits of future growth may be unevenly distributed. And it is likely that a significant portion of households will be faced with the need to reduce their consumption levels in the foreseeable future. But Gordon does not explain why these circumstances will negatively affect the rate of economic growth.

Is the US economy in danger of returning to the 18th century?