[Rune]

The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History, Got Sick, and Will Recover (Eventually)

America is in disarray and our economy is failing us. We have been through the biggest financial crisis since the Great Depression, unemployment remains stubbornly high, and talk of a double-dip recession persists. Americans are not pulling the world economy out of its sluggish state -- if anything we are looking to Asia to drive a recovery. Median wages have risen only slowly since the 1970s, and this multi-decade stagnation is not yet over.

By contrast, the living standards of earlier generations would double every few decades. The Democratic Party seeks to expand government spending even when the middle class feels squeezed, the public sector doesn’t always perform well, and we have no good plan for paying for forthcoming entitlement spending. To the extent Republicans have a consistent platform, it consists of unrealistic claims about how tax cuts will raise revenue and stimulate economic growth. The Republicans, when they hold power, are often a bigger fiscal disaster than the Democrats.

How did we get into this mess? Imagine a tropical island where the citrus and bananas hang from the trees. Low-hanging literal fruit -- you don’t even have to cook the stuff. In a figurative sense, the American economy has enjoyed lots of low-hanging fruit since at least the seventeenth century: free land; immigrant labor; and powerful new technologies. Yet during the last forty years, that low-hanging fruit started disappearing and we started pretending it was still there. We have failed to recognize that we are at a technological plateau and the trees are barer than we would like to think. That’s it. That is what has gone wrong. The problem won’t be solved overnight, but there are reasons to be optimistic. We simply have to recognize the underlying causes of our past prosperity—low hanging fruit—and how we will come upon more of it.

About the Author
Tyler Cowen is a professor of economics at George Mason University. He blogs at Marginalrevolution.com, the world's leading economics blog. He also writes regularly for the New York Times, and he has written for Forbes, the Wall Street Journal, Newsweek, the Washington Post, the Los Angeles Times, and the Wilson Quarterly.

Tyler Cowan was interviewed by James Stafford of OilPrice.com. It was a short, inadequate interview but I glanced at the author's credentials and saw this little eBook. You can get it on Amazon for $3.79.

I liked this essay. It is light, common-sensical and puts our recent history in perspective. Its very simply written.

I was disturbed when Cowan began talking about our "technological plateau" - because I avidly follow emerging science and technology - but when I read on, I found I couldn't help but agree.

I read the whole thing easily in one very enjoyable sitting. His remarks are relevant to much of what is discussed here at PO.com.

[noobtube]

Why is it that the Europeans that came to the Western Hemisphere have such a problem with acknowledging all the free labor they stole from Africa, in the form of the Transatlantic slave trade?

It's as if they are still clinging to this notion that somehow they deserve to have it better than anyone else, just because that's what they want.

And, it's because of this basic dishonesty that will doom Europeans (and their descendants) over and over again, because they will keep making the same mistakes, no matter how many chances they have to get it right.

[americandream]

Discomfort for the American working class...yes. For the American (nay, global) elite, greater extraction of value as the once premiumed American (Western) worker grows accustomed to less (with some help from parties such as the Tea party..

[Fishman]

"Why is it that the Europeans that came to the Western Hemisphere have such a problem with acknowledging all the free labor they stole from Africa, in the form of the Transatlantic slave trade?" Rounded up and sold to them by other Africans with slavery lasting decades longer in said Africa. Wanted to help you with your history lesson.

"It's as if they are still clinging to this notion that somehow they deserve to have it better than anyone else, just because that's what they want." Its human nature, all folks do this.

"And, it's because of this basic dishonesty that will doom Europeans (and their descendants) over and over again, because they will keep making the same mistakes, no matter how many chances they have to get it right" Feel free to give an example of another group that doesn't do the same.

[Rune]

Average Is Over: Powering America Beyond the Age of the Great Stagnation

The widening gap between rich and poor means dealing with one big, uncomfortable truth: If you’re not at the top, you’re at the bottom.

The global labor market is changing radically thanks to growth at the high end—and the low. About three quarters of the jobs created in the United States since the great recession pay only a bit more than minimum wage. Still, the United States has more millionaires and billionaires than any country ever, and we continue to mint them.

In this eye-opening book, renowned economist and bestselling author Tyler Cowen explains that phenomenon: High earners are taking ever more advantage of machine intelligence in data analysis and achieving ever-better results. Meanwhile, low earners who haven’t committed to learning, to making the most of new technologies, have poor prospects. Nearly every business sector relies less and less on manual labor, and this fact is forever changing the world of work and wages. A steady, secure life somewhere in the middle—average—is over.

With The Great Stagnation, Cowen explained why median wages stagnated over the last four decades; in Average Is Over he reveals the essential nature of the new economy, identifies the best path forward for workers and entrepreneurs, and provides readers with actionable advice to make the most of the new economic landscape. It is a challenging and sober must-read but ultimately exciting, good news. In debates about our nation’s economic future, it will be impossible to ignore.

The couple of comments in the posts above did not really respond to the substance of what Tyler Cowan was saying in The Great Stagnation, although much of the contents in that little eBook were dead on with the kinds of economic issues that have been debated and fussed over interminably here at PO.com, particularly since 2008 and the Financial Crisis. It's worth the $3.79 to download.

I liked it so much that I bought Cowan's follow-on book, Average Is Over, and I am reading it now.

I have to say, I was surprised to here a mainstream, popular economist begin his book right off the bat with a discussion of machine intelligence.

I think it was around 2005 that I first posted stuff here about machine intelligence. I had read Ray Kurzweil's books and others on the subject and became fascinated with it -- and, of course, if anyone here has been around long enough to remember those posts, I got a lot of shit for bringing up the subject. But now, its not just futurists like Kurzweil (who can easily be ridiculed for some of his notions), its many others who are contributing books and articles about the advent of machine intelligence and how it will give the Average Joe a real headache - because computers will be able to supplant the average joe's intellectual skillset quite easily in the years ahead.

So, Cowan's book is about this phenomenon and what it means economically.

Incidentally, Tyler Cowan was interviewed on OilPrice.com (which is how I discovered him) about shale and peak oil and whatnot. It was not an in-depth interview but it was enough for me to notice these books of his. They are reasonable and well-written and apparently very popular.

The Shale Boom, Just Getting Started

Thanks to the shale boom, markets already perceive the trade balance optimizing, energy prices are cheaper than they would otherwise be and we’ve even cut carbon emissions. And we are only getting started, according Tyler Cowen, New York Times best-selling author and one of the most influential economists of the decade.

While we aren’t likely to get past the American public’s irrationality over gas prices at the pump and their confusion about why this hasn’t translated into lower gas prices, that doesn’t change the fact that our shale boom is only just beginning to affect the global economy. The only question is who will be the next to latch on to this revolution.

Cowen gives us the long view in his most recent book, “Average is Over: Powering America Beyond the Age of Great Stagnation”, and in an exclusive interview with Oilprice.com, he discusses:

•    Why energy-intensive investment is our real future
•    Why peak oil isn’t an issue for at least 3 decades
•    Why Syria is impossible to predict
•    Why US gas exports are a win-win situation
•    How the US shale boom has benefited the economy
•    How the shale boom is just getting started
•    What the general public doesn’t get about gas prices
•    Why we can’t do much to stop energy market manipulation
•    Who’s right about climate change? Wait and see…

[americandream]

@ Rune

I suspect that you need to wrap your head around the concept of the accumulation of LABOUR SURPLUS before contemplating the place of machines in the social-economy of capitalism. The value added by labour (both in the exchabge of that value and its realisation at the other end (of the labourer's component), as consumer, is the foundation stone of capital. The tensions that thus arise given the capitalists' paradoxical struggle to, on the one hand constantly mitigate labour costs by a variety of means, including machines, whilst needing a labour rich with his component of labour surplus, is what ensures that the role played by machines in the process is always benchmarked at an optimal level. Anything beyond that, and the system collapses driving the capitalist out of business.

Of course these machines are then available for common usage. To that extent, these books remind us that these forces are at play, always.

[noobtube]

Why is it that the Europeans that came to the Western Hemisphere have such a problem with acknowledging all the free labor they stole from Africa, in the form of the Transatlantic slave trade?" Rounded up and sold to them by other Africans with slavery lasting decades longer in said Africa. Wanted to help you with your history lesson.

What does what Africans do, have to do with what Europeans DID TO THOSE Africans?????

This is deflection.

The Europeans still did it but don't want to acknowledge it. Why?

It's like asking a criminal why did they commit the crime, and their response is that others are committing crimes, too.

It's as if they are still clinging to this notion that somehow they deserve to have it better than anyone else, just because that's what they want. Its human nature, all folks do this.

False equivalency. Just because you say everyone does it, does not mean that Europeans are not guilty. You admit Europeans think like this. You don't know if anyone else does. So, Europeans are the problem here.

This is the kind of thinking that has gotten Europeans in the mess they are facing today... with no way out of it.

And, it's because of this basic dishonesty that will doom Europeans (and their descendants) over and over again, because they will keep making the same mistakes, no matter how many chances they have to get it right Feel free to give an example of another group that doesn't do the same.

No one did what the Europeans did. Give me an example of non-Europeans who enslave Africans, wiped out the indigenous people of the Western Hemisphere, then promptly turned the natural beauty of the Earth into trash and pollution... all in the name of profit.

Who else has been that stupid and self-destructive?

It's this unwillingness to recognize that Europeans have done it all wrong, for so long, that is dooming the entire planet (well, at least Europe, the United States, Canada, and Australia).

[Heineken]

America has definitely lost something . . . a whole lot, in fact. We have lost, lost, lost, and gained very little to offset that trend. Anyone who denies this is blind, or a fool.

Another thing I notice is the complete lack of "spirit" and meaning in these times. There is a loss of identity, of uniqueness. Decades like the 50s and the 60s, or the 1920s and the 1940s, or the 1890s for that matter, bring to mind a distinctive "style," a mood, a look. The current decade, and the one that preceded it, are mostly voids.

[Ibon]

The current decade, and the one that preceded it, are mostly voids.

Voids perhaps, but voids are those poignant silences where you may assimilate and internalize truths that are not yet ready for prime time.

I like to look at this void as an incubation of sorts. We'll see.

[Simon_R]

No one did what the Europeans did. Give me an example of non-Europeans who enslave Africans, wiped out the indigenous people of the Western Hemisphere, then promptly turned the natural beauty of the Earth into trash and pollution... all in the name of profit.

Who else has been that stupid and self-destructive?

>> We did a spot of slavery, come on who hasnt .... hands up.
>> we also had a bit of a scrap with some indiginous people, they all seem to be here now though
>> I could be wrong but the earth still seems to be quite beautiful, if you catalogue the places I will pass it on,
we probably missed a few spots (What with the slavery and genocide, busy busy)

[efarmer]

America had the copious natural resources and sparse population to take European forms of
civilization and let them grow exponentially, and then in the 20th century, the exponential
amount of energy growth per capita possible with petroleum power and products and
fossil fuel generated electricity layered in on top of the first exponential growth
mechanism. The horrible things humans do to each other such as slavery and extermination
of native peoples and real or imagined potential competing peoples is a thread in this
scenario, as well as all of those that came before, and probably that are yet to arrive.
Abundant resources and cheap energy have created some incredible living experiences
that we all attribute to our various political and other belief systems for manifesting.
It is possible we might have this a little backwards.

I enjoy the article very much and thank you.

[Rune]

Book: The Great Deformation: The Corruption of Capitalism in America by David Stockman

Summary article: David Stockman Explains The Keynesian State-Wreck Ahead – Sundown In America

David Stockman, author of The Great Deformation, summarizes the last quarter century thus: What has been growing is the wealth of the rich, the remit of the state, the girth of Wall Street, the debt burden of the people, the prosperity of the beltway and the sway of the three great branches of government – that is, the warfare state, the welfare state and the central bank… What is flailing is the vast expanse of the Main Street economy where the great majority have experienced stagnant living standards, rising job insecurity, failure to accumulate material savings, rapidly approach old age and the certainty of a Hobbesian future where, inexorably, taxes will rise and social benefits will be cut… He calls this condition “Sundown in America”.

  SUNDOWN IN AMERICA: THE KEYNESIAN STATE-WRECK AHEAD

Remarks of David A. Stockman at the Edmond J. Safra Center for Ethics, Harvard University, September  26, 2013

The median U.S. household income in 2012 was $51,000, but that’s nothing to crow about. That same figure was first reached way back in 1989— meaning that the living standard of Main Street America has gone nowhere for the last quarter century. Since there was no prior span in U.S. history when real household incomes remained dead-in-the-water for 25 years, it cannot be gainsaid that the great American prosperity machine has stalled out.

Even worse, the bottom of the socio-economic ladder has actually slipped lower and, by some measures, significantly so. The current poverty rate of 15 percent was only 12.8 percent back in 1989; there are now 48 million people on food stamps compared to 18 million then; and more than 16 million children lived poverty households last year or one-third more than a quarter century back.

Likewise, last year the bottom quintile of households struggled to make ends meet on $11,500 annually —-a level 20 percent lower than the $14,000 of constant dollar income the bottom 20 million households had available on average twenty-five years ago. 

Then, again, not all of the vectors have pointed south. Back in 1989 the Dow-Jones index was at 3,000, and by 2012 it was up five-fold to 15,000.  Likewise, the aggregate wealth of the Forbes 400 clocked in at $300 billion back then, and now stands at more than $2 trillion—a gain of 7X.

 And the big gains were not just limited to the 400 billionaires. We have had a share the wealth movement of sorts— at least among the top rungs of the ladder. By contrast to the plight of the lower ranks, there has been nothing dead-in-the-water about the incomes of the 5 million U.S. households which comprise the top five percent. They enjoyed an average income of $320,000 last year, representing a sprightly 33 percent gain from the $240,000 inflation-adjusted level of 1989.

The same top tier of households had combined net worth of about $10 trillion back at the end of Ronald Reagan’s second term.  And by the beginning of Barrack Obama’s second term that had grown to $50 trillion, meaning that just the $40 trillion gain among the very top 5 percent rung is nearly double the entire current net worth of the remaining 95 percent of American households.

So, no, Sean Hannity need not have fretted about the alleged left-wing disciple of Saul Alinsky and Bill Ayers who ascended to the oval office in early 2009. During Obama’s initial four years, in fact, 95 percent of the entire gain in household income in America was captured by the top 1 percent.

David Stockman is discussing the same themes as economist Tyler Cowan in his eBook, The Great Stagnation and his more detailed, Average Is Over

Nowhere in either of these books is the idea that Peak Oil and diminishing sources of hydrocarbon energy is somehow responsible for America's economic stagnation over the last 40 years. It is all attributed to unrelated economic factors.

Here on Po.com, the 2008 financial crisis has been endlessly attributed to rising energy costs, but this is simply not true.

Hope, if you will, that the fracking phenomenon will shortly peter-out and we can all get back to imminent doom-as-usual. But you will be hoping for that for a very, very long time - at least 30 years - IF no alternatives to fossil fuels are found. These could be Thorium, Small-Mod Nuclear, GM'd biological organisms, Advanced Solar, or even (heaven forbid!) The E-Cat. But you have to bet that nothing will be innovated or found over the next 30 years, at least. Good luck with that. In the meantime, imminent peak oil doom is a giant yawn.

But don't fret, there are plenty of other things to make chicken-little crow; it just won't be Peak Oil.

By the way, EVERY chapter of Tyler Cowan's Average Is Over incorporates the advent of increasingly capable machine intelligence. He says that, instead of some sort of human-brains-in-supercomputers idea, the predominant relationship will be Human-Machine cooperation; that those people who best know how to work with machines will prosper in the future. His discussion of it is fascinating and is nothing at all like Kurzweil's presentation of the material.

David Stockman's book, The Great Deformation has been described by reviewers on amazon as a history book; a re-write of mainstream economic history sinced The New Deal.

I read the summary article and bought the book, but I haven't read it yet.

The major themes described by these two economists are - one primarily historical, the other primarily forward-looking - are HOT economics at present.

[SeaGypsy]

In the meantime, imminent peak oil doom is a giant yawn.

But don't fret, there are plenty of other things to make chicken-little crow; it just won't be Peak Oil.

You live in a dream world. Just when it appeared you might be capable of a sane conversation, you even start one- you can't even get through page one without posting a pile of unsubstantiated garbage.

[Rune]

In the meantime, imminent peak oil doom is a giant yawn.

But don't fret, there are plenty of other things to make chicken-little crow; it just won't be Peak Oil.

You live in a dream world. Just when it appeared you might be capable of a sane conversation, you even start one- you can't even get through page one without posting a pile of unsubstantiated garbage.

Peak Oil doomers are the "dreamers" - not that global risks do not exist in various forms.

In the case of David Stockman, NOTHING is said about energy-resource scarcity as a primary factor in America's economic "deformation".

In the case of Tyler Cowan, he states tha "peak oil will not be an issue for at least another 30 years".

So throw your idiot barbs at them.

[SeaGypsy]

Why? I don't give a flying hoot what these economic hoodoo gurus spout- it's total hokum. The basis of economics IS ENERGY stupid. Why the heck do you hang around here for?

[Rune]

The basis of economics IS ENERGY stupid.

...and there is plenty of it.

I hang around here to read about energy, economics, current events, etc. I post what I and others find interesting and relevant and I make comments and sometimes venture an opinion.

I don't read your stuff, however, because it's passe, un-informing, and usually quite childish.

[SeaGypsy]

You don't read it but you respond to it usually within minutes (8 & 15 for the above)- another clever trick of your very fanciful imagination. IMO you are an ass who should have been booted from here years ago, so your disdain is fully reciprocated. Peak oil is already ripping holes in the global economy through tripling oil prices- will continue to do so. You live in some cushy life I guess it doesn't effect you personally so to you it's not real. Doesn't change the fact or the reality.

(I have lost count how many times you have changed your ID here, how many times you have seriously lost it and chucked a hissy fit agro tantrum, how many times you have been suspended for breach of the CoC, making threats etc including to me-whose posts you don't read. Me- same ID for 4.5 years, no hissy fits, no suspensions, friends made around the world. You think I'm needing your approval?) (Lol )

[Rune]

You don't read it but you respond to it usually within minutes (8 & 15 for the above)- another clever trick of your very fanciful imagination. IMO you are an ass who should have been booted from here years ago, so your disdain is fully reciprocated. Peak oil is already ripping holes in the global economy through tripling oil prices- will continue to do so. You live in some cushy life I guess it doesn't effect you personally so to you it's not real. Doesn't change the fact or the reality.

This thread is not about me.

It is about similar economic theses and discussions by two au courant, widely-read economists.

It is boring, childish and silly that all you ever seem to do is attack moi for commenting on relevant recent events or relevant recent books.

I don't make these things up. They are just there.

If these current events or discussions offend you in some peculiar way, don't click on the thread. And please refrain from attacking the messenger.

[SeaGypsy]

I don't read your stuff, however, because it's passe, un-informing, and usually quite childish.

I'm talking on a peak oil site, which I have spent best part of 5 years on, because I believe peak oil is the issue of our era. You hold nothing but disdain for peak oil but you hang around here posting fantasies. Who is 'attacking the messeger'? Who is 'childish'? Why are you here? Why not nick of to LENR.com or Unicornsexy.org?

[SeaGypsy]

This thread is not about me.

It is boring, childish and silly that all you ever seem to do is attack moi

please refrain from attacking the messenger...

peak oil doom is a giant yawn.

But don't fret, there are plenty of other things to make chicken-little crow; it just won't be Peak Oil.

The major themes described by these two economists are - one primarily historical, the other primarily forward-looking - are HOT economics at present.

This is definitely about you, not peak oil. If you had refrained from these few stupid and derogatory words, I would have left your page here alone. When you start with your generalizing slag offs- it's time to expect your page to get messed with Mr Cuckoo.