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Starts with an Excuse

What would make a recovery sustainable?  If you ask an economist, they’d tell you that what makes any economy grow and prosper is, ultimately, what they call “productivity gains”.  That’s the ability to make more with less that allows a people to propser.  During the 1990s this was given as the reason why interest rates could remain low and we could have one Hell of a party – a sloppy, hazy bender.  We live in the hangover that resulted, but have we really learned how intoxicating this one, simple idea is?

Like a first drink, the initial effects are simple and hard to argue against.  Changes in technology, either physical or through more efficient organization, allow companies to either make more stuff or do what they are doing with fewer people.  The gain in efficiency, measured in dollar output per employee or capital required, means that the economy as a whole is producing value.

In the 1990s, cocktail of choice became information technology, aka computers and internet.  During this period of time “technology” came to mean nothing more than this narrow area of tech, but the principle has been the same no matter what kind of “skill” is reduced to practice in a way that increases people’s ability to put out more stuff per person.

Going back in time to the 1970s, however, we had a more fundamentalist view of this intoxicating stuff.  Back then, we relied more heavily on manufacturing as an economy and tended to focus on manufacturing systems.  Technological developments then were in the form of assembly robots and other mechanization, and they were not as well received.  The United Auto Workers warned everyone that jobs lost to machines were a threat to not just their jobs but the entire economy.

The reasoning of the time went like this:  if you make more things, there have to be people who are willing to buy them, and if you let people go while you make the same amount those people have to find new jobs.  Technology might be great for the company, but it’s hard on the economy as a whole.  This view was common right through the 1980s but was eventually drowned out by one simple fact – consumption, or money spent on things that don’t last, rose dramatically in this period from 62% of GDP to 70% of GDP.

By the time the information technology came along, the warnings of the grumbly Union Guys and their weak beer started to seem very old fashioned.  Popular culture started to assume that what might be true for one class of people wasn’t necessarily true for all.  Improvements in “productivity” brought by the information technology were somehow different, as if a Cosmopolitan was different from PBR.  Nevermind that we didn’t need as many people storing, maintaining, and recalling data written on paper to make things work.  Forget about how banks once managed risk by getting to know their customers and the intimate details of their lives.

The drinks just kept on comin’, and they were good.  Technology was a driving force that increased “productivity” and made it possible for us to all be rich because we’d be even more efficient.

It’s important to look back over the blur of the whole party because there’s no one point where we went over the edge.  It only worked because we were able to consume the excess that was produced through the bubble economy of the 1990s. We were able to change the popular mythology of what technology does for us because we had an amazing party.

There is little question that the downturn we are in started around 2001 because from that year forward the net growth in GDP minus Federal deficits is negative – every other part of our economy, from manufacturing to mining and from retail to services, has added up to a decline every quarter since then.  Once we were able to use these new systems to cash-out home equity, using our homes as a kind of ATM, the overall economy actually fell harder outside of these operations that generated quick, unsustainable cash.  The crash of 2008 gradually became inevitable.

Where did it all start?  It wasn’t simply the first drink of “productivity gains”, although these clearly resulted in a need for fewer workers or goods and services that we couldn’t consume fast enough.  It started with an excuse.  Just like the commercials against drunk driving tell us, impaired reasoning and a feeling of invulnerability created the excuse that allow us to justify stupid, destructive behavior.  We need to understand that it is just an excuse and there is still no substitute for a hard dose of reality.

Technology and the “productivity gains” that it can create are not always a positive, wonderful thing.  They create side effects that ripple through the whole system.  If we want our new understanding to serve us we have to not make excuses for it because it’s left us feeling giddy and powerful.  That’s when the technology, like any addictive substance, starts to take over your life.

17 thoughts on “Starts with an Excuse

  1. Well, yes, but it’s all a matter of balance. If you’re arguing that too much of anything is a bad thing, I can agree with you. I think that’s what I see you getting at here. Maybe we have been too quick to assume that tech is a good thing all the time.

  2. No matter how efficient technology gets, it can’t eliminate the need for raw materials. Our economy is dependent on the importation of resources from other parts of the world … this is a difficult position to maintain, and it’s led to a decrease in the middle class standard of living since 1973 (the same year lower 48 oil production peaked).

    We could be rational about this and restructure an economy based on lower energy and raw material wealth, encouraging innovation and training a high-tech workforce. However, we’ve decided that limits are for wimps and have created a series of bubbles … in technology, real estate, investment banking … and (coming soon!) the health care sector.

    I guess what I’m saying is, these bubbles are a symptom of a larger problem. You can’t build a sustainable economy when you’re using more resources than your own country can produce.

  3. You skimmed over the class issue, but it makes a big difference. The way we look at the digital divide is all about class and who gets left behind.

  4. I should explain a little. This started as an argument with my kids who, along with many people of their generation, seem to think that the advance of technology is an unquestionable “good”. It struck me as strange given that we’re working our way through old Twilight Zone episodes where there are many stories about how technology can be dangerous. I had a feeling that they, and their generation, didn’t get the idea that there could be a problem here.

    Ultimately, yes, the consumption of resources way beyond anything sustainable is the real issue. What’s weird about the belief in tech is that it seems to be based on the idea that we are post-manufacturing – which is to say that it’s not about consuming resources anymore but pure brain power. I totally agree that this is the real issue at hand.

    But there’s a real fundamental belief at the core of why we find it easy to ignore this problem – and never really talk about it – that I find even more troubling. I was going to start another long series today on this topic, but this came out instead. Call it a rant if you want, but I’m trying to get at a root problem before I work forward.

    Things seemed to have changed about the time Reagen became president and we haven’t looked back. Consumption became good because it justified a popular belief in how economies operate. I would like to think that this belief has been shown to at the very least be limited.

    I’m just trying to raise my kids to be properly critical of conventional wisdom. I had this dark, ooky feeling that there’s something deep at the core of how we got where we are that makes it really hard to talk about the reality of our situation – which is that we are living in a cloudy unsustainable bubble that hasn’t yet popped.

  5. I could raise the conventional counterpoint to your idea(s) here but I won’t cuz it would only be redunant and would bore us both to tears. Some interesting things I have read, seen, heard along the way 1) Elliot Spitzer who once was a bright shining star until a sex scandal brought him down to earth agrees with you on a recent debate he said some of this knowledge economy is bogus. To need lawyers/financers/professionals you actually have to have clients who produce in someway to represent them.
    2) Something that might interest you is the new sci fy series caprica the prelude to battlestar galactica it portrays a society drunk on technology and the setting, actors etc. are very interesting it is set as a family drama so it is about relationships for females and not all that geeky. 3) on some blog recently another writer was saying similar things Gawd I’m having a senior moment and can’t remember exactly what he wrote but when it pops in my head I’ll let you know I shoulda jotted it down oh well lovely read and emailed conversation.
    I still think there is something to be said for the sharing of knowledge of all kinds even if it is not easy to quantify. Maybe its intrinsic a thing of value in itself but it probably has some slighty beneficial aspects. You know the drill 6 steps forward 5 steps back.
    Oh now I remember the German republic in itself for all its European liberalsim is also deeply conservative. They are recently expanding the school day an hour and it is meeting with some resistance. Society still put value on females for kitchen, kids and church. But dealing with new outside challenges is putting new adaptations, roles etc onto people.

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