|Professor Gordon points out that the innovations that permitted such high rates of growth in the 20th century happened a long time ago. He refers to running water, electricity, central heating, airline travel, the telephone and other technological advances. They were already in place when we were a child.
Since then, there have been substantial refinements, but the basic components of modern life are the same as they were 50 years ago.
We drive automobiles. We live in houses with thermostats. We talk on the telephone. We watch TV and listen to the radio. We now have computers in our houses, but the internet does not seem to have made much difference to the material side of our lives. It is more like a 2-way television, a rich source of entertainment and useful communication device, but not much more.
Nothing much really new has come along in the last 30 years. We eat the same food. We wear the same clothes. We drive the same cars (though they are much more likely to have been made overseas). We even listen to the same rock and roll groups that were performing in the ’60s.
So, where will the next breakthrough come from? Fracking…biotech…
Google’s driverless cars? Not likely, says Gordon.
New inventions always introduce new modes of growth, and history provides many examples of doubters who questioned future benefits. But I am not forecasting an end to innovation, just a decline in the usefulness of future inventions in comparison with the great inventions of the past.
Even if we assume that innovation produces a cornucopia of wonders beyond my expectations, the economy still faces formidable headwinds. The retirement of the baby boomers and the continuing exodus of prime-age males from the labor force, sometimes called the “missing fifth,” are reducing hours worked per member of the population. American educational attainment continues to slide ever-downward in the international league tables, due to cost inflation at our universities, $1 trillion in student loans, abysmal test scores and large numbers of high-school dropouts.
For us, the analysis is simpler. What powered the high-growth rates of the 20th century? Fossil fuels…the energy from the sun, compressed, over millions of years. When mankind figured out how to use that energy in machines – planes, trains, factories and automobiles – it got a bit growth spurt.
But the machines were all in place by 1950. And the growth spurt began to slow down in the ’70s. Since then, growth rates have declined, by fits and starts, to where they are now.
Is there a new breakthrough on the horizon? Will we figure out how to use even more energy to produce even higher standards of living? Who knows? But very low rates of GDP growth are the rule, not the exception. For tens of thousands of years mankind probably advanced little if at all.
That’s why the move to wind power is a move ‘back to the future.’ We’ve had windmills for hundreds of years. But if it made sense to use wind turbines to generate electricity, there would be no need to subsidize the wind power industry. It could produce the juice and make a profit at it.
On the other hand, if it can’t produce electricity at a competitive price, it is like an auto company that can’t make cars at a profit…or a bank that needs federal bailouts to stay in business.
Imagine a company that makes widgets. It ‘invests’ $100 worth of labor, materials and overhead in order to make $90 worth of widgets. The world is $10 poorer. Ten dollars worth of resources has been lost.
Now, you can imagine what would happen next. The company should go broke. But the local politicians might announce a plan to ‘save jobs’ by giving the outfit a subsidy. Then, the zombie business could go right along losing money…making people poorer…almost indefinitely.
Wind powered electricity has been making people poorer ever since it was invented by Charles Brush 125 years ago. It has never been able to compete with electricity generated from fossil fuels. Still, that hasn’t stopped people from trying. Especially after Congress voted to give the industry subsidies in 1992.
When entrepreneurs have their own money on the line, they learn quickly. But when it is other peoples’ money that keeps them going, ignorance is bliss. They are happy zombies, generating power – at a real loss – from the fickle winds…and making the world poorer as a result.
Phil Gramm, former US senator from the Lone Star state, tells us that it costs $52.48 worth of government subsidies for every million watt hours of electricity the windmills put out. This is much more than nuclear power, which gets only $3.10. Natural gas gets only 63 cents.
And if the subsidies to the wind zombies continue for another year, we’ll be out another $12 billion.