Two items in my newspaper this morning are yet more evidence to my mind that the industrial revolution, 1785 to 1985 might have been a flash-in the pan. It is highly likely that we are now back to a hardly discernible rate of economic growth — let us say, well below 0.5% per annum — that was characteristic before then.
“What nonsense!” those who support continuing high economic growth will say. “Innovation is more prolific today than it’s ever been throughout history. There has never been so much scientific discovery.” True enough, but the latter doesn’t necessarily lead to the former — at least not in the consumer goods department. There hasn’t been a single new consumer item in 50 years or more. Improvements to existing ones, By all means. New ones, No.
And, let’s face it, it is new consumer goods that has accounted for something like 70% to 80% of all production ever since 1785. Without uniquely new consumer goods in the advanced countries they can’t possibly lead all the rest of the world into economic growth because they carry out almost all the scientific research. The rest of the world is crowded out.
Instead of economic growth, what is happening in the advanced countries as we proceed from manufacturing occupations towards service professions. Instead of institution-led high-intensity financial investment in projects with high and relatively rapid returns, we are now proceeding to a condition of lower, parent-led financial investments over longer periods into the education of children with much longer hopes of returns.
What were the items in my paper this morning? One was a short item describing how Japan is “facing a new recession.” That will mean that Japan has had a flat economy for 35 years ago. The other is a grumble by Andrew Sentance, formerly a member of the Bank of England (BoE)’s that we are now becoming “addicted to low interest rates”. (We need to correct him here, banks are still charging respectable interest rates when making loans. It’s the BoE’s basic rate of 0.25% that he’s talking about.)
But why not remain addicted to zero basic rates in the central banks? Why not dispense with central banks altogether as being no longer required? Most workers in an advanced economy today earning a decent wage are quite content with the consumer goods that are now available and the leisure pursuits that were also developed during the industrial revolution.