.. median income rose a remarkable 5.2 percent
.. In fact, the top one percent is now paying about the same share of its income in federal taxes as it did in 1979, before Ronald Reagan began the era of big tax cuts for the rich. And some of the increased tax take is being used to subsidize health insurance for middle- and lower-income families.
Conservatives predicted disaster from these initiatives. Tax hikes on the rich, they insisted, would stall the economy. Obamacare’s combination of regulation and subsidies, they declared, would kill millions of jobs without increasing the number of Americans with insurance.
.. Any attempt to help working families directly, we’re told, will backfire by hurting the economy as a whole. So we must cut taxes on those “job creators” instead, counting on a rising tide to raise all boats.
When Economic Growth Doesn’t Make People Happy
That economic expansion leads to greater well-being is a central tenet of modern thought. And yet, that’s not what is happening in America today.
In 2013, UNICEF released a report comparing the well-being of children in 29 of the world’s most advanced nations. The report compiled data on health, safety, education, behavioral factors, living environments, material well-being, and subjective “life satisfaction” surveys from children themselves. The United States landed near the bottom on almost all measures, ranking 26th out of 29 countries; only Lithuania, Latvia, and Romania performed worse.
.. Early cities appear to have been fairly egalitarian. Engong Ismael, a Balinese anthropologist, describes them as characterized by a horizontal caste system with clearly defined roles—each caste respected for its contribution to the health of the community.
.. Easterlin’s paper, which analyzed the comparative happiness of nations, indicated that rising incomes increase the happiness of individuals in lower-income countries, but that as the prosperity of nations rises it hits a point beyond which additional income doesn’t make people any happier. This phenomenon has come to be known as the Easterlin paradox.
.. Happiness is tied to what Deaton calls emotionally enriching social experiences. Kahneman says, “The very best thing that can happen to people is to spend time with other people they like.
The Next Industrial Revolution
A “crisis of abundance” initially seems like a paradox. After all, abundance is the ultimate goal of technology and economics. But consider the early history of the electric washing machine. In the 1920s, factories churned them out in droves. (With the average output of manufacturing workers rising by a third between 1923 and 1929, making more washing machines was relatively cheap.) But as the decade ended, factories saw they were making many more than American households demanded. Companies cut back their output and laid off workers even before the stock market crashed in 1929. Indeed, some economists have said that the oversupply of consumer goods like washing machines may have been one of the causes of the Great Depression.
.. Counting both humans and machines, the world’s labor force will be able to do more work than ever before. But this abundance of workers—both those made of cells and those made of bits—could create a glut of labor.
.. Thompson: There is an ongoing debate about whether technological growth is accelerating, as economists like Erik Brynjolfsson and Andrew McAfee (the authors of The Second Machine Age) insist, or slowing down, as the national productivity numbers indicate. Where do you come down?
Avent: I come down squarely in the Brynjolfsson and McAfee camp and strongly disagree with economists like Robert Gordon, who have said that growth is basically over. I think the digital revolution is probably going to be as important and transformative as the industrial revolution. The main reason is machine intelligence, a general-purpose technology that can be used anywhere, from driving cars to customer service, and it’s getting better very, very quickly. There’s no reason to think that improvement will slow down, whether or not Moore’s Law continues.
.. I would say the best evidence comes from the wage growth numbers. I know we’ve experienced an uptick in recent months, but we’re seven years into the recovery and still well short of the level of nominal wage growth we would expect, even compared to recent disappointing recoveries.
.. Employment in Britain is at an all-time high, and wage growth there has underperformed America and most of Europe. This suggests that the main way that employers are using people in countries like the U.K. is to use them to do low-productivity work.
.. In the long run, I’m optimistic for technology to transform health care, but that’s a harder sector to disrupt.
.. The very rich will still want people, their own personal shoppers and assistants. Being able to retain human labor would be a sign that you’re wealthy. So even in a future city that had a lot of laborers replaced with technology, you might still have artisanal service sector workers.
.. A universal basic income is a totally different social contract. It says that, on a permanent basis, a large class of people will probably be subsidized by a different class. That’s a much trickier thing politically, and it raises questions about the value that they are contributing to society.
There’s No Such Thing as an Economic Miracle
Most of the world’s wealthiest and best-governed countries got there without super-rapid bursts of growth. Denmark, which has a per capita income of about $52,000 and is frequently ranked as one of the happiest countries in the world, never experienced what anyone would call an economic miracle.
.. From 1890 to 1916, per capita growth averaged about 1.9 percent per year, and if in 1916 you had forecast that this pace would continue for another 100 years, you would have been off by only about $200. Denmark had positive growth about 84 percent of the time and no deep recessions
.. U.S. growth rates at the time were typically below 2 percent, and even lower up through 1860, hardly impressive by the standards of today’s China or India — or for that matter today’s U.S. The big advantage of the U.S. is that it avoided major catastrophe for long periods of time, apart from the Civil War, and pushed ahead with fairly steady progress.
.. It’s hard for economies at or near the technological frontier to rapidly improve living standards, because invention is usually slower than playing catch-up by borrowing technologies from wealthier nations.
.. Many export industries are automated and hence don’t create as many middle-class jobs as they used to.
.. In other words, today’s world may resemble the 19th century more than the last few decades.