Since the end of World War II, the United States has seen a remarkable period of economic growth in which measured gross domestic product, population and standards of living have grown faster than 2 percent annually. Indeed, for much of the nation, this has been the norm since shortly after the Civil War.
This has led us to feel for some time that one generation will be much better off than the last. There is some troubling evidence that this might be changing.
One way to think about this is to count the number of quarters in which gross domestic product grew at a blistering pace—let’s say at an annual rate of more than 4 percent in a quarter.
In the 1950s and ’60s, we saw 20 quarters each of growth above 4 percent. In the ’70s and ’80s, we had a dozen and 13 quarters, respectively, over 4 percent, but we had an even better ’90s, with 15 quarters of rapid growth.
The 2000s saw only five rapid-growth quarters, and this decade has had two, putting it on pace for a replay of the last decade. Something is happening.
This metric has its shortcomings, not least of which is that there is less volatility in the economy. Also, fewer rapid-growth quarters implies less buoyant consumer and business confidence of the type that really boosts growth.
It might also mean that higher average growth rates are more difficult to achieve due to structural changes in the economy that have to do with technology.
Most of us are amazed at the apparent technological change in just the latest version of our smartphones, much less over the past 50 years. But how much of this change affects economic growth?
I am typing this column in the pre-dawn hours on a touch-screen device that was barely envisioned in the science fiction TV shows of my youth. This device makes my life easier and the household quieter, but I am not sure how much more productive it makes me.
Much of the technology we now use makes our lives better, but it might not make us more productive at work. This is good, of course; we work to have better lives.
But this technology does not boost GDP. Moreover, where this technology does affect the workplace, it might do as much to eliminate labor as it does to create demand for new workers. Either way, slow growth may be here to stay.•
Hicks is director of the Center for Business and Economic Research and a professor of economics at Ball State University. His column appears weekly. He can be reached at firstname.lastname@example.org.