Octobre 9, 2012
Give money to physicists and see it spent on dark matter and dark energy, if not poured down black holes. If the whole creation is in the grip of the dark side, we should not be surprised our future too looks mostly dark. There you go again, Cassandra, you might say, but wrongly so.
In this fillip, the future is dark not for any forseeable cataclysm but for being unknowable. Nothing that the Greek did not know naturally. Even Pericles must have privately pictured himself facing the past, his back to the invisible future, a realistic attitude of the ancient Greek which clashes with more modern expectations. Who will today dare confess having no vision to where to lead the people, when solliciting their votes?
Yet what sure plan can fulfill every politician's prayer and guarantee the growth without which few states can hope finance their deficits, let alone balance their budgets? Some sacrilegious minds go further and ask "might growth be ending?", the first sentence of Martin Wolf's recent column (*).
Relaying "Robert Gordon of Northwestern university" (1), Martin Wolf argues innovation has propelled economic growth since 1750 but, despite "the computer, the semiconductor and the internet", "overall innovation is now slower than a century ago". Combined with globalisation and aging populations, this tapering of innovation will make "the rise in the real disposable incomes of those outside the elite [...] slow to a crawl".
Lest you be seduced, read John Gapper's farewell hymn to the United States and its "enduring capacity to reinvent itself through technology" (**). Whether in telecommunication, with 4G smartphones, or energy, with hydraulic fracturing, the US is "rac[ing] ahead. It hasn't lost its touch".
Shrinking from such disagreeable dissonance, we could say both columns but reflect their authors' circumstances. From New York to London, John Gapper travels in the wrong direction. Financial Times readers know the European Union is in a bit of economic trouble compared to which the United States glow, positively. And Martin Wolf may be biased by the present repressed depression. Writing during the 70's stagflation, Fernand Braudel too wondered whether "some kind of ceiling may not be reached in the future" to stop "that wonder of wonders, continuous growth" (2).
We could also caricature the two columnists' positions as two opposite bets about innovation, one optimistic, one pessimistic, to be settled at a time when, Greek wise, we are able to face our future in hindsight. If the future is dark, aren't skepticism and gambling the only logical positions?
Like matter and energy though, the future is not totally dark. To see whatever light there is, let us question Martin Wolff's question and ask what is growth in the first place. I leave the details to the experts but, however they go about it, growth is a quantitative increase in some economic measure. This being so, we must remember that, each time we attempt to track a social phenomenon, society remains free to falsify the results.
Forget financial accounting in modern Greece, forget Google bombing. What about search engine optimization? If intent and tactics to make one's site more relevant than reality warrants are conscious, what of long term phenomena? Who in China understood that, given a few centuries, an examplary examination system (3) which measured intelligence independently of lineage would evolve in the fossilized learning of the mandarin class?
Professor Gordon's error is to see current developments in information technology as some later phase of the Energy Age, ushered some 250 years ago by the Industrial Revolution. In a fit of foresight, I claim instead they are the stirring of the Age of Information, which falsifies growth as we know it. Indeed let us not confuse growth as measured today by the economists and what it wants to represent, i.e. the development of society.
I once criticized Yochai Benkler for dismissing markets as irrelevant to today's intellectual production. But who will deny that the economic layer "made up of all the activities outside the market and state controls", what Fernand Braudel calls the "bargain basement" (2), is rapidly growing as a direct consequence of the Information Age? Professor Gordon's paper is available at the National Bureau of Public Research for a fee and for free at Northwestern University. Who thinks today's growth measurement will capture but a tiny fraction of the total activity, where all clicks are equal?
Shortly before 1789, French society was legally divided into three "estates", the nobility, the clergy and the miscellaneous "third", on which taxes fell in a manner so preferential and inefficient it had left the French State quasi bankrupt. You know what happened next, an explosion.
Aren't western states in the same quandary as 1789 France? Buying the lawmakers to pass laws favorable to their interests, capitalists minimize their share of taxes. Yet another layer of society, the bargain basement, shirks all duties on its black economy. As a result, the more the state decreases its deficit, the more it focuses the tax burden on a single layer, the market economy, and the more it risks depressing it, while social solidarity suffers.
Social solidarity developed in the XIXth century as employees in similar situations pooled their risks. It too faces falsification if employment itself is in decline due to the rise of information networks. "We're all headed toward an agent economy, where everyone becomes an agent or a service provider instead", Mike Farmer told Catherine Rampell (***). It may take a while but, in the long term, didn't industrialization similarly slay slavery?
Perhaps the state should get agents to join the mutual insurance schemes which protect employees and fund social solidarity for citizens on taxes. To spread taxes beyond the market economy and its employees, it should note neither capitalists, nor bargain basement operators can do without financial transfers. This is pointed out by a piece Simon Kuper penned in favor of "financial transaction taxes [FTT's]" (****). "An FTT's shouldn't be cast as a punishment for bankers. Rather it's a wonkish choice to take money where it can be missed", high frequency traders notwithstanding.
Still laws should also encourage pirates to rejoin true capitalism, whether from society's bargain basement or capitalists' perverted capitalism.
Stephanie Clifford illustrates how consumers, so much hated as copyright evaders, can become regular sales agents as "companies, like Pose, pay [them] when a purchase is associated with a link" they display to their social audience (*****). "The Federal Trade Commission says the practice blurs the line between a recommendation and a paid endorsement". Were Stephanie Clifford paid by Pose, her article would be flagged as an ad, wouldn't it? Paid bloggers are no different. But as it implies that true recommendations should be free, the FTC repeats Yochai Benkler's error.
Rather imagine we were given legal ownership to our personal data. Taxable transactions would encompass a whole new asset class. Imagine bundling of digital data were declared illegal whenever the bundler reached a certain size? Whole new markets would emerge, such as for mobile maps. James B. Stewart enrolls "Herbert Hovenkamp, an antitrust at the University of Iowa College of Law" to warn "most tying arrangement cases have involved firms with close to 100 percent market shares" (******). Sadly true, yet innovation feasts on interoperability and openness.
Louis XVI had advisors to cast some light on his future. Yet he closed his eyes and lost his head. There I go again, try as I may. The future is dark.
- (*) ........... Is the age of unlimited growth over?, by Martin Wolf (Financial Times) - October 3, 2012
- (**) ......... Innovation is the driver of America's reinvention, by John Gapper (Financial Times) - October 4, 2012
- (***) ....... When Job-Creation Engines Stop at Just One, by Catherine Rampell (New York Times) - October 5, 2012
- (****) ..... How to change the world on the quiet, by Simon Kuper (Financial Times) - October 6, 2012
- (*****) ... The Shopper as Seller, by Stephanie Clifford (New York Times) - October 3, 2012
- (******) . The Shadow Of Steve Jobs In Apple's Maps Push, by James B. Stewart (New York Times) - October 6, 2012
- (1) see Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds, by Robert Gordon (Northwestern University), August 2012
- (2) from chapter 6 and the conclusion of Le Temps du Monde, translated in English as The Perspective of the World (1979)
- (3) for more details, see the Chinese examination system on wikipedia