Back to Work, Back to School, Back to the Future

Here is another reprint for new subscribers. This article originally appeared at bretswanson.com on September 8, 2020.

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A lack of faith in the future. That could be the central problem with today’s perilous politics.

It’s an age-old dilemma because it’s far easier to tear down than to build up. Gravity and thermodynamics say so. For thousands of years, individuals or small groups struggled each day to to find food and shelter. Growing meant seizing land or treasure. Then the Industrial Revolution led to an escape from this zero-sum trap. 

Technology and creative collaboration unleashed a positive-sum explosion not only in living standards and life spans but also in the total number of humans and the rights they enjoyed. Suddenly, radically different futures were possible. This novel ability to think about the future then propelled additional waves of investment, discovery, and equality. 

Despite our riches, there’s evidence the rate of future-orienting activities has slowed in recent years. This downshift of constructive behaviors could be both a cause and effect of recent attacks on the American idea itself. If growth slows and opportunity recedes, many will question whether the system is fair. On the other hand, pessimistic zero-sum thinking can close off the vast opportunities of a collaborative, pluralistic society. Which ever comes first – slow growth or anti-growth thinking – they often conspire to generate a downward spiral.

Americans aren’t moving from place to place or job to job like they used to. Geographic mobility is down. The rate of startup business formation has been falling for several decades, even for high-growth firms. As economists John Haltiwanger and Ryan Decker show, the rate of job reallocation – the sum of jobs created by expanding firms and jobs eliminated by shrinking firms – has also significantly declined. When fewer workers move toward more innovative firms, productivity and income growth slows. (See, for example, Leaving money on the table: Declining responsiveness and the productivity slowdown ; and What Happened to U.S. Business Dynamism?)

Smaller families could also be a sign of pessimism. Births per woman declined to 1.73 in 2018 from 2.12 in 2007, the biggest drop since the early 1970s.

Falling fertility and falling economic dynamism may be mutually reinforcing. Two essential inputs of child-rearing are health care and education, the cost of which has risen between two and four times the rate of inflation for four decades. Building human capital is increasingly expensive. Unlike other industries, health care and education have mostly resisted radical technological and entrepreneurial innovations which, in the rest of the economy, routinely deliver better products at lower prices. Throw in the rising cost of housing, another non-negotiable input, and children look like near term liabilities instead of long term assets. 

Before Covid-19 hit, we’d begun a modest multi-year economic acceleration, with higher productivity and wage growth spread more broadly across workers and industries. But the pandemic interrupted this mini-trend and once again blocked our view of the future. Extended lockdowns and school closures were based on a narrow, zero-risk mindset. A panic about daily survival turned into a medieval state of paralysis, superstition, and fury.

Today’s fashionable solutions to malaise could not be more counterproductive. Just like the failed economic collectivism of the 20th century, today’s woke-tivism is positively zero-sum.

Economic Marxism presumed permanent conflict between rigid classes of  workers and owners, between labor and capital. Neo-Marxism presumes a permanent conflict between rigid groups based on identity and ideology. In both narratives, for some to rise up, it must come at the expense of those on top. There is no cooperative interplay.

Last century, that meant seizing the means of production. Today, it means seizing the means of influence – in companies, schools, and the media, on boards, in politics and university admissions, and on platforms, from social media to index funds.

But the means of production and of influence are not fixed. The miracle of technology is that we can build new machines and companies far better than the existing ones. Or create new information channels and institutions which expand the ability to speak, learn, and organize. For everyone of any identity. 

The Internet’s ability to mitigate many of Covid’s worst effects is instructive. The pandemic-induced rise of telemedicine and remote education, although imperfect, is just a preview of the quality and cost revolutions coming to these previously impervious industries. Exploding information channels can expose corruption and injustice, find and fix elite errors, and help us stumble toward the truth.

Recommitting to the future, however, requires a basic agreement on bedrock American values, such as free speech and equal opportunity. The ferocious campaign to silence disfavored voices in all our institutions, especially on social media, is dangerous. The genius of the open society is that when the best ideas in science, business, and politics rise to the top, everybody wins.

Woke science, technology, and business won’t get us to Mars, cure Alzheimer’s, or harness fusion energy. Nor will it help us deter and win wars or find solutions to our most pressing social problems. It surely cannot generate the type of economic expansion which might support healthy families and broad-based income growth, helping us to pay our surging debts.

The Internet gives us history’s most powerful tools to collaborate and generate knowledge, wealth, and justice. But only if we allow the entrepreneurial, positive-sum, error-correcting codes of free speech and creative cooperation to flourish.