The economist Robert Gordon, one of the seven speakers at the APEC CEO Summit, says that the technological revolution has not been as important as the inventions from the end of the XIX century.
Robert Gordon was named in 2016 as one of the 50 most influential people in the world by Bloomberg. This prestigious economist, professor at Northwestern University and expert on inflation, employment and growth, will be one of the seven international speakers at the APEC CEO Summit, the event that will bring together in Santiago the best-known businesspeople of the Asia-Pacific region.
In his talk he will present the findings from his latest book, The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War, in which he asks why economic growth has been so slow in the last few years in developed countries. Between 1920 and 1970, for example, the United States registered productivity growth of nearly 3% per year.
“Not all inventions are of the same importance. The invention of electricity and the combustion engine, as well as others, at the end of the XIX century are key to understanding how we were able achieve such rapid growth in productivity. We need to understand why the digital revolution, associated with computers, has not been so powerful, why it hasn’t changed our daily lives in the same manner. These are some of the issues I will be talking about” he commented in an interview with the Diario Financiero.
– So, from what you say, Information Technology has advanced rapidly, but its impact on growth in productivity has not been as important as for previous inventions?
– Correct. The impact of Information Technology has been felt over a long period. We had a complete transition in the business world from typists and filing cabinets to search engines, internet and flat screens. But this transition, which was very important and gave the United States a temporary resurgence of growth in productivity at the end of the ‘90s, came to an end in 2005. The most relevant invention of the last decade, the smartphone, has been hugely beneficial to consumers, but it hasn’t changed business practices or productivity very much.
– Do you think that this change could be accelerated with the increased use of Artificial Intelligence and robotics?
– Yes. Indeed, I will be talking about robots and Artificial Intelligence (AI). The benefits of AI are not going to appear from one day to the next. We have already seen the use of AI in voice recognition, language translation, customer service and calls. Autonomous vehicles, however, have turned out to be more difficult to develop than was assumed five years ago, because the technology is not sufficiently advanced.
– So, you rule out an impact on productivity levels and employment?
– We have already seen some examples of AI, but it has been a gradual development that hasn’t been important enough to change business productivity. I am going to mention the famous prediction made five years ago that says that over the next 20 years half of the jobs in the United States will be eliminated. I have researched this in depth, and I show that the number of jobs has grown substantially, contrary to what was thought.
– Are we in the midst of a new world with low growth and low inflation?
– I think that the biggest revolution of the last decade has been the disappearance of inflation and the flexibility given by central banks to get to extremely low interest rates, in their continual battle to reach their targets of 2%. I am glad you mentioned this, because it is something that is not really categorized as productivity change, rather it is a change in the way that prices are fixed. It is partly the result of goods being so cheap, which has been possible thanks to computers. In part it is due to the opening up of economies and trade, which incorporate cheaper products to replace national products. It is also related to the weakness of manual labor, with the decreasing power of the trade unions, and the ever less important indexation of salaries.
– Are prices being measured correctly?
– There has always been an upward bias in the price index, due to the incapacity to correct for new products, such as smartphones, and to correct for changes in quality in existing products. I was on the Boskin Commission that reviewed biases in price indexes. We concluded that 20 years ago, the US Consumer Price Index had an upward bias of 1.1% per year, which meant that growth in production and productivity has been underestimated by the same amount. There is a consensus that this bias has stayed the same, but that it hasn’t got worse. Therefore, we can’t explain the deacceleration of productivity as a measurement problem.