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Yet Gordon’s analysis misses the real source of sustained economic growth by focusing too narrowly on technology. Economic growth is not the result of industrial revolutions. Instead both industrial revolutions and economic growth are the consequences of liberty, of the loosening up of the social, cultural, and economic strictures on innovation and experimentation. History teaches that technological innovation and economic growth occur in nations with strong property rights, the rule of law, limited democratic government, and free speech. In this reading of history, the main reason the Industrial Revolution took place where it did wasn't because Western Europeans and North Americans were smarter than people elsewhere or had access to more raw materials. It's because they were relatively speaking freer to try new ways of doing everything.
It is obviously possible for countries with authoritarian regimes to grow for a while as they copy the technologies and managerial techniques devised in free countries. Think of contemporary China. Sooner rather than later, its growth will decelerate sharply if it doesn't liberalize virtually every aspect of economic and cultural life. Despite the recent blistering pace of economic growth in China and its rise as the second-largest economy on the planet, it still has far to go; its workers produce just one-fifth the wealth per year that American laborers do.
Can the U.S. avoid the sort of economic stagnation that Gordon and others see? Without becoming panglossian, the short answer is yes. With regard to innovations that could substantially boost productivity and increase per capita GDP, Gordon fails to peer deeply enough into his crystal ball. For example, 3D-printing is coming (a.k.a. additive manufacturing) in which parts and equipment can be customized and made to order. The biotech space is bristling with innovation. Biology has turned out to be harder to manipulate and standardize than many boosters (including me) had hoped, but as the bioinformatics revolution gains speed, that should change. Developments in biotech and synthetic biology will increase crop productivity, extend healthy human lifespans (potentially taking pressure off of unfunded liabilities related to health care and pensions), and manufacture (read: grow) a wide range of products from cups to houses. And artificial intelligence is already being embedded in all sorts of everyday items and appliances (such as Siri on your iPhone). Having the computational capability and insight of IBM’s Jeopardy-winning Watson machine in your cell phone can only boost your productivity in ways that we cannot yet imagine or capture with existing measures.
It may be that none of these nascent industrial “revolutions” will yield 2 percent per capita annual GDP growth. Nevertheless, maintaining—or should I say restoring?—competitive free market institutions will provide the essential foundation for continued technological and economic progress in the 21st century.