Immaterial World

The Evolution of Progress: The End of Economic Growth and the Beginning of Human Transformation, by C. Owen Paepke, New York: Random House, 382 pages, $25.00

This book reminds me of Francis Fukuyama's The End of History and the Last Man: an absurd but engaging thesis, thoughtfully and earnestly argued. Though the central argument ultimately runs aground, the journey toward the reefs is an interesting and thought-provoking one.

The author is C. Owen Paepke, a Phoenix, Arizona, attorney and "unabashed generalist," according to the jacket sleeve. His modest proposition is that the era of material progress, and its radical transformation of living standards over the last two centuries, is coming to an end. "The children of the 1980s and 1990s," he writes, "will exert about the same effort during their lifetimes, and will have their needs and wants satisfied to about the same degree, as their parents….Man's material state has arrived at its practical limits."

As economic growth peters out, a different form of progress, what Paepke calls "human progress," is now emerging: "The new kind of progress, which makes human traits and abilities the subject rather than just the source of change, will dominate the agenda of the next century, perhaps even the next decade." Thus, as the conditions under which human beings live enter a long stagnation, qualitative improvement of human beings themselves is now on the horizon. Paepke has in mind such things as the extension of the human life span and the augmentation of intelligence through chemical, genetic, and electronic means.

Unlike Club of Rome types, Paepke rejects the notion that finite resources pose limits to economic growth. "In practical terms," he says, "the planet's resources have become not scarcer, but more plentiful." Instead, he argues, material progress is grinding to a halt because of a combination of technological limitations and consumer satiety. In other words, for most of the things we do, there just isn't any appreciable room for improving how we do them—or if there is, people aren't willing to pay for it with the necessary savings and investments.

Paepke sees the past two centuries of economic growth as the product of four converging historical forces, all of which are nearly spent: technological innovation; the emergence of free-market institutions; market expansion through cross-border trade; and the accumulation of capital.

As to technology, here's the nub of his case in one paragraph:

"But technology, however ingenious, must obey physical laws, and those laws limit the tangible benefits to be realized from further advances. Consider transportation. Crossing the United States in a Conestoga required considerable grit, some luck, and six months. It now occupies a few hours spent sitting in an easy chair. The next century could shave another hour or two from the transit time, but that improvement would be negligible compared to what technology has already accomplished. Satellites and fiber optics communicate information in all forms worldwide at the speed of light, an absolute physical limit. Energy flows freely from fossil, hydroelectric, and nuclear sources. Contrary to the common perception, it has become not scarce and expensive but abundant and cheap. Vaccines and antibiotics have nearly eliminated the threat from contagious disease in the developed world, allowing all but a small minority to live full life spans. Labor-saving mechanization and rising yields have reduced the number of farmers, once a majority of the population, to negligible levels. Manufacturing productivity increases—more than tenfold in this century alone—are doing the same for blue-collar labor. In these and other fields, future progress will be confined to ever smaller increments between the state of the art and the limits of the possible."

Paepke grossly overstates his case. New technology continues to hold the promise of not just incremental but sweeping changes in material welfare. While information may travel over wire or glass or through the air at the speed of light, it rarely makes the trip from sender to receiver without major bottleneck slowdowns at both ends—if you don't believe me, try faxing a 100-page document sometime.

The not-far-off arrival of integrated broadband communications—the much ballyhooed "data superhighway"—will break through those bottlenecks and allow the real-time communication of voice, text, and video. That capability will radically transform the way we do business, the way we entertain ourselves, and the way we educate our children.

In other areas, biotechnology can offer healthier and better-tasting food. More exotically and over the longer term, space travel can literally open up whole new worlds for human development. In addition to creating dramatic new products and services, technological innovation will continue to batter down the costs of existing goods.

Paepke notwithstanding, there remains plenty of room for improvement. For example, about 16 percent of the U.S. work force is still tied down in manufacturing; about 20 percent is in wholesale and retail distribution. Those percentages contain large chunks of blue-collar and middleman inefficiency that will eventually be rooted out by developments in automation and information technology. In turn, those cost savings will free up resources for, among other things, increased leisure, improved environmental quality, new forms of entertainment, new cultural outlets—not to mention investing in and buying all the new goodies of "human progress" that Paepke trumpets in the second half of his book.

Of course there will be industries that remain relatively untouched by technological dynamism—in particular, many face-to-face services (for instance, hotels and restaurants). Still, I have little doubt that material conditions in the 1990s will seem unbearably primitive from the perspective of the 2090s—I can barely remember how we got along 10 years ago without ATMs and fax machines and PCs.

Paepke is similarly off base in assessing the vitality of the other three forces driving material progress. He properly credits the development and spread of market institutions with launching the spectacular growth of the last 200 years, but then he argues that "the very completeness of capitalism's triumph shows that the freeing of markets has already made its major contribution."

Would that it were so. The bulk of the world's people and resources remain either trapped in subsistence agriculture or controlled by statist planners. In our own country government consumes or controls over half the national income, and we're the freest nation on the planet.

Gains in wealth from the unification of local and national markets through trade are approaching their limits, asserts Paepke, because "all the advanced nations are integrated into a single worldwide economy." Of course, the vast majority of the world's population does not live in the "advanced nations" and is only marginally involved in global trade and investment flows. Even in the developed nations, the international economy is still disproportionately dominated by commodities and manufactured goods; the potential of information technology to globalize services is just beginning to be realized. And over the much longer term, space travel can let us move beyond simply a global economy.

Capital accumulation fares no better in Paepke's view. He argues that increasing affluence diminishes people's incentives to save and thereby fund further economic growth. He has a point, but unfortunately it cuts against not only material progress but "human progress" as well. After all, genetic engineering and artificial intelligence are going to cost a lot of money, and it has to come from somewhere.

Not to worry, though: The connection between rising incomes and falling savings rates, though probably real, is less than meets the eye. First, the savings-as-percentage-of-GDP statistics commonly cited have their fair share of problems, not the least of which is their failure to include unrealized capital gains as savings. More importantly, the governments of the United States and other industrialized nations, through their policies of punitive taxation and continual inflation, are waging a war on savings. The main factor depressing savings today isn't affluence; it's bad policy. In short, though the forces of material progress may be losing a little steam, they remain immensely powerful and unlikely to fade away in anything resembling the foreseeable future.

Paepke's argument completely falls apart when he tries to exclude the "human progress" now emerging from the larger phenomenon of economic growth. These new human-ability-enhancing technologies will open up new markets, create new industries, generate new fortunes, and promote a general uplift in living standards. That's economic growth, folks. It is ludicrous to talk about "the end of economic growth" while in the same breath extolling the enormous promise of these technologies—you can't have stagnating living standards and rising life spans.

If Paepke had simply argued that human progress will soon replace material progress as the most dynamic area of economic growth and social change, he might have sold me. Instead, he goes overboard into nonsense, arguing that material progress is coming to an end, and that human progress will emerge apparently through some kind of immaculate conception unmediated by economic transactions.

So why read a book with a nonsensical argument? Well, Paepke's discussion of the historical forces behind material progress offers a solid, useful summary of "how the West grew rich," in Nathan Rosenberg and L. E. Birdzell's phrase. And his treatment of such brave new fields as genetic engineering, intelligence enhancement, and life extension provides a fascinating and accessible overview of the cutting edge of scientific research, as well as ample source references for the more technically minded.

Finally, Paepke's willingness to look at the big picture and speculate on future social development challenges the reader to widen his own perspective, to get past the buzz and clutter of daily headlines and take a longer view. Provoking if not convincing, The Evolution of Progress is worth a read.

Contributing Editor Brink Lindsey is director of regulatory studies at the Cato Institute.