The Dismal New Science of Stagnationism

If the future is behind schedule, it may be because the world’s major financial institutions and venture capitalists have not been backing the right ideas.

Could pessimism about progress through technology be spreading to the political Right? Respected figures like entrepreneur/financier Peter Thiel and economist Tyler Cowen have been contemplating the heretofore unthinkable.

The trend is new. Over the last 75 or 80 years, conservatives and libertarians have been more sanguine than the Left about the future of rising living standards through scientific and technological innovation in America. While Franklin Roosevelt is remembered for boundless good cheer and for bold technocratic projects like the Tennessee Valley Authority and the Flood Control Act of 1938 (recently celebrated by David Welky in his new book The Thousand Year Flood), there was a gloomier side to the New Deal. Alvin Hansen of Harvard, the greatest American Keynesian and one of the most respected economic advisors of the New Deal, developed what his now better-known colleague and sparring partner Joseph Schumpeter called “the theory of vanishing investment opportunities.” (Keynes, as Schumpeter later wrote in a memorial essay, had believed as early as 1920 that the pace of technological innovation was flagging and that market incentives to invest were thus shrinking.) Ironically, some economic historians, including Alexander Field in his recent book A Great Leap Forward, now consider the 1930s to be a high point of technological innovation. By the early 1980s the Marxist economist Paul Sweezy, quoting Schumpeter’s remark, took issue with both men but acknowledged that Hansen’s analysis of the weakness of investment had become “a good deal less, not more persuasive.”

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Jimmy Carter, trained in the once-cornucopian profession of nuclear engineering, seemed to proclaim a new age of limits and lowered expectations during his time in office, whereas Ronald Reagan set the tone for his administration with a sign in the Oval Office that read, “It CAN Be Done!”; John Boehner, Speaker of the House, keeps a similar one on his desk. George W. Bush may have provoked snickers with his call to “make the pie higher” (actually more logical than “bigger,” since pies are sold in standard diameters and often vary in depth), but the virally broadcast malapropism may actually have helped to reinforce his optimistic

What has changed the picture is not the current recession in itself but the failure of icons like the Concorde and the disappointing commercial progress (so far) of others: magnetic levitation trains, high-temperature superconductivity, genetic engineering, individualized medicine, fusion power, and nanotechnology. Solyndra’s bankruptcy has dampened hopes for a green technology boom. Futurism is almost a nostalgic word.

Conservative stagnationists were not the first to identify the issue. On the scientific side, that credit goes to the writer John Horgan in The End of Science (1997); on the technological, to the military historian David Edgerton in The Shock of the Old(2007).

But there’s new life in the theme. Tyler Cowen’s The Great Stagnation (2011) has become a best-selling e-book in which the author argues that we have been living through decades of flat real income and that no turnaround is in sight. Yes, he says, the Depression continued an era of fundamental invention, but we have been largely living on its intellectual capital, especially since 1960 or so. New innovations are possible but have become so expensive that the rate of return on technology is doomed to sink.

Nor is government regulation a real culprit; the tandem growth of corporate and state bureaucracy is a consequence of technological maturity, not liberal conspiracy. Although he points to some signs of hope in the closing chapter, Cowen’s only concrete suggestion is to “raise the social status of scientists.” The paradox is—at least in my experience as a former science book editor—that the greater the scientist, the less the concern about social status. Albert Einstein, Marie Curie, Richard Feynman, and Cowen’s favorite, Norman Borlaug, didn’t do what they did in order to join some country club. In fact, if the fruit (so necessary for President Bush’s deep-dish pie) is high enough, perhaps even such giants could not reach it.

Where Cowen sees inherent obstacles, Peter Thiel, in a series of interviews and essays (most recently in National Review) is most concerned about political ones. He scorns higher education and holds a competition for student entrepreneurs willing to drop out of school to pursue projects. He blames colleges for promoting identity politics and culture wars, politicians for maintaining entitlement programs at the expense of investment in infrastructure, and the public for abandoning its faith in the radiant future—as represented by Robert Moses of the 1930s (still a New Deal liberal) and the architect of Brasilia, Oscar Niemeyer (a lifelong Communist).

Thiel still appears to lean toward the low-hanging-fruit hypothesis; at least he has never identified some innovation with the potential to transform living standards, although like Cowen, he recognizes the technological fecundity of the 1930s. On the other hand, where Cowen cites the high quality of life in statist Japan to suggest that stagnation may not be so bad, Thiel “no longer believe[s] that freedom and democracy are compatible” and has spoken out for city-states on ocean platforms instead.

The new stagnationism faces three challenges. First, earlier stagnationists like Hansen have been wrong, at least in the near term. Second, one of the main measures of human well-being, life expectancy, continues to increase steadily at 3 months per year; a leading demographer, James Vaupel, believes there is no limit. Third, given the dozens of possible breakthroughs announced by scientific magazines every month, it is unlikely that they are all dead ends. On the other hand, neither do such numbers refute stagnationism.

If the future is behind schedule, as I’ve joked elsewhere, there is another and more hopeful set of explanations. It’s possible that, for cultural reasons, the world’s major financial institutions and venture capitalists have not been backing the right ideas. They and their investors may be more impatient for payback than their predecessors. At least that is what business critics like Alfred Rappaport and John Bogle in Saving Capitalism from Short-Termism (2011) might argue. Some of the greatest postwar innovations like the Xerox 914 photocopier and jet aircraft had to overcome years of discouraging setbacks. On the other hand, the world’s most admired technology company, Apple, is actually praised by authorities like Fareed Zakaria for how little it spends on basic research; if AT&T had adopted that policy in the mid-20th century, there would be no Apple. So changes in taxation and corporate culture should also be considered.

Neither optimism nor pessimism about future innovation can be proven. And optimism, as the Solyndra case shows, has its own pitfalls. But optimism has been a consistent political winner for conservatives, as well as liberals, not only because people like to hear positive things but because they understand that stagnationism has a fatal flaw: It can become a self-fulfilling prophecy.

By Edward Tenner