Bliss Is On the Way: The Case for Economic Optimism
We are suffering just now from a bad attack of economic pessimism. It is common to hear people say that the epoch of enormous economic progress which characterized the century is over; that the rapid improvement in the standard of living is now going to slow down…that a decline in prosperity is more likely than an improvement in the decade which lies ahead of us.
No, this passage did not come directly out of a speech by Federal Reserve Chairman Ben Bernanke in the midst of the 2008–2009 recession, nor President Obama’s inaugural address. It comes from a talk given in 1928 by the not-yet globally renowned John Maynard Keynes to a group of high school students. The title of the talk, which appeared in print in 1930, was “Economic Possibilities for Our Grandchildren.”
Keynes argued that the doomsayers of his day were excessively focused on the short term. This tendency blinded them to what Keynes termed the “true interpretation of the trend of things”: The long-term movement of history driven by the miracle of capital accumulation. As Keynes—father of macroeconomics and innovator of the concept of government-led economic stimulus—saw it, by saving and investing in productive machines, each successive generation could produce more than the one before, thereby increasing the resources each person could consume and (potentially) save over time. As such a process followed its natural course, Keynes foresaw a rosy outcome for humanity: “Assuming no important wars and no important increase in population, the economic problem may be solved, or at least within sight of solution, within a hundred years.”
What Keynes meant by this was that within a century, society would reach a point where life would stop getting better—not because progress had stagnated, but because life on average was good enough that there was no point in trying to improve it further. From that point forward, human society would cruise along at constant, but elevated, level of satisfaction. In the U.S., we term such a condition “living in Oregon.” Keynes had a different term: “bliss.”
A bumpy ride along the way to bliss was to be expected, but not feared. Indeed, Keynes attributed the sudden increase in unemployment that marked the start of the Great Depression to just the sort of technological displacement of workers that is once again—eighty years later—identified by economists in the U.S. and other advanced, industrialized countries as the underlying cause of persistent unemployment.
“We are being afflicted with a new disease... namely, technological unemployment,” he wrote. “This means our discovery of means of economizing the use of labor is outrunning the pace at which we can find new uses for labor. But this is only a temporary phase of maladjustment.”
In Keynes’s era the great transformation happened as mechanized farming reduced the demand for rural labor, with workers looking for new jobs in factories in the 1930s, '40s, and '50s. In recent decades those very factories have themselves either closed down or retooled for a new, highly automated age of production.
“Technological unemployment” in not only about emptying the factory floor to make room for robots. The outsourcing of administrative functions by large corporations, the collapse of the newspaper industry and the recent proliferation of options for online education are all manifestations of the fundamental trends that Keynes identified decades ago. First journalists and accountants, then X-ray technicians, artists, and photographers, among many others, have undergone the disconcerting experience of watching old market structures that previously would have guaranteed lifelong livelihoods crumble before their eyes.
Just as Great Depression was ultimately overwhelmed by the tide of beneficial change in the 20th century—see the stunning accumulation of evidence at gapminder.org if you have any doubts—our own recent economic doldrums are not likely to register as more than a perturbation in the upward trend of human well-being in the 21st century. The dream of economic bliss isn’t dead—in fact, with the pace of globalization intensifying, its closer to attainment than ever.
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The couple of decades that followed Keynes’s talk to the students at Winchester did not exactly follow the script he sketched. The economic and political turbulence of the 1930s led to a global war that resulted in the deaths of sixty million people—a human toll that, in raw numerical terms, corresponds to one 9/11 attack every single day for half a century. Subsequently, even as market democracies gradually recovered from the war and socialist economies surged forward, the majority of the world’s population remained on the sidelines of the “global” economy. Bliss it wasn’t.
It turns out that Keynes’s vision depended on two critical elements not present in most of the world until recently: The organization of the economy attainable through large-scale investment, and the adaptability of the economy attainable through entrepreneurship. Soviet socialist economies had the first, but the not the second; most of the rest of the world had neither.
Outside of market democracies, few countries possessed the infrastructure that would allow start-ups to challenge entrenched businesses and political interests in open competition. As a direct consequence, the sixth of the world under Soviet influence lagged; the two-thirds of the world allegedly in the process of development was left out altogether. Only the most fortunate sixth of the world—citizens of North America, Europe, and Japan, and other enclaves of wealth—benefited from the uneven march of progress.
That was the picture until the end of the 1980s, when the bottom finally dropped out of the Soviet economic machine. The wall fell and communism crumbled. As entrepreneur-led disruptions in the post-Mao era were recast by a nervous leadership as market-liberalizing “reforms,” China turned a corner. Investment began to flow from rich countries to emerging markets—through the 1990s, at an average rate of $170 billion a year, up from just $1 billion per year the previous decade.
At the turn of the millennium, the pace of global change accelerated. Over the decade that followed, investment in emerging markets—many of them, like South Korea and Taiwan, now fully emerged—continued its astounding upward climb, averaging $400 billion a year. The most recent data from the Bank for International Settlements show flows reaching $1.4 trillion in 2007—an increase by a factor of 1,400 in just a quarter century.
All this has created opportunities on a large scale for new small- and medium-size enterprises to connect with global supply chains. International standard-setting bodies—successor organizations to institutions the British had created as mechanisms of colonial coordination—reversed their exclusionary function and became gateways of opportunity for hundreds of thousands of companies in more than 170 countries around the world. In the same way that earning a college degree can help a young person from an economically marginalized community succeed in the labor market, attainment of a certification from the International Standards Organization can help similarly situated young company succeed in global markets. In 2008 nearly a million companies sought the specific ISO certification in quality management alone; of these, over a quarter were located in the People’s Republic of China.
The recent—and justified—outcry over revelations about working conditions at factories manufacturing Apple products does not alter the basic reality communicated by these statistics: Globally, over time, new jobs and new opportunities are the solution for a world still in need, not the problem. Indeed, the large-scale migration of people away from rural destitution toward urban opportunity throughout Asia and elsewhere in “ascending markets” is a functional continuation of the past rural-to-urban migrations in the U.S. Given the point from which China in particular began its economic ascent in the late 1970s, we can hardly be surprised if it continues to lag behind the U.S. and advanced industrialized countries along important dimensions of human well-being. But the existence of persistent gaps should not be interpreted as the absence of progress, but of opportunities for more.
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At this point the well-informed skeptic is likely to chime in: “That’s all well and good for the countries who still stand to gain from the low-hanging fruit of economic development, but what of industrialized nations facing a foreseeable future of economic stagnation? Is this promised bliss still in the future, or are we watching it recede in the rear view mirror … even as others approach and exceed our past attainments?”
The answer to this question is unequivocal: the coming prosperity will bring increased opportunity to the richest sixth of the world (including the U.S.) in almost equal proportion to the poorer five-sixths. The key is to understand changing nature of prosperity itself. Prosperity in the 21st century won’t be about life-long “employment” and ever-increasing “consumption,” as it was in the 20th century. Instead it will be about connecting, creating, contributing, and collaborating in a rapidly evolving world. Intense localization will interact with all-pervasive globalization.
People will learn, share, and create with—not for—one another at a previously inconceivable scale.
The catch here is that the career-ladder-climbing skills of the 20th century won’t cut it when it comes to catching the wave of 21st-century prosperity—ladders make terrible surfboards, as a general rule. Some evidence: In 2010, Manpower Inc., a global employment services company with offices in eighty-two countries, released the results of a major survey of its clients worldwide that found persistent unemployment in industrialized countries is not fundamentally caused by a lack of jobs. Rather, it is caused by a mismatch between the jobs that exist and the skills possessed by the long-term unemployed.
How is it that, under conditions of 8, 9, or 10 percent unemployment in an advanced economy such the United States, businesses can credibly complain that they are unable to find qualified candidates?
Granted, the unemployment rate among college graduates in the U.S. remains low, even now. Yet the employment opportunities that exist for recent graduates still often do not match their aspirations. Compounding this problem is the fact that the educational system continues to push students through career services offices around the country toward the same pathways followed by their parents, rather than encouraging students to map out new pathways that correspond to current realities. The consequence is frustration and disappointment on a large scale—not only among the economically marginalized, but even more so among the relatively advantaged.
Precisely what talents are missing in the labor force—why are they important, and why are they suddenly in short supply? Are employers looking for blue-collar workers, or white-collar workers? Neither. Lacking any other term (and inspired Steve Jobs’ black turtleneck) I’m going to call them “black-collar” workers.
Black-collar workers are the factory workers of the present day. They’re wearing spotless lab-coats, not grimy overalls. Instead of leaning over an assembly line, they are programming multi-million dollar manufacturing machines. Black collar workers are also leading the farm-to-table movement that is transforming how people in the US and around the world produce, prepare, and consume their food. These are not yokels selling heads of cabbage by the side of the road; these Pinot-sipping pioneers of the plow are savvy businesspeople, PhD scientists, and downtown restaurateurs.
Black-collar workers are easy to find. They crowd coffee houses with their laptops. They create prototypes of their inventions on 3-D printers at San Francisco’s TechShop, raise money for their projects on Kickstarter, and share their creations at Maker Faire events around the country. They are the work force of the future, powering change in the present.
Black-collar workers are after purpose, not pensions. They’re not seeking lifetime employment; they’re seeking lifetime learning. They don’t have secretaries or bosses; they have teammates. They don’t punch in at 9, and they don’t time out at 5. They connect, create, contribute, and collaborate whenever and wherever it makes sense. They try to minimize their spending in order to maximize their flexibility.
From where we sit now, it seems improbable that an entire economy could be built of such workers. Where are the drones in this picture? Where are the undifferentiated masses of the unfulfilled? Try asking yourself this question instead: from the standpoint of a 15th-century peasant, how likely is the reality of the present day? And what evidence exists that the sequence of events that has taken us from then, to now, is about to be broken? Yes, each generation is responsible for generating its own set of challenges—paradoxes of prosperity. A century ago, newly prospering debated how to rid cities of the scourge of horse manure. In our time, such challenges include climate change, water scarcity, and decreasing biodiversity. Addressing such challenges will require a distributed effort at a global scale.
Just as former farmers were compelled to convert themselves into blue-collar workers to realize their potential in the economy of the 20th century, so will former factory workers (and retooling economic drones of all types) convert themselves into black-collar workers to realize their potential in the economy of the 21st century.
Black-collar workers are everywhere and of all ages, but the exigencies of history have determined that they will eventually predominate among the young. The same Manpower Inc. study cited above described the differences among generations in the working world as follows: “Baby Boomers are more idealistic, loyal to their companies. Gen. X are more pragmatic, loyal to their career. Gen. Y are more spontaneous, loyal to their purpose.”
Having taught in universities for the past 20 years, I find this characterization fairly accurate. The progressive shift in attitudes described by the Manpower report strikes me as particularly pronounced among the most recent college graduates. This generation indebted themselves as none before to earn their credentials only to find, too often, that the job market was looking for someone or something else. As the sharp-minded Umair Haque, author of Betterness, has written, “It’s not the world that’s harder to make sense of. It’s our place in it.”
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At the outset, I emphasized that technological and organizational change driven by entrepreneurial innovation can destroy jobs as well as create them. Of that there is no doubt. But the positive trend in the flow of history is equally clear—and ultimately more significant.
The organization of the economy attainable through large-scale investment, and the adaptability of the economy attainable through entrepreneurship are now both global phenomena. Over the next quarter century, the majority of the world’s population will at last connect with the global economy. Three billion people will begin to derive benefits from the past five centuries of technological and institutional innovation from which they had previously been excluded. This means simply that human well-being will likely improve to a greater extent in coming decades than at any time in history.
Let’s be clear—“the coming prosperity,” as I term it, isn’t just a humanitarian happy ending to a four-centuries long sob story. It’s also the moment at which the currently conflicted narrative of capitalist development in the United States and other rich countries can return to its core themes and regain its lost momentum. Those core themes are about making, not taking; about true, shared prosperity, not phony opulence for a few.
How does this transition happen? Well, it doesn’t happen by trying to drag globalized societies of the 21st century back to the labor arrangements of the 1960s, or the social mores of the 1950s. We make zero progress when we try to bring back manufacturing of a type that will never return or revive social intolerance in the guise of protecting our communities or our borders.
For countries as well as for individuals, the way to move forward is by moving past outdated narratives of fear and seeking opportunities to make the most of humanity’s moment. To find a partner for your business concept in Guatemala, seek out someone from your community who was born there—yes, they will have ideas and valuable contacts. To find a source for fresh fruits and vegetables at the same time that you create jobs in your neighborhood, work with local government to convert vacant public land into plots for large-scale urban agriculture. In these and a thousand more similar ways, we will create new modes of work that will live up to the expectations of ever more talented generations of youth. And, ultimately, we will get to the world freed from want of which I spoke at the outset.
Along the way, major disruptions will inevitably occur. Paradoxes of prosperity will continue to darken the horizon for humanity as a whole. Entire industries will vanish, cities will be remade, and millions of people will move from one side of the earth to the other in search of better lives.
But there is no other plan. We don’t know what form the purposive work of the future will take. We don’t know how to solve the complex challenges created by increasing prosperity in a densely inter-connected world. We can’t build the answers. We have to find them.
As Joi Ito, director of MIT’s Media Lab, recently put it, “The compass has replaced the map.” We’re searching for a world that will not only be great for a few but also, and importantly, good enough for all. It’s out there, within our grasp. Bliss? Maybe not. If such an appreciation of the coming prosperity isn’t the single “true interpretation of the trend of things,” as Keynes put it, it’s pretty close.
This essay is adapted from The Coming Prosperity: How Entrepreneurs are Transforming the Global Economy, forthcoming in April.