The “special century”…
“We wanted flying cars. Instead, we got 140 characters”…
It’s not insane to think Trump might run again in 2028…
Dear Reader,
Is the United States economy — is in fact the world economy — fading into obsolescence?
Is that economy nearing its “limits to growth?”
These are the brow-furrowing questions we tackle today.
Until the 19th century, technological and economic progress advanced inch by tedious inch.
The most rapid mode of transport in A.D. 1776 was the most rapid mode of transport in 1776 B.C. — the equine mode of transport.
Global trade flowed to the relaxed rhythms of wind and tide… as it had since the opening whistle.
Nights were lit by flame, as they had been since ancient times.
And economic growth?
From year 1 to 1820… economic growth of the Western world averaged a grass-growing 0.06% per year.
0.06% annual growth equals 6% growth not per year, not per decade — yet per century.
The “Special Century”
Yet the mid-to-late-19th century spawned a gobsmacking series of revolutionary inventions.
It raised the curtain on a golden age of technological and economic progress… an era of such high razzle-dazzle… that it faced no equal in history.
The electric light bulb transformed night into day. Electric power brought progress on a thousand fronts.
The railroad, steamship and internal-combustion engine finally put period to the “homely plod of hoof and sail” that paced transportation for millennia.
The telegraph, telephone and radio unhorsed the terrible twin tyrannies of time and distance.
Industry exploded. As did populations. And the cities that quartered them.
The result was a “special century” of technological and economic progress, 1870–1970.
This special century was so transformative… some argue its impact will never be paralleled.
The Light Bulb Can Only Be Invented Once
Robert Gordon professes economics at Chicago’s Northwestern University.
He once authored a book, The Rise and Fall of American Growth, by title. From which:
The economic revolution of 1870–1970 was unique in human history, unrepeatable because so many of its achievements could happen only once… the revolutionary century after the Civil War was made possible by a unique clustering, in the late-19th century, of what we will call the “Great Inventions”… What makes the period 1870–1970 so special is that these inventions cannot be repeated.
“With a few notable exceptions,” Gordon adds, “the pace of innovation since 1970 has not been as broad or as deep as that spurred by the inventions of the special century.”
It appears there is justice in this view.
The light bulb can only be invented once. It can be improved, refined, brought within sight of the perfections.
Yet it cannot be reinvented. Thus Edison remains on his throne.
What truly astounds is the pace of progress.
From Kitty Hawk to the Moon in 66 Years
Man crammed more technological progress into that one special century than the previous dozen combined.
He was chained to Earth some 40,000 years before snapping gravity’s “surly bonds” at Kitty Hawk.
The 12-second “flight” worked roughly 12 feet of altitude… and 120 feet of distance.
Sixty-six years later man was blasting to the moon. Impossible — but there it is.
Has there been progress since 1970?
Only a fool would argue there has not been progress since 1970.
Yet it appears more a progress of the margins, a progress of efficiencies.
Evolutionary, Not Revolutionary
Boeing can engineer a more efficient jet, for example — and I hope sincerely that it does.
Yet the 787 that whisks you across the ocean at 563 miles per hour?
It is no faster than the 707 that whisked your father across the ocean at 563 miles per hour in 1958.
It is true, automakers can craft a better, faster car with every whistle, every bell.
Yet autos featured air conditioning as early as 1933. They were racing 100 miles per hour by the close of the 1930s.
What we see in these examples is largely — again — a progress at the margins.
We Wanted Flying Cars, We Got 140 Characters
Venture capitalist Peter Thiel has lamented that:
Whether we look at transportation, energy, commodity production, food production — that with the exception of computers, we’ve had tremendous slowdown.
He concludes, pithily, ruefully, tearfully:
“We wanted flying cars. Instead, we got 140 characters.”
I must agree.
It is a counterfeit progress when a fellow in Kathmandu can follow the latest capers of Kim Kardashian on X… but whose auto is pushed along by the same internal combustion engine that pushed along the Model T.
Is it coincidence that broader American prosperity began petering around 1970… as the “great inventions” passed that infamous point of diminished returns?
It is by no means the only answer. But perhaps a partial answer.
Diminishing Returns
Has the vast progress of the special century finally run its course? And has our present monetary system likewise run its course?
Ms. Gail Tverberg writes in Our Finite World site:
For many years, it appears that added debt (money supply) can be used to temporarily work around a resource problem. For example, a dam purchased with debt may allow irrigation so more food can be produced for a given population.
The problem with this approach is that the benefits of added debt reach diminishing returns.
At some point, an economy discovers that adding debt doesn’t add much energy supply; instead, it simply leads to inflation (and, indirectly, higher interest rates to compensate for this inflation). Also, for governments, the interest on debt becomes a greater and greater burden.
The US government seems to have reached the point of having too much debt.
Indeed it does, Ms. Tverberg. Indeed it does.
The Limits of Debt
More:
Adding infrastructure such as roads, pipelines, and railroads can be helpful in the beginning. The additional infrastructure enables new businesses to be built that make use of this infrastructure. Initially, the tax revenue from new businesses makes it easy to repay the debt with interest.
But additional roads, pipelines, railroads and other infrastructure are not nearly as helpful. They may add capacity, but they don’t materially change the transportation options. The tax revenue added is less.
At some point, simply maintaining and replacing all the infrastructure becomes burdensome. Adding debt for the replacement of infrastructure becomes burdensome because the new replacement infrastructure adds no new functionality. It just maintains the old functionality.
The interest on the debt must come from somewhere, but it is not built into the system the way it was when totally new infrastructure was built. Today’s approach is simply to increase the debt level and hope that the revenue will come from somewhere else.
That revenue — by all indication — has failed to appear.
Hope
Many argue the world is perched upon the bleeding edge of revolutionary breakthroughs in artificial intelligence, robotics, biotechnology and related wonders.
They claim the decades ahead will rival — if not excel — the “special century.”
I hope beyond all hope they are correct.
What other hope is there?
Brian Maher
for Freedom Financial News