The George Mason University economist, Tyler Cowen, has written a provocative new book entitled “Average is Over”, which has just been reviewed by the Economist: “The American Dream, RIP?” . His thesis is that the slow recovery of middle class jobs following the Great Recession of 2008-2009 portends a new economy more and more devoid of middle class jobs and broad prosperity.
Mr. Tyler says that “An elite 10-15% of Americans will have the brains and self-discipline to master tomorrow’s technology and extract profit from it. They will enjoy great wealth and stimulating lives. Others will endure stagnant or even falling wages as employers measure their output with ‘oppressive precision’. Some will thrive as service providers to the rich….Young men will struggle in a labor market which rewards conscientiousness over muscle.” Some highly motivated individuals, born poor, will be able to move into the elite group with cheap online education. This creates overall a sense of “hyper-meritocracy” at the top which “will make it easier to ignore those left behind.”
What Mr. Cowen has done is to take the strong social and economic forces of globalization and technology, add to this mix emerging machine intelligence (Google is a prime example) and then to use his vivid imagination to conjure up an image of what life will be like in the not so distant future. America will still likely be the dominant country in the world but the historically strong middle class will shrink as the rich become richer and the poor become poorer.
Is this pessimistic vision of America’s future inevitable? Is there anything we can do to at least slow down if not to reverse these trends?
Speeding up economic growth is our only chance to turn things around and mitigate this grim future. Better K-12 education (and therefore early child education as well) will help in the long run. In the short run, broad based tax reform, healthcare cost control, relaxing overly burdensome regulations, and immigration reform are the four things which will help the most. The same old basic stuff is what we need to do! Tyler Cowen’s story just makes the need for such changes more compelling and more urgent!