Waves of disruptive change are sweeping the world. Technology is transforming our society. Life today is less stable, less certain than ever.
Cowen – a professor of economics at George Mason University and co-author of the Marginal Revolution blog – argues that the trouble began after the turmoil of the 1960s and 1970s. From the 1980s onwards, the affluent, educated middle classes embarked on a collective, concerted and remarkably successful attempt to build a world in which nothing really bad could happen to them.
Or, as he puts it in an interview with CapX, “We all, as individuals, have taken many steps to make our lives safer and more comfortable. And these have indeed made us better off, it’s why we have done it.
“Nonetheless, when applied collectively, these strategies ultimately choke off dynamism and make it impossible for us as a nation to sustain the safety we’ve built. And my book is a narrative of how that was built up and why eventually it needs to collapse.”
That book, The Complacent Class, is packed with an array of convincing, and fascinating, evidence for his thesis. Americans are more static: the proportion moving across state lines is half what it was in the 1950s and 1960s. They are more less entrepreneurial: the share of under-30s who own a business has fallen by 65 per cent since the 1980s. And they are less innovative: the country creates 25 per cent fewer high-class patents per worker than it did in 1999.
More broadly, Cowen argues, they are more willing to tolerate stasis. Adjusted for inflation, the median wage for American men is – shockingly and shamefully – lower than it was 1969.
Increasing numbers of low-skilled Americans have dropped out of the job market, and largely out of society – but instead of taking to the streets, they are sitting at home playing video games. And the country tolerates planning restrictions which exclude increasing numbers of citizens from its richest and most productive cities, sacrificing almost 10 per cent of its GDP in the process.
The US, he says, is not only growing less than it should. It has erected a caste system in which some have high-status, high-paid, high-productivity jobs and many do not – with little prospect of moving between the two.
This entrenches other divisions: New York, he points out, has a level of educational segregation that would make the South blush. And there’s little sign of this changing – not least since young people are even more risk-averse than the old.
Is this, I ask, a natural evolution of capitalism – that you get to a point of affluence, or at least of relative affluence, where you start to prize security above opportunity? Yes, he replies. But the genesis of the book was rather different, he explains: he was struck by “how many parts of my life, at age 55, were not that different from my life when I was 17”.
“Obviously, technology is totally different,” he admits. “But in terms of just taking the train to New York, driving around – it’s been well over 40 years, and a lot of core aspects of life are more or less the same. And my grandmother could not have said the same: she had antibiotics, radio, television, automobiles, aeroplanes, vaccines, clean water, my goodness.”
The reason for the success of the current system, then, is that it seems to work just well enough for just enough people. “Yes, but very slowly the number of people that is works for is diminishing. So I do think at some point, arguably already, there’ll be a big counter-reaction, but it won’t be a constructive kind of reaction. In this country it’s Trump.”
Even before Trump, when Cowen was writing the body of the book, he had a sense that things were starting to fray around the edges – that instability is creeping back into the system. So how, I ask, do you fix things before the collapse?.
“How you solve it is via a set of policy prescriptions that actually you hear from a lot of people,” Cowen explains. “I don’t think the things we should do are always that mysterious. Spend more on R&D. Let more people move into your most productive cities. Hire more experts in government, who are sadly lacking. People who can actually change something. The question the book is asking is why these are not even on the table, rather than saying ‘here’s my list of fixes’.”
This, indeed, is one of the more alarming aspects of the book. America’s government, Cowen points out, is essentially broken. It lacks the resources or flexibility – or spare cash – to do big, bold things, or to respond to crises as they arise. It’s not even that the US couldn’t recreate the Apollo programme or Manhattan Project, it’s that under Trump, “we literally do not have a functioning executive branch at the moment”.
Cowen’s book is – fair warning – exclusively about America. But as I observe, his thesis could apply with equal or greater force on this side of the Atlantic. The whole point of the European Union, for many of its members, is to protect the way of life of its more successful citizens – to admit as much of the market as is necessary to pay for their cherished “social protections”.
It’s a point Cowen entirely agrees with.
“France is maybe the most extreme example,” he says. “They spend so much money just pulling people out of the labour force to protect their middle class. So old people retire early, young people may never work at all, or may just be on temporary contracts. But the wage structure of at least part of their middle class is still fairly pretty good. That’s what runs the country. But that also, in my view, cannot go on forever.”
So are we all doomed?
“I think it depends on the country. At some point you can’t pay the bills any more, so that’s when real trouble starts. Some of Europe is already at that point. And people will respond by wanting more and more security – but that worsens the dynamic, and eventually the books don’t balance.
While he doesn’t believe the US has reached this tipping point, “I think there’s more room for disorder in my country than yours. Yours may be a slower erosion. France I think could be a more rapid unravelling because these kinds of structures are so deeply built in.” (This is, I should note, before the election of Emmanuel Macron.) “Germany I think is probably stable for quite a while, in a better situation than the US or UK.” Italy, he adds, is “my big worry for a huge crack-up. They have not really grown in 16 or 17 years in per capita terms and they have huge debt.”
There are places, of course, where complacency has yet to set in. Cowen cheerfully admits that the West is a much more pleasant place to live, not least because of the lack of pollution, but he is obviously an admirer of the way the country has pulled itself up by its bootstraps: one of the more interesting sections of the book describes how Jack Ma founded the internet giant Alibaba essentially by being unwilling to take no for an answer.
Yet even there, he says, “what I see in China is they’re slowing down somewhat. I’ve done some interviews with Chinese papers and they’re all like, ‘How quickly is it going to happen to us?’. So there is a universality to the logic and China and other countries are not immune from it, they’re just further from the point.”
Talking to Cowen is a fascinating experience – while critical of the EU, he is unimpressed by Brexit (“If it’s a bold strategy to strike out and reinvent the United Kingdom, I don’t see that at all”). He cheerfully admits, for example, that he has failed to practise what he preaches – “I have been living where I live now, in the same county for 27, 28 years”.
He is also scathing about the effects of academic tenure in encouraging complacency: “A lot of the incentives are pushing you towards conformity and not doing very much. There’s some kind of extreme selection pressure for conformists and people who will not rock the boat. So I think academia right now is failing us.”
But perhaps his biggest idea is also his most frightening. In his book, Cowen quotes Alexis de Tocqueville – who not only marvelled at America’s unique dynamism, but prophesied its end.
“People suppose that the new societies are going to change shape daily,” the Frenchman wrote. “But my fear is that they will end up by being too unalterably fixed with the same institutions, prejudices and mores, so that mankind will stop progressing and will dig itself in.”
That, indeed, is Cowen’s depressing conclusion: that we have indeed stopped progressing altogether. Towards the end of The Complacent Class, he writes, in bold, that: “The biggest story of the last 15 years, both nationally and globally, is the growing likelihood that a cyclical model of history will be a better predictor than a model of ongoing progress.”
It’s a striking claim to make. Surely people have objected? “Sure. But I think the last five years, and also the financial crisis – possibly even 9/11 – has made people think in the back of their minds, ‘Hmm, maybe this is somewhat true’. People are objecting, but I think they’re objecting because they’re scared it might be right.”
And is he scared too? “Of course! I’m terrified I might be right. In the 1990s, I thought progress would just keep on running. If you recall, there was serious talk about, like, Russia entering the European Union. Today, that question would not even be a good joke. Or when will China become a democracy? Most people thought it would within 20 years. Again, no one thinks that any more today.”
Much as I admire Cowen, I cannot share his conviction that the world is going to hell in a handcart: even tamed and trammelled, the market retains at least some power to drive us towards prosperity. Indeed, I’ve written an entire book about technology, acceleration and disruption.
But it’s hard to shake the feeling, shared by so many people, that something, somewhere has gone wrong with the economy. For example, I am talking to Cowen shortly after interviewing Douglas Carswell and David Goodhart, two other prominent figures who are convinced that something in our system is broken – even the trio’s their solutions are divergent and often contradictory.
In Cowen’s case, his conclusion isn’t really that capitalism isn’t working: rather, that it’s worked too well. The challenge, by his lights, will be persuading those comfortable, complacent voters that it’s worth accepting some inconvenience now to avoid a lot more later – and that by moving fast and breaking things, you might just fix them too.
‘The Complacent Class’ by Tyler Cowen is published by St Martin’s Press and available here