In his State of the Union address this Tuesday, President Obama talked a lot about the economy. He talked a lot about jobs and easing the financial burden many American families face. But he made a disturbing comment that reveals a total misunderstanding of basic economics:
What I believe unites the people of this nation, regardless of race or region or party, young or old, rich or poor, is the simple, profound belief in opportunity for all—the notion that if you work hard and take responsibility, you can get ahead.
Let’s face it: that belief has suffered some serious blows. Over more than three decades, even before the Great Recession hit, massive shifts in technology and global competition had eliminated a lot of good, middle-class jobs, and weakened the economic foundations that families depend on.
In essence, President Obama claimed that technological advances that undermined old-fashioned ways of doing things inhibit middle-class growth. They pull the rug out from underneath Americans who depend on hard work and responsibility to make ends meet. No longer do people’s financial futures depend on their own effort, but rather, technology and competition has introduced extraneous factors into the economic equation that undermine the norm of hard work being the key to financial success.
Technology, he says, makes life harder.
I don’t imagine such words are heard from political leaders in other parts of the world. Try telling Indians—whose average life expectancy has grown by more than twenty years since 1960—that technology makes life worse. Try convincing people in Ghana and Nigeria—whose GDP per capita has grown almost five-fold since 2000—that new medicines and digital communications are bad for their personal finances.
But President Obama has been spoiled. He, like every other American, has enjoyed the outpouring of wealth that technological advance brings about for the entirety of his life. He takes economic growth for granted and thus sees the difficult transitions that technological change brings about as inhibitive—not supportive—of higher standards of living.
But that doesn’t excuse his false ideas about economic growth. Of all people, the President of the United States ought to understand how the economy grows, why it crashes and what to do about it. But President Obama seems to have given up on trying to push the United States into the future, and is instead content to pump money into jobs and industries that have no future in a modernized economy. The President should care about the people who have lost jobs when the economy transitions from one industry to another. But that is hardly the end of the story. In the grand scheme of things, technological innovation has lasting positive effects on societies.
I could go on and on about the backwardness of President Obama’s thinking, but let me summarize his shortcomings into one simple point: President Obama doesn’t know his history.
Technological innovation is the heart of economic progress. As long as it continues, life will improve for everyone.
His historical horizon does not extend far beyond the past fifteen or twenty years. In many ways, the 1980s and 1990s were better decades for economic growth. This was in the midst of the transition from the industrial to the information age, which, for a time, saw growth in both industrial manufacturing jobs and technology-related jobs. From the perspective of those years, it makes more sense to blame today’s economic woes on recent technological developments and increases in global competition.
But a more complete view of history shows that technology has done anything but make life harder. It does the opposite. A hundred years ago, for example, the average wage was $11,942 in today’s terms. Putting food on the table often required a full day of work. In-home electricity was almost unheard of and running water was a luxury only the wealthiest could afford. Few Americans lived to their 70th birthday.
Of course, technology has grown by leaps and bounds since then. Running water and electricity are standard features in every home. Cars are affordable even for teenagers. Communicating with family and friends hundreds of miles away is possible to anyone with a few quarters to spare.
The result: Most Americans will live to see their 70th birthday, and many far beyond that. A hearty meal costs less than the hourly minimum wage. Americans take more vacations, have more free time and invest more money into financial markets that, in turn, fund cutting-edge research and accelerate the pace of economic growth.
Technological advance does anything but detract from the idea that hard work is enough to make ends meet. Jobs come and go, as they always have and always will. But technological innovation is the heart of economic progress. As long as it continues, life will improve for everyone.