By Michael Baxter, economics writer
The solutions to the economy’s woes lie with something wonderful and truly exciting. Economists are so preoccupied with gloom and their obsession with mathematical models, that they miss the big picture. And so what is this miracle?
It is nothing less than the new industrial technological revolution.
Cast your mind back to the 1820s, but if you are not old enough do that, take the word of the historians. Back then the UK’s public debt was 250 per cent of GDP. Alternatively, consider the UK just after World War II. Again public debt was in excess of 200 per cent of GDP.
But on neither occasion did the economy then stumble and fall into depression. Instead, technology led us forward. Thanks to the industrial revolution, the Victorians found that government debt fell as growth increased. In the 1850s and 1960s, the innovations of the previous half a century or so, were incorporated into business, and the economy enjoyed a golden age.
Right now, the internet is changing communication so that inventors and scientists can work together like never before. The internet is creating new levels of specialisation.
3D printing, and advances in genetics and prosthetics are changing the world. Last week Oscar Pistorius, a man with no lower legs, reached the semi-final of the 400 metres at the Olympics); thanks to certain drugs, couples (who in a different age would have met their maker by now) can now enjoy an active love life.
And lurking beyond all this is the big one: nanotechnology.
All this is creating new potential, and means by which economic growth can once again take off, making our current debts seem modest.
But we need to accept some truths. If you accept the idea behind the NHS and that health care should be free for all, then, as medical science gives us new innovations, health care spending must rise, which means taxes must go up. New technology means education is more important than ever, and unless you want a big chunk of society to play no part in this revolution, spending on education must rise. Our retirement age must go up too.
But above all unless demand rises in tandem with potential, instead of economic boom we will get depression. This may have been what happened in the US in the 1930s.
The preoccupation with austerity is a threat to all this.
As for economists, they are the biggest sinners of the lot.
There is a law that describes the opportunity; it is called Moore’s Law. Not Moore’s Law in literal meaning applying to computers doubling in speed every 18 months or so, but as a metaphor for the rapid technological progress in our midst.
Scan an economics text book and you will be hard pressed to find a single reference to this law. Scan documents for central bankers and again this law is missing.
And it is this ignorance of the big opportunity that provides the biggest threat to the economy.
Michael Baxter, firstname.lastname@example.org