💥 The Long Boom that wasn't — and what we can learn

It's always good to think about 'scenario spoilers' and try to guard against them

“The acceleration of technological progress has been the central feature of this century.” - Vernor Vinge, 1993.

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💥 The Long Boom that wasn't — and what we can learn

This newsletter occasionally looks at the failed economic and technological forecasts of the past, including those by well-known futurists such as H.G. Wells, Arthur C. Clarke, and Ray Kurzweil. No space colonies, no flying cars, no $100 trillion American economy, and, of course, no flying car in every garage. My point in highlighting such disappointing predictions isn’t to mock those who made them. It’s to mourn for the world we could’ve had but don’t.

One of the best sources for late 20th-century futurist forecasts is the archives of Wired magazine. One of my all-time favorite pieces is a 1997 essay by Peter Schwartz and Peter Leyden, “The Long Boom: A History of the Future, 1980–2020.”

Some things they got correct, such as Rising China, the sharp decline of global poverty, and the pervasive power of the internet. Other things, less so. Today, we’re not all driving around in hydrogen-powered cars or watching humanity walk on Mars. Broadly, the rapid productivity and economic growth of the late 1990s didn’t continue into the 21st century as they and many others of that time predicted. This from the essay:

We have entered a period of sustained growth that could eventually double the world's economy every dozen years and bring increasing prosperity for—quite literally—billions of people on the planet. We are riding the early waves of a 25-year run of a greatly expanding economy that will do much to solve seemingly intractable problems like poverty and to ease tensions throughout the world. And we'll do it without blowing the lid off the environment.

If this holds true, historians will look back on our era as an extraordinary moment. They will chronicle the 40-year period from 1980 to 2020 as the key years of a remarkable transformation. In the developed countries of the West, new technology will lead to big productivity increases that will cause high economic growth—actually, waves of technology will continue to roll out through the early part of the 21st century. And then the relentless process of globalization, the opening up of national economies and the integration of markets, will drive the growth through much of the rest of the world. An unprecedented alignment of an ascendent Asia, a revitalized America, and a reintegrated greater Europe—including a recovered Russia—together will create an economic juggernaut that pulls along most other regions of the planet. These two metatrends—fundamental technological change and a new ethos of openness—will transform our world into the beginnings of a global civilization, a new civilization of civilizations, that will blossom through the coming century.

Again, making predictions is hard, especially about the future. Perhaps more interesting is how Schwartz and Leyden looked that what might possibly go wrong with the bullish scenario, what they call “scenario spoilers” that could “cut short the Long Boom.” As I think you will see, many of them seem pretty relevant to America and the world of the 2020s. Here they are, in the order they were presented in 1997, with some comments by me:

1/ “Tensions between China and the US escalate into a new Cold War—bordering on a hot one.” This would’ve maybe seemed overly pessimistic until the ascendance of Xi Jinping and China’s turn away from economic and political liberalization. We certainly seem to be square in the middle of a new Cold War as the US and China compete for global supremacy in various domains such as trade, security, diplomacy, ideology, and perhaps most of all, technology — especially AI. (Recently, the general in charge of US Air Mobility Command predicted in a memo, “My gut tells me we will fight in 2025.”) And what would be the economic impact? Here’s one scenario from RAND:

The estimated decline in China’s GDP can be compared with Germany’s 29 percent decline in real GDP during World War I, when Germany itself was spared heavy damage, as well as Germany’s 64 percent GDP decline and Japan’s 52 percent GDP decline during World War II, when both were heavily attacked. Of course, to suggest that the Chinese would be unwilling or unable to fight on despite such costs is to ignore that the Germans and Japanese withstood much greater costs, along with widespread destruction, and did not surrender until left with no choice. Moreover, the Chinese state would presumably work to limit the impact on consumption, as we have estimated. Still, the effects on China and its citizens of a one-third reduction in GDP would obviously be grave and lasting. In contrast, the effects of a protracted and severe conflict on the United States and its citizens, while severe, would also be the equivalent of a serious recession.

2/ “New technologies turn out to be a bust. They simply don’t bring the expected productivity increases or the big economic boosts.” Nailed it. While there’s no doubt that the Information and Communications Technology Revolution (PCs + Moore’s Law + internet) has generated a significant economic impact, there’s also no doubt that the impact is less than what many techno-optimists of the 1990s thought it would be. Northwestern University economist Robert Gordon is unfortunately correct in this appraisal:

The wonders achieved by computers and, since the mid-1990s, by the Internet have misled many analysts into believing that the current rate of economy-wide progress is the fastest in human history and will become even more rapid in the future. The basic flaw in this faith in an acceleration of technological change is that even if the contribution of computers to economic growth were increasing, the share of total GDP represented by computers is too small to overcome the great majority of economic activity where the pace of innovation is not accelerating and, indeed, in many aspects is slowing down.