Tyler Cowen, author and of the blog Marginal Revolution, recently suggested that the world economy needs the transformation that was apparent in the postwar boom – the industrialisations of inventions. He refers to it as:
The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better.
He suggests that productivity advances are occuring but are in the form of:
1. laying off workers
2. moving their production to countries where the cost structure of producton is much more advantageous.
It is imperative that innovation is exploited as it is the driver of economic growth. According to Will Hutton in the Observer the technologies that once created a significant number of jobs are not now prevalent in society. The growth of some industrialised countries has been disguised by the credit boom starting with the Big Bang in 1986 – a huge number of jobs were created in the financial services sector.
The phrase Big Bang, used in reference to the sudden deregulation of financial markets. The day the London Stock Exchange’s rules changed, 27 October 1986, was dubbed “Big Bang Day” because of the increase in market activity.
However job growth in this area cannot be maintained and this is apparent with the amount of debt that a lot of countries are now carrying. The world has embraced the free market and the consensus has been that governments fail and markets succeed. Nevertheless future growth of the world economy will be determined by innovation and invention, something that is too important to be totally left in the hands of the market.