Why the pessimists are wrong about the future of economic growth

There is an active economic debate today about whether we have reached a structural slowdown in economic growth due to the fact that fundamental technological progress is over. This view reflects a failure of both imagination and analysis. In fact, we can already see the foundations in science that will create vast new technologies and industries. We may be in a transitional stage, where there has been a slowdown in the pace of growth. But we have the intellectual potential to create enormous growth and it is quite likely we will do so.

The pessimists commonly make the following argument: (a) Man’s most important technological discoveries have already been made; (b) improvements in information technology do not create the same number or quality of jobs as past advancements; (c) nothing upon the horizon will generate the scale of jobs provided in the past; (d) therefore, humanity must resign itself to a future of slow growth, declining job creation and little prosperity.

This view underestimates mankind’s ability to make technological leaps because of a failure to grasp the history of scientific and technological application. Big, radical leaps in technology and science take time and develop slowly. For example, there was a roughly 50-year span from the development of quantum theory in the mid-1920s to its first practical application in the transistor in 1947, to Intel applying the theory to develop the first commercially viable microprocessor in 1974.

There is an enormous amount of talent, treasure and tools being applied today to facilitate new technologies and scientific discoveries. Consider this astounding factoid: 95% of all scientists who have ever lived are active today. What’s more, the financial rewards have never been higher: venture capital may have its origins in support for IT, but it is now being used to seek out opportunity in other areas, such as biotech, automotive, energy and environmental technology. No good idea goes unfunded today.

Examples in three key areas point to great technological leaps that will provide economic platforms for future growth:

ICT: With algorithmic discovery, big data can discern patterns no human can see. “Little AI”, as exemplified by Amazon’s “1-Click” feature, for example, is not in itself a major advancement. Yet, with its novel use of algorithms, “Little AI” represents a significant information technology shift nonetheless. Within 5 to 10 years, small bits of artificial intelligence will be involved in virtually everything that humans do. Not only will this increase productivity, but it will also launch a new generation of products and services. A large variety of automatic services will function in the background of human activity, coordinating, organizing and informing human interactions.

Biological and molecular engineering: The related fields of synthetic biotechnology and molecular engineering each promise new kinds of materials and enhanced properties for materials already in use. By 2050, we will have learned how to grow buildings like trees rather than with only concrete and steel. We will produce mature redwood fibre in the lab within days, not years. This and similar biotech developments will transform old industries and create entirely new ones.

Understanding gravity: There is a strong likelihood that within the next 50 years, man will come to understand gravity. Presently, we can observe the effect of gravity, but have no idea how and why it works. As coming to an understanding of electromagnetism in the 19th century led to all the fruits of the electrical and electronic age, we might presume a similar benefit from harnessing gravity. As this is at the outer edge of speculation, we can only guess what it could mean, but one could imagine anti-gravity vehicles or possibly even radical new ways of generating energy.

As a society, how can we nurture a new age of discovery?

First and foremost, we should not panic and do the wrong things. We should not avoid transformation or protect the past − the same dystopian arguments made in the 1970s are being made today, often by the same people. Instead, we should facilitate the transition by investing in R&D, skills and capabilities. We must nurture an environment that rewards entrepreneurship, as California does with its concentrated focus on education and venture capitalism.

There are important geopolitical implications to consider, as the sources of innovation increase around the globe. Whereas R&D used to be based solely in the United States, now emerging economies such as China, Brazil, India and Singapore are all making important R&D contributions. The Eurozone, though, in many ways seems stuck in the past with its peoples’ wholescale rejection of Google and its governments’ restrictive regulatory regimes.

Having only mentioned three big leaps in science and technology – out of the many currently in the development pipeline — we can already see some of the potential for economic growth. If we take a global perspective, then the scope of economic growth will be felt both in productivity gains in what we already do and in whole new industries that are just being born.

The sceptics are incorrect; we are not at the end of history, but somewhere near the beginning. For while there is little certainty when it comes to predicting when new technologies will bear fruit, the past tells us that they do, eventually. We need to invite people to think beyond restrictive mindsets and consider how we can make this transition as efficient as possible.

This piece is one of a number of individual perspectives from the Global Strategic Foresight Community of the World Economic Forum for the Annual Meeting 2015. To read more access the full collection.

Author: Peter Schwartz is the Senior Vice President for Global Government Relations and Strategic Planning at Salesforce.com.