I get many questions when I give presentations about the economy all around the state. Most of the questions focus on short-term issues, like the job market for the rest of the year, where gas and food prices are headed, and if it will get more or less expensive to borrow money.
But occasionally I get what I term a “long-run” question. The person doesn’t want me to peer into my crystal ball for the rest of this year or even next near. Instead, they want to know what the economy will be like 20, 30 or maybe even 50 years from now. Young workers just beginning their career often ask this kind of question. Or sometimes it’s an older worker who’s worried about the future for children or grandchildren.
When I receive such a question, I often joke that my crystal ball isn’t just cloudy for the next 20 to 50 years; it’s actually burned out! It’s a tall order to say anything definitive about the economy that far away. So many things can, and will, happen that are on nobody’s radar screen. Making predictions for 2040, 2050 or 2060 really are “shots in the dark.”
Still, it’s understandable to be concerned about the future, and I actually compliment people who are interested in the economy that far away. So the problem isn’t the question; rather, the problem is the ability of folks like me — professional economists — to give a meaningful and useful answer.
Fortunately, many of my colleagues have tried. In reading forecasts about the long-run economy, I think opinions can be grouped into two broad categories: those seeing an optimistic economic future and those expecting a pessimistic economic future.
The forces driving an optimistic future are creativity, ingenuity, technology, energy and world trade. Optimists correctly state the world’s standard of living didn’t begin to rise until humans began to invent, create and then harness new techniques and processes. Beginning with the steam engine and continuing with the locomotive, electricity, flight, radio and television, all the way to today’s microchip and internet, inventions have allowed us to grow food, clothe and house ourselves, and manufacture the products and services making our lives easier, fuller and longer.
Optimists see these trends continuing, in areas like virtualization, nanotechnology, cheaper and stronger building materials, and cleaner and more efficient resource use — all advances that will lower costs and push our well-being to new heights, plus create new jobs in industries we can’t even imagine today. In particular, technology will arrest the spiraling costs of health care and education by prompting more efficient delivery systems reaching more people.
The optimists also see gains from the accumulation of new energy resources, from conventional sources like oil and natural gas, but also from non-conventional sources such as solar, ocean waves and wind. Energy will be cleaner, more abundant and cheaper, thereby facilitating the development and deployment of the technological advances making the economy better.
Finally, as the new technologies and lower-cost energy move hundreds of millions of people worldwide from subsistence levels to “middle-class” status, tremendous trade opportunities will open responding to the new spending of these more prosperous households.
The case for pessimism for the economic future rests on three concerns: demography, inequality and a lack of meaningful technological improvement. Lower worldwide birthrates are aging the world and, in some countries, creating expectations of population declines. Older households spend less, deplete their savings and increase demands from programs such as — in our country — Social Security, Medicare and Medicaid. Pessimists see our increasingly “top heavy” age structure causing aggregate spending to drop, investment values to plunge and tax rates to rise — a perfect formula for a sluggish economy, and perhaps even an economy in a tailspin.
Pessimists also see technological advances primarily benefiting those at the top in both education and income and bypassing the rest. And to make matters worse, many of the technological improvements will be job-destroying, by having machines replace people. So-called “technological unemployment” will become standard for the majority of workers.
To top off the bleak outlook, pessimists also see future technological advances being minor, amounting to little more than “tweaks” to existing capabilities and feeble in comparison to past inventions and innovations. Thus, they don’t see the great uplifting of living standards coming from the next generations of machines and ideas.
So the optimistic and pessimistic views of our long-term economic future couldn’t be more different. Perhaps rather being one or the other, the future might be a combination of the two. But who knows? I certainly don’t. Still, it may be helpful to consider the alternatives — but you decide!
Dr. Mike Walden is a William Neal Reynolds Distinguished Professor and North Carolina Cooperative Extension economist in the Department of Agricultural and Resource Economics of North Carolina State University’s College of Agriculture and Life Sciences.