Technology Shifts and Economic Depression
Joseph Stiglitz (the Nobel prize winning economist) has a great new article: “The Book of Jobs“(behind Vanity Fair’s paywall, sorry). In it, he makes a convincing case that the first global depression was caused by a process similar to what we are seeing today (I’m very happy somebody in the social sciences is actually attempting to show how technological change was a driver of the first depression, it’s about time). Here it is in a nutshell:first depression, it’s about time).
- Technological change in the form of the internal combustion engine (cars, tractors, trucks) improved transportation and farm productivity. This led to an agricultural revolution that impacted a huge percentage of the US population.
- Farm productivity soared and prices dropped. This forced many farmers into bankruptcy and led to a steady migration of people from rural to urban locations driving down incomes/demand.
- The downward pressure on incomes this caused resulted in a protraced economic depression that only ended when the US and Europe mobilized/nationalized every segment of the economy during WW2 (put everyone to work, trained them, etc.).
At this point in the article Stiglitz stumbles.