Why Have We Stopped Investing In The Future?

what-happened-to-the-future

 

“What happened to the future? We wanted flying cars, instead we got 140 characters,” laments the online manifesto of the San Francisco venture capitalists, Founders Fund, headed up by billionaire technology investor Peter Thiel.

That seems a strange thing for a company based on the West Coast of America to say. After all, isn’t that the part of the world that is busy inventing the future?

What seemed even stranger was when Thiel, a well-known libertarian, took to the stage at the 2016 Republican National Convention to endorse Donald Trump and bemoan stagnation in the US economy.

In his speech to the GOP faithful, he spoke of flat wages, low productivity, increasing levels of indebtedness and stalling growth.

He argued that, though significant progress in communications and computer technology has made Silicon Valley prosper and him rich, it has obscured a dismal lack of technological innovation in America since the 1970s. Innovation, usually the muscular driver of monetary expansion, has largely withered away.

Five months later, promising a radical shake-up of the economic status quo, Donald Trump won the US election after turning long neglected, rust-belt states, like Wisconsin and Pennsylvania, from blue to red.

It’s not just America. Similar concerns in the United Kingdom have shifted the public mood against existing power structures. It was why many people in deprived regions of the country voted to leave the European Union. I understand why they did so and I am certainly no fan of the EU, but the type of economic decline that sections of the UK have experienced is part of a wider post-industrial malaise not unique to the low-growth Eurozone.

For the fantastic, delusional dreams of our past.

In the 1950s and 60s this was not the future people envisaged. That was the era when the pace of technological innovation peaked in the West. Between 1870 and 1970, sometimes referred to as “the special century”, ordinary people’s lives were transformed by breakthroughs in transport, electricity, automation (cars, vacuum cleaners, washing machines, etc.), vaccines, and space travel. David Rotman in the MIT Technology Review described this period as “an explosion of inventions and resulting economic progress.” “Think the PC and the Internet are important?” he wrote. “Compare them with the dramatic decline in infant mortality, or the effect that indoor plumbing had on living conditions.”

The people of that time imagined we would have colonies on Mars and underwater cities by now. In fact, the term “Retro-futurism” is used to describe the techno-optimism of the mid-twentieth century. An online forum dedicated to discussing the subject describes itself as, “RetroFuturism: For the fantastic, delusional dreams of our past.”

Maybe those were just quixotic fantasies that could never have been realised, but the point stands that since then innovation has slumped.

It wouldn’t be wise to devise a Sovietesque planned economy where the State picks winners, but the UK government does seem to lack a sensible, long-term investment strategy for the future.

The prevailing consensus amongst libertarians and free marketeers is that that is not the place of government.

But the fact is, when it comes to space travel, big infrastructure projects or investment in science and technology, it is often only the government that has the financial capabilities to take on such risky and expensive ventures. It is very difficult for individuals in the private sector to do so.

And government funding for scientific research and development in the UK is falling desperately short.

A 2015 report by parliament’s Science and Technology Committee warned that investment in those sectors has dropped far below the average for developed nations.

Higher education policy seems muddled too. We are told there are shortages of qualified people to work on the NHS. Yet every year thousands of young people are encouraged to take on huge amounts of government-backed debt to pursue degrees they will never find useful and that the economy doesn’t need. There is a huge opportunity cost to this. Why aren’t these resources being directed towards investing in innovative technology and future growth industries that could benefit many generations to come?

I object to libertarians who would oppose this for ideological reasons alone. I lean libertarian on most issues, but that is because I believe the principle of liberty has great social utility. For me, it is not simply an ideological consideration, but a practical, outcomes-based one. I  don’t believe that government has no role at all in aiding prosperity and improving people’s lives. Especially, when there is evidence to suggest that it can.

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