ALEX FIELD
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As we celebrate the 100th anniversary of magnetic recording and information storage technology, and look forward to the future, it is appropriate, and I think helpful, to reflect in a larger context on the impact of this remarkable technology on our standard of living and equality of lives. I want to try to do this today by providing a overview of some macro economic productivity trends in the U.S. We have already heard from Ron on some of the micro economic aspects of this, and I want to consider the place of Magnetic Recording in this history. I think it is in some respects a unique and remarkable place. First some definitions. There are two widely used measures of aggregate productivity, the first of these is labor productivity which simply measures the ratio of real G.D.P gross domestic product, to hours of input, typically in the non farm sector. This is the measure you typically hear reported in the Wall Street Journal or on the evening news. It receives prime billing because it is the direct determinant of our standard of living. If labor productivity does not rise our standard of living can't go up, unless we work more hours or the labor force participation goes up. Given the existing state of technology, that is, if we don't have a major new processing product innovations, there are ways in which out standard of living can go up, but they involve real and sometimes painful sacrifice. More of the people in the population can work. We can work longer hours or as a society we can collectively agree to reduce our concurrent consumption by devoting part of our product to the accumulation of physical capital, more structures, equipment and inventories. Now the second measure of productivity which is the more general measure, multi factor productivity, also takes in to account the role of the growth of our real physical capital stock, and that is the chart that you see on the screen. Multi factor productivity growth is the growth rate of real gross domestic product less the weighted growth of the two key factors, physical capital stock and labor hours, with the weights reflecting the shares of these two factors and national income, which has been historically about 25% for capital and 75% for all forms of labor compensation. Multi factored productivity growth measures the increase in real output that can't be accounted for directly by increases in physical productivity if it is conventionally measured. So it is in the history of multi factored productivity that we see the trace, the evidence of revolutionary new product process innovations. |
It is from this prospective that I ask us to look
back over the past century. In fact I have got data here that goes
back a little more than the past century it goes back to 1870. This
history is really quite remarkable as it shows, first of all, that the
last quarter century has been a disappointing one from the stand point
of productivity growth, it is not that there hasn't been growth in labor
productivity but almost all of that growth can be accounted for by accumulation
of physical capital. That is, almost all of it can be accounted for
by the growth of a weighted combination of the growth of the physical capital
stock and the number of labor hours. In some areas of the economy
indeed in the last quarter century in particular construction, electric
power generation, and mining, productivity growth has been almost nil since
the early post war period. The massive investments in computers has
at best only begun to manifest itself in the aggregate data. Certainly
in manufacturing, if you look at this aggregated data, we do see this impact
in manufacturing, but manufacturing is now less than a fifth of the economy.
Arguably in distribution,I think there is some real opportunities there,
but we have to recall as well that we have a massive investment in shopping
centers, an amazing investment in structures, which seem to be vacant a
considerable part of the day except during sales times. Arguably
in finance as well. I think theses are major areas where we have
potential for gains. Moreover, and Paul Locatelli referred
to this, at least looking at data through 1994 almost all of the gains
in real income since the 1970's, have been experienced by the top twenty
or perhaps the top forty percent of American households. As the trend
towards greater income equality, which was apparent in the United States
from the end of World War II to the early 1970's, reversed itself.
So the last quarter century has really been distinguished in a number of
ways, not all of them necessarily something that we want to celebrate.
At least looking at the long span of historical progress. Now what
is also interesting taking this very broad perspective is that the from
the productivity stand point the last quarter century actually turns out
to look remarkably like the period from 1870 to 1914. Now that period
from 1870 to 1914 was actually a period of more rapid economic growth,
but that was simply because the population in labor force was growing more
rapidly. It was a period in which almost all of the growth again
can be accounted for by the growth of physical capital and the labor force.
Immigrant labor help build a national infrastructure epitomized by the
expansion of a railway net that totaled only thirty thousand miles at the
end of the civil war, but reached more than a quarter of a million miles
by the start of World War I.
What turns out to be really remarkable then from
the stand point of the past quarter century is the periods sweeping from
the 1920's trough the 1960's. Encompassing both the boom of the 1920's
and the depression of the 1930's. I think, because of the wide spread
unemployment, we tend to overlook how technologically dynamic the decade
of the 1930's actually was. A period in which the economy witnessed
historically unprecedented growth of both labor productivity and multi
factor productivity. Now why? This period can now be seen to
have been simultaneously revolutionized by four related but distinctive
complexes of technological innovation. First of all, of course, the
internal combustion engine and its impact on road and air transport, suburbanization,
retail distribution, and a whole slew of other industries. Second
electricity, with its revolutionizing of the American household.
I often described to my students my experiences of the 1964 world's fair
in New York. They had a exhibit, the General Electric carousel of
progress, which was subsequently I think moved to Disneyland and they showed
pictures of the American kitchen in 1880, 1900, 1920, 1940, 1960, and I
remember being struck when I saw that as a teenager, that the household
of 1920 was revolutionary different from that of 1900 and 1880 because
of all of the new electric appliances, the vacuum cleaner, the electric
range, and so on and so forth, but that the kitchen of 1960 did not have
the same qualitative difference. So I merely suggested that as a
way of reminding us what electricity did for the American household but
it also revolutionized American manufacturing, by permitting a great increase
in the flexibility in the organization of production. You would no
longer essentially be constrained by the need to move motive power, steam
power for example, in physical terms with great loss of energy through
overhead tables and belts. The third area then, that I would like
to emphasize, and this is particularly important in the 1920's and 1930's,
is chemical engineering. I think a area that is sometimes overlooked.
The American leadership in organic chemicals which was derived from increased
understanding of the processing of petroleum. We seized leadership
from Germans in terms of world wide leadership in chemical engineering.
The German technology was based on the processing of coal based feedstock,
Americans based on petroleum. And then finally the fourth area and
it has already been eluded to and that is radio and television. Which
revolutionized communication but perhaps more significantly home entertainment.
It is with respect to the last of these four that magnetic recording information
storage technology played a critical role in economic growth earlier in
the century. As we have already heard in terms of the reference to
Bing Crosby's role as a venture capitalist in developing audio recording.
Now in contrast, the dominant innovations of the last quarter century have
been as I think Paul Locatelli suggested, the computer and its related
technologies, and arguably biotechnology. Improvements of magnetic
storage and information technology have been critical for both of these
efforts, particularly the former, and will continue to be so. But
the jury still very much out on what will be the long term impact of these
innovations on our standard of living. Robert Solo, a Nobel prize
winning economist, has remarked that computers are showing up everywhere
except in the productivity statistics. Now some of this maybe attributable
to measurement issues. But it is unlikely that it will count for
all of it. I think a more hopeful view is that as was true
with electric power generating and transmitting equipment at the beginning
of the century, it will take time for us to understand how best to utilize
these new technologies, and for their impact to be fully absorbed.
Some recent data suggests that we may be finally beginning to see some
real turns in the massive investments in computers and infrastructure.
I am speaking about recent labor productivity data over the last three
or four years.
Now magnetic recording and information storage technology
can claim some uniqueness in playing a significant role, both in the great
productivity expansion of mid century, and also in what maybe received
by historians, when they look back from the stand point of the year 2050,
as a subsequent big wave, separated by the doldrums of the last quarter
century. Although we have made hundreds of billions of dollars in
investments in computer and information technology, expenditures now run
at the rate at over 200 billion dollars a year. That is fully a third
of total gross investment in producer durables and equipment. The
productivity improvements we might expect to result from these commitments
have not manifested themselves yet unequivocally in the aggregate data.
I said there has been some encouraging news on the productivity front for
the past four years not reflected in this data here up through 1994.
But we don't yet know the long term significance of these observations,
whether they are temporary or reflective of the beginnings of a delayed
realization of the gains from the massive investments already made.
As we discuss the past and future of magnetic recording
and information storage, we should bear in mind the critical historical
juncture at which we stand. The evolution of this industry and those
to which it provides inputs, will play a important role in influencing
the course of future productivity growth. And determining whether
the next quarter century recapitulates the disappointing record of the
past quarter century or rather reflects the onset of a new golden era which
we are just in the process of beginning to experience. In way similar
in magnitude to those experienced in mid century. I have noted these
technologies played, in earlier incarnations, a very important role.
Thank you.