In the late 19th century, roughly half of Americans worked in agriculture. By 2000, that fraction had fallen to under 2 percent. During the last century alone, we have seen those involved in the production of goods (from mining to manufacturing to construction) fall from about a third of the population to just under one in five. Over the same period, the proportion of Americans involved in services more than doubled, from 31 percent in 1900 to almost 80 percent by the turn of the last century. Since 1900, the number of farms in the United States has fallen 63 percent, and the average farm size has grown by two-thirds.
The U.S. economy has, in the past 150 years, seen stunning changes. It has gone from agrarian to industrialized, from primarily rural to primarily urban and suburban -- from one in which primarily men worked to one in which by 2010 more than half of professional workers were women, from one in which most people did not complete high school to one in which 40 percent of 18- to 24-year-olds are enrolled in college, from one in which most American companies made their money in the United States to one in which about half the sales of S&P 500 companies come from other countries.
We should be comforted by this story of adaptation. The result has been unprecedented benefits across society, from GDP growth to rising standards of living. This has been not one industrial revolution but a whole series of upheavals culminating in the massive shift in recent decades from manufacturing to services, powered by globalization and new technologies.
Naturally, the folks in charge had to adjust. Protectionism that may have worked in the 19th century proved a calamity by the early 20th. Gold-based currencies were ultimately replaced by fiat alternatives. New data were needed to judge economic health. New regulations were needed to protect society and individual citizens. Indeed, national economic institutions like the Federal Reserve and the Securities and Exchange Commission have had to be augmented by coordination with similar groups in other countries to ensure market stability, liquidity, and crisis response.
Now, however, signs suggest that another enormous change is afoot -- only this time, the folks in charge are not adjusting.
Once upon a time, the U.S. economy grew in tandem with the productivity of American workers, leading to the creation of jobs and wealth across society. During this century's first decade, however, this relationship no longer applied. GDP grew and productivity climbed, while job creation slowed to a crawl, median incomes fell -- and the rich got richer.
This is not just a problem for the United States. Emerging economies -- even China -- are facing a similar phenomenon. Erik Brynjolfsson and Andrew McAfee, digital-business specialists at MIT, describe the disconnect in grim detail in Race Against the Machine, their book about what might be called a third Industrial Revolution. They explain that massive increases in productivity due to the happy marriage of information technology and advanced manufacturing techniques are having a chilling, unprecedented effect on job creation.