The first 100 days of the Trump presidency may have been lacklustre, and the first three months of the year certainly showed disappointing GDP growth – only 0.7 per cent annual rate. For high-tech America, this quarter has been a scorcher. So what matters more?
This week saw the share price of Amazon, the Google parent Alphabet, Facebook, and Microsoft hit all-time highs. This was on the back of very strong results, with Amazon profits up 41 per cent and Google 29 per cent, and both Microsoft and Intel producing fundamentally strong, if less spectacular earnings. We will see what Facebook achieves when it publishes its results next Wednesday but the market expects another stunner, to judge by the surge in the share price in the past few days. Intel also traded within a whisker of its all-time high.
This contrast between apparently slow growth and a booming high tech business is not new. It has been evident right through the recovery, and may in some measure be associated with the swing of voters towards their new president. The elite, either on the high-tech West Coast or among the Wall Street investors who have profited from them, are doing just fine. But the mass of Americans are barely getting by, for the figures suggest that this has been the slowest economic recovery since the Second World War. The business of America may indeed still be business, but it seems to be big business, not small.
There is no easy explanation, except to acknowledge that in part, at least, this evident dissonance between winners and losers is indeed valid. If you have a stock market boom, and the Dow Jones is up 21 per cent on last year, people who own stock will do very well. The more they own the better they will have done.
That leads to another debate as to whether present share values, particularly of these high-tech companies that dominate the market, are justified. At some stage there will be a market “correction” – I love that euphemistic description of what the rest of us would call a share crash – but while these companies’ earnings continue to soar you can make a decent case to support these record market levels.
But the “print shedloads of money and it has to go somewhere” argument, while probably correct, is only part of it. There are, I think, two other elements at work.
The first is that we are mis-measuring GDP. This is a familiar theme, the argument being that the impact of Google, Facebook and the like have greatly increased people’s real living standards in a way that isn’t captured in the statistics partly because so many of the new services are for free, and partly because the benefits are often in saving people time and we find it difficult to put a cost on that.
The other is more general. We are in the early stages of a revolution, which has been dubbed the Fourth Industrial Revolution because its impact may be as big as the three preceding ones – that of steam and the railways, of electricity and mass-production, and of computers and telecommunications. In the early stages of any such revolution there are some obvious losers (think of blacksmiths) but many more, less obvious gainers (anyone travels in a car). So now we can see the losers, people who lose their jobs from automation, but are less aware of the gainers, who comprise nearly all of us.
There is a further twist. In the early stages of any such revolution there are people who become vastly wealthy – the steel and oil barons in the US 100 and more years ago, the high-tech princes now – and the widening of differentials leads to social tension. Eventually societies adapt and that will happen again now.
Meanwhile, set alongside such a gigantic economic force as US high-tech industry politics seem almost irrelevant. Barring some catastrophe that does not bear thinking about, our lives will be changed more by Facebook, Google and Apple, than by any incumbent of the White House.