Grasping Reality · Economics & Policy
TIER 4 Mon, 15 Jun 2026 19:58:20 +0000
Myrdal's missed apocalypse: affluence, technology, & the dual economy: do a wrong short-run forecast by a Swedish social democrat 75 years ago register the right long‑run anxiety for us today?
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# READING: Gunnar Myrdal: "Challenge to Affluence" (1963)
| | Brad DeLong
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| Jun 15
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###### Myrdal's missed apocalypse: affluence, technology, & the dual economy: do a wrong short-run forecast by a Swedish social democrat 75 years ago register the right long‑run anxiety for us today? And might post‑apartheid South Africa prefigure America's technostructural into-bio tech-attention economy structural trap??
Writing this down because I am trying to decide what I think about this rather odd book:
* **Myrdal, Gunnar**. 1963. _Challenge to Affluence_. New York: Pantheon Books. <https://archive.org/details/bwb_S0-BKX-571>.
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This is one of the more interesting and also one of the most forgotten books of the "Thirty Glorious Years" 1945-1973 era, during the heyday of the mass-production economy and the social-democratic New-Deal Order, after the defeat of fascism, and the belated recognition that really existing socialism was not at all attractive, and before the oil shocks and inflation of the 1970s. The book is propelled by Myrdal;s profound anxiety about--well, about what?
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**Briefly** : Myrdal argued back 62 years ago that post-WWII U.S. "affluence" masked structural stagnation, entrenched poverty, and a hardening underclass that threaten both American democracy and its global power. Myrdal's central claim was that postwar America had settled into slow, unstable growth with chronically high unemployment, and that only large, explicitly egalitarian reforms--especially in education, social policy, and public investment--could restore rapid, steady growth and preserve liberal democracy at home and U.S. influence abroad. In short, that the U.S. managerial class needed to convert itself (or be converted) into the Wallenbergs, that the AFL-CIO needed to be transformed into the LO, and that the United States needed to become Sweden.
Driving this were Myrdal's very pronounced fears of techno-structural change. As Myrdal saw it, technological change did not mechanically create mass unemployment, but in the actually existing U.S. institutional setup it was a powerful engine of polarization and a hardening underclass--and would indeed generate mass future unemployment unless policy became radically different.
Why?
Because:
1. **The direction of labor demand, not just its level, was changing.**
Technological change in farming and industry sharply reduced demand for:
* unskilled labor,
* many traditional skills (including once-secure craft jobs),
* agricultural labor in particular.
* And at the same time it raised demand for educated and trained workers, especially in urban, technical, and managerial roles.
2. **Formal hiring screens amplified this:** Big firms increasingly relied on credentials, tests, and interviews rather than traditional craft skills. That pushed labor demand even further toward people with schooling, smooth resumes, and strong social capital--and away from the already disadvantaged.
3. **Result: structural mismatch & polarization: **Thus you got simultaneous overtime for the educated core and long‑term joblessness for the less educated. So unemployment in the U.S., he said, was no longer just cyclical "Keynesian" shortfall; it was **structural** --a mismatch between the kind of labor supplied and the kind demanded in a technologically advancing economy.
4. **His comparative benchmark: Sweden:** The**** counterfactual:
* In Sweden, with **stable full employment** and strong macro policy, automation was _driven_ by labor scarcity; firms automate because workers are hard to hire.
* The state then **actively managesdadjustment** : retraining, relocation subsidies, regional policies, targeted support for lagging sectors.
* Unemployment policy became **investment in mobility and human capital** , not long‑term relief.
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In that environment, technological advance raised productivity and wages without generating a large pool of permanently excluded workers.
From this failure to be Sweden, Myrdal saw six derived consequences:
1. **The U.S. economy underperforming** : He saw a pattern of "sluggish and jerky" growth, short "boomlets," and recurrent recessions, with no evidence the economy will by itself shift into a rapid, stable growth path. A rich elite and a prosperous "middle third" coexisted with tens of millions in poverty and destitution, making the notion of a fully "affluent society" dangerously complacent. Roughly 38 million Americans (over one‑fifth of the population) lived in poverty; another ~39 million lived in "deprivation" just above poverty. And about 12½ million (nearly 7%) lived in destitution--below half the poverty line. And Black unemployment at about three times the national average, leaving "close to a fifth" of Black workers unemployed.
2. **Unemployment structural & creating an "underclass"**: High and rising joblessness increasingly concentrated among the young, the less educated, older workers, and racial minorities. Prolonged joblessness, poor schools, slums, bad health, and weak political voice had created a vicious circle in which poverty reproduced itself--especially among Black Americans and other minorities--as temporary unemployment turned into permanent unemployment, underemployment, and entrenched poverty
3. **Technological change without social policy polarizing labor markets::** Automation and farm rationalization reduced demand for unskilled labor while rewarding educated workers, and without massive investments in education, training, and mobility, growth alone could not absorb the displaced. Even in recoveries, a large pool of workers would remain jobless or underemployed because their skills, education, and geography did not match the pattern of labor demand.
4. **Full employment required activist planning and redistribution:** Myrdal called for deliberate long‑range economic planning, expanded public investment, and egalitarian reforms (education, health, social insurance, housing, minimum wages) to lift demand and upgrade labor.
5. **Social justice & growth the same problem**: "Never in the history of America has there been a greater and more complete identity between the ideals of social justice and the requirements of economic progress". In Myrdal's view, eradicating poverty via tax reform, expanded social security, education, housing, and public works was not a luxury but the necessary route to full employment, higher productivity.
6. **U.S. near-stagnation undermined foreign policy & liberal ideals:** Slow growth and persistent unemployment weakened America's ability to win the Cold War: to meet the Soviet economic challenge, to aid poor countries, and to lead a liberal international order without lapsing into frustrated, counterproductive policies.
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Myrdal's arrow shafts largely missed their marks. He saw an American economy with growth that was too slow, too erratic, too dependent on the military spending; with recoveries that were too weak and unemployment that remained too high. The decade after publication saw one of the strongest periods of American economic growth in modern history. Unemployment fell sharply. Productivity accelerated. The feared stagnation of the early 1960s proved temporary. The United States remained the dominant world economy. The immediate crisis that animated the book largely disappeared. The immediate situation in which he wrote and the developments he saw signs of emerging and feared were overtaken by events, which rendered his book silly-looking almost immediately, for Myrdal underestimated the capacity of postwar America to generate growth
But--and this is very much worth noting--Myrdal greatly feared that technological change was robbing people outside of the educated elite of their path to a secure and worthwhile and respected livelihood. Increasingly, the economy would no longer need sowers and reapers, hewers of wood and drawers of water, tighteners of bolts on the assembly line, carriers of hods, and so on.
So what, then, would people who did not have the engineering or the technical or the numeracy or the literacy skills needed to be a full functioning member and participant in the post-industrial economy Myrdal saw emerging do?
The problem would not arise in Sweden, where there was One Big Union and employers understand that their profits flowed on sufferance to the extent that they were useful to the social democracy. The union and the employers would find things for people to do and would retrain the middle-aged, pension off the old, and vocationally educate the young.
The problem, Myrdal thought, would arise in the United States. The result would be a "dual economy": there would be those who were successfully plugged into the technostructure of large firms, high throughput productivity, plus those who knew how to provide key services to keep the pieces of the machine running. and then there would be the rest, who would be neither terribly productive nor slotted into places in the high-throughput increasing returns machine, and would be frantically bidding against each other, pushing their wages down in the hope that someone would hire them for the equivalent of a low-productivity odd job.
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Perhaps the best way to look at what Myrdal feared would be to look at post-apartheid South Africa today:
South Africa today really is a relatively rich call it Portugal‑style enclave sitting on top of a larger much poorer low-education society, That structure is doing most of the work in generating its extreme inequality. (Plus it is layered: at a lower layer, South Africa itself is an enclave in southern Africa as a whole; at a higher layer, the richer portions and people of the Western Cape are an enclave within the Portugal-style enclave.) South Africa as whole has aa Gini around 0.63, with the top 10 percent capturing about 70 percent of pre‑tax income (versus roughly a third in France or the Nordics), the middle two-thirds capturing 20%, and the bottom quarter capturing only 5%: 70-to-1 top-to-bottom tenth income ratio.
One pole is a globally integrated, high‑productivity capitalist core: finance, business services, formal manufacturing, modern retail, some high‑end tourism. It lives on fiber internet, private medical aid, gated suburbs, global capital markets. The other pole is a vast low‑productivity "second economy" of informal services, marginal agriculture, townships and rural former homelands, and structurally high unemployment, and over 30 percent unemployment nationwide. The high‑productivity core doesn't employ many people, and it pays very high wages (and returns to capital) to those who do get in. The rest of the labor force is either in low‑productivity informal work or not employed at all.
It is no longer apartheid-era South Africa. A very substantial and very prosperous Black professional and business elite has emerged--helped by BEE, public sector employment, and access to the high‑productivity core. But the pattern is "racial convergence from the top": the top Black decile racing ahead, pulling overall Black average income upward, while the bottom half of the Black population remains effectively stuck.
And the state is not irrelevant. Tax‑benefit accounting that includes in‑kind education and health spending shows that South Africa's redistribution lops a non‑trivial 20‑plus Gini points off pre‑tax income inequality, and the bottom half get a majority of education spending and about half of public health spending. Social grants, especially old‑age pensions and child support grants, matter a lot. But the largely successful redistributive state operates on top of a production structure that continually regenerates inequality: between a narrow, skill‑intensive, capital‑intensive core with strong global linkages, and a marginalized periphery whose labor is simply not demanded at scale by that core.
Sweden or South Africa? Is that a way to think about the choices America will make as we move into the info-bio tech-attention economy?
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