The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War (The Princeton Economic History of the Western World Book 70)

by Robert J. Gordon

This is a book about the rise and fall of American economic growth since the Civil War.

There was no economic growth over the eight centuries between the fall of the Roman Empire and the Middle Ages.

that real output per person in Britain between 1300 and 1700 barely doub...

Americans in the twentieth century who enjoyed a doubli...

that American growth was steady but relatively ...

struggled for decades to identify the factors that caused productivity growth to decline...

the issue of corporate “tax shifting,” that is, the question whether business firms escaped the burden of the corporation income tax by passing it along to customers in the form of higher prices.

The Kendrick data showed that the sharp jump in output relative to capital between the 1920s and the 1950s characterized the entire economy, not just the corporate sector.

At the same time there was clear evidence that the long post-1972 slump in U.S. productivity growth was over, at least temporarily, as the annual growth rate of labor productivity soared in the late 1990s.

The book connects with two different strands of literature. One is the long tradition of economic history of explaining accelerations and decelerations of economic growth. The other is the more recent writing of the “techno-optimists,” who think that robots and artificial intelligence are

arguing that the main benefits of digitalization for productivity growth have already occurred during the temporary productivity growth revival of 1996–2004.

slowing growth in a group of headwinds—inequality, education, demography, and fiscal—that are in the process of reducing growth in median real disposable income well below the growth rate of productivity.

that the Great Depression and World War II taken together constitute the major explanation of the sharp jump in total factor productivity that occurred between the 1920s and 1950s.

The book is a readable flashback to another age when life and work were risky, dull, tedious, dangerous, and often either too hot or too cold in an era that lacked not just air conditioning but also central heating.

The century after the Civil War was to be an Age of Revolution—of countless, little-noticed revolutions, which occurred not in the halls of legislatures or on battlefields or on the barricades but in homes and farms and factories and schools and stores, across the landscape and in the air—

because they touched Americans everywhere and every day.

The century of revolution in the United States after the Civil War was economic, not political, freeing households from an unremitting daily grind of painful manual labor, household drudgery, darkness, isolation, and early death.

The economic revolution of 1870 to 1970 was unique in human history, unrepeatable because so many of its achievements could happen only once.

Economic growth is not a steady process that creates economic advance at a regular pace, century after century. Instead, progress occurs much more rapidly in some times than in others.

Our central thesis is that some inventions are more important than others, and that the revolutionary century after the Civil War was made possible by a unique clustering, in the late nineteenth century, of what we will call the “Great Inventions.” This leads directly to the second big idea: that economic growth since 1970 has been simultaneously dazzling and disappointing. This paradox is resolved when we recognize that advances since 1970 have tended to be channeled into a narrow sphere of human activity having to do with entertainment, communications, and the collection and processing of information.

progress slowed down after 1970, both qualitatively and quantitatively.

TFP grew after 1970 at barely a third the rate achieved between 1920 and 1970.

that are blowing like a gale to slow down the vessel of progress. Chief among these headwinds is the rise of inequality that since 1970 has steadily directed an ever larger share of the fruits of the American growth machine to the top of the income distribution.

But articles on growth theory rarely mention that the model does not apply to most of human existence.

Angus Maddison, the annual rate of growth in the Western world from AD 1 to AD 1820 was a mere 0.06 percent per year, or 6 percent per century.

Three great inventions of that half century—the railroad, steamship, and telegraph—set the stage for more rapid progress after 1870.

the Battle of New Orleans had been fought on January 8, 1815, three weeks after the Treaty of Ghent was signed to end the War of 1812.

no longer did society have to allocate a quarter of its agricultural land to support the feeding of the horses or maintain a sizable labor force for removing their waste.

Households in the late nineteenth century spent half their family budgets on food, and the transition of the food supply from medieval to modern also occurred during the special century.

Mason jar, invented in 1859 by John Landis Mason, made it possible to preserve food at home. The first canned meats

Kellogg’s corn flakes and Borden’s condensed milk to Jell-O, entered American homes. The last step to the modern era, the invention of a method for freezing food, was achieved by Clarence Birdseye in 1916,

By the 1920s, most female clothing was purchased from retail outlets that did not exist in 1870—namely, the great urban department stores and, for rural customers, the mail-order catalogs.

Public waterworks not only revolutionized the daily routine of the housewife but also protected every family against waterborne diseases.

clean running piped water and sewer pipes for waste disposal had reached 94 percent.

short, the 1870 house was isolated from the rest of the world, but 1940 houses were “networked,” most having the five connections of electricity, gas, telephone, water, and sewer.

The percent of the nation classified as urban grew from 24.9

SINCE 1970: A NARROWER PALETTE OF PROGRESS COMBINES WITH DIMINISHING RETURNS

Second, after 1970, rising inequality meant that the fruits of innovation were no longer shared equally: though those at the top of the income distribution continued to prosper, a shrinking share of the growing economic pie made its way to the Americans in the middle and bottom of the income distribution.

Progress after 1970 continued but focused more narrowly on entertainment, communication, and information technology, in which areas progress did not arrive with a great and sudden burst as had the by-products of the Great Inventions.

this is relevant only to a limited sphere of human experience. Total business and household spending on all electronic entertainment, communications, and information technology (including purchases of TV and audio equipment and cell phone service plans) amounted in 2014 to only about 7 percent of gross domestic product (GDP).

Frozen food having long since arrived, the major changes in food availability have entailed much greater variety, especially of ethnic food specialties and out-of-season and organic produce. There has been no appreciable change in clothing other than in styles and countries of origin,

Motor vehicles in 2015 accomplish the same basic role of transporting people and cargo as they did in 1970, albeit with greater convenience and safety.

American achievements after 1970 have been matched by most developed nations,

one important regard Americans fell significantly behind, struggling with the enormous cost and inefficiency of the nation’s health-care system. Compared to Canada, Japan, or any nation in western Europe, the United States combines by far the most expensive system with the shortest life expectancy.

which witnessed the invention of antibiotics, the development of procedures for treating and preventing coronary artery disease, and the discovery of radiation and chemotherapy, still used as standard treatments for cancer.

“real GDP per person.”

This book shows that there are two important reasons why real GDP per person greatly understates the improvement in the standard of living for any country, and particularly for the United States, in the special century. First, GDP omits many dimensions of the quality of life that matter to people.

not intended to include the value of nonmarket activities that matter to people.

as a measure of market activity, is systematically understated,

price indexes used to convert current-dollar spending into constant inflation-adjusted “real” dolla...