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The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War
Robert J. Gordon
Princeton University Press, $39.95 (cloth)
In 1879 farm laborers in Maryland destroyed harvesting machinery and left the farm owner a note: “You will please stop your other machines or next will be your life. . . . We do not get work enough . . . we have to go into det.” In 1938 Congress examined how mechanization was displacing tens of thousands of farm workers and families. And in 1962 President Kennedy declared that machines replacing men posed the major domestic challenge of the decade.
Repeatedly, new technologies have displaced and “de-skilled” specific kinds of work. Overall, though, American workers have gone on to have better jobs in each case. A new book by economist Robert J. Gordon, The Rise and Fall of American Growth, nonetheless argues that this time the end of good work is really coming.
Americans take as a birthright an ever-rising standard of living, as experienced during the mid-twentieth century. But that era, Gordon argues, was an anomaly in American history—in fact, in human history. The generations before, the generations since, and the generations to come were, are, and will be bleaker.
Gordon’s predictions are based on his deep immersion in the history of technology, business, and productivity. He argues that American productivity, and therefore Americans’ material well-being, rose rapidly between 1920 and 1970 because of critical, one-time-only technological innovations that occurred between 1870 and 1920. Breakthroughs in energy, machinery, materials, public health, transportation, and communications propelled advances in everything from bountiful food and comfortable homes to longer lifetimes. However, the “economic revolution of 1870 to 1970 was unique in human history, unrepeatable because so many of its achievements could only happen once.” By comparison, Gordon suggests, our latest technological advances are marginal. Consequently today’s slow growth rates will persist. Real median GDP per person will rise less than 0.5 percent per year for the foreseeable future, compared to the 2.5 percent it rose annually between 1920 and 1970, returning us to the stagnation of time immemorial.
If inventors will not bail us out, inventive government might.
Most of Rise and Fall recounts how well-being was improved for average Americans. For those familiar with this history, much of the book will feel like a recap, describing the shift from short lives of harsh work and debilitation to long lives of suburban comfort. The book swells with potted mini-histories—for example, of refrigeration, germ theory, television, and the elimination by automobiles of disease-spreading horse droppings from American streets.
Still, Gordon adds important nuances. He emphasizes, perhaps for the benefit of his fellow economists, that standard income accounting fails to properly value improvements such as longer lives, reduced physical pain, and widespread learning. He points out that conventional discussion of technology exaggerates the importance of most postwar and contemporary developments. While recent advances have unquestionably changed our communications and entertainment sectors, and made access much cheaper, they have done far less to alter more basic goods—food, clothing, shelter, and health—than did the inventions of three generations ago.
But Gordon gives insufficient attention to the role of government in fueling innovation. For example, he notes, “First rank among the causes of [health] progress during 1890 to 1940 is awarded to urban sanitation infrastructure.” Absent from this appraisal, however, is an acknowledgement that the infrastructure he praises was planned, built, and funded by government. Gordon only briefly notes how critical governmental innovation was to a range of other advances. For example, direct subsidies helped build the telegraph, transcontinental railroad, highways, medical research, defense-related technologies such as airplanes, and the Internet. The government supported growth by establishing and enforcing licensing, patenting, and property rights and by instituting antitrust protection for new entrepreneurs. The state offered public schooling, from wood shop to keyboarding, to train workers, and underwrote risk insurance for farms and workers.
That government support for innovation has waned may be as much to blame for wilting American fortunes as is technological stagnation. Between World War II and the 1970s, total nonfarm compensation (the pay received by most American workers) grew roughly apace with growing productivity; workers and owners shared equally in the boom. Since then productivity continued to go up, but compensation has hardly risen. The portion of total output received by American employees decreased from about 67 to about 57 percent over nearly 70 years, shrinking especially rapidly in the last 15. Maybe workers’ declining fortunes result from technological stagnation, global competition, and rising immigration. But the decline results as well from what one report called “developments in labor market institutions and policies.” In other words, early and mid-twentieth-century innovations such as labor protections, the minimum wage, regulatory oversight, and support for unionization have been weakened. These trends, too, are crucial to explaining Gordon’s rise and fall.
Gordon documents the extent of that fall—the reduced productivity growth since 1970—interrupted only briefly by a computer-related uptick in the late 1990s. He expects little better for the coming decades, mainly because of technological stupor, but also because of four “headwinds” against productivity growth: rising economic inequality, failing educational quality and attainment, demographically driven declines in working hours, and growing public and private debt.
The one positive of Gordon’s techno-pessimism is that it makes him less pessimistic about jobs. Americans of the low-productivity future may not be paid well, according to Gordon, but they will still have work. Many of the techno-optimists painting bright pictures of “smart” houses, clothes, and appliances foresee far worse. Entrepreneur Elon Musk, for instance, believes that a future in which intelligent machines do more and more for us will inevitably cause “tremendous upheaval in terms of employment. If you have self-driving cars, then what happens to the 12 percent of the population whose job it is to drive a car, or drive a truck?”
When it comes to preparing for the low-productivity future he anticipates, Gordon’s prescriptions are weak tea, and he knows it. His policy recommendations are mostly familiar liberal ideas such as more preschool education, a higher minimum wage, and less incarceration, mingled with conservative recommendations to deregulate land use and occupational licensing. These policies, he confesses, will only work at the margins, because we will never again experience a sustained period of life-changing inventions such as we did during the generations straddling 1900.
Is that so? That recent innovations pale beside those of a century ago does not mean that a new inventive era cannot come. Gordon devotes a few pages to an unconvincing argument that one can foresee major inventions—much as Jules Verne did—and what he foresees is only modest tinkering ahead. Yet one major breakthrough in energy, such as efficient fusion or superconductivity, or in health—say, effective gene therapy—would invalidate all of Gordon’s calculations. Economist Tyler Cowen charges Gordon with a shortage of imagination, concluding that he “unintentionally demonstrates the weakness of the case for pessimism.”
Or, maybe, if the inventors will not bail us out, inventive government might, as it has before. A radical policy shift—something like guaranteed basic income or a single-payer healthcare system—might turn out to be as much of a tonic for weak economic growth as the technological advances that Gordon has come to both praise and bury.
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