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Robert J. Gordon argues the high rates of economic growth seen in the US during the “special century” of 1870-1970 were a one time event, and that there is no reason to expect these rates to ever return. His thesis can be distilled into five key points:
All aspects of American life and work were greatly transformed between 1870-1940, with improvements continuing until 1970.
1870s Americans were well fed, but with a highly monotonous diet based around pork and corn, which were easy to preserve. The advent of refrigeration and supermarkets over the following century allowed diets to vary and made food preparation easier, but major innovations were finished by 1940.
1870s Americans owned few outfits, but by the 1940s clothing production shifted from the home to factories, and the rise of department stores and mail-order catalogues contributed to better selections with lower prices. The arrival of the car ended the monopoly of local stores by allowing easy travel to different stores outside people’s local area.
During this period, homes became connected to running water, sewerage, gas, and telephone services. Bathrooms replaced outhouses, and bathtubs replaced bathing in the kitchen. Central heating meant more rooms than the kitchen were comfortable in winter months, and the invention of labour saving appliances improved cleanliness and reduced housework hours. Gas lighting was replaced with safer electricity.
Intercity railways were well established by 1870, however transport within cities was severely lacking. Caring for horses to provide last-mile transport was expensive and diverted a great deal of agricultural production, and they could only move people and goods a few miles every hour. Electric streetcars in the 1900s and then affordable production model cars in the 1910s eliminated the need for horse drawn transport, and by the 1940s automobiles dominated American life. The final transportation developments of the interstate highway system and commercial air travel had been completed by 1970.
1870s communication was by mail or expensive telegram, which led to great rural isolation. By 1940, the telephone, phonograph, movies, and radio had all been developed, allowing easier communication between businesses and families. Between 1940-70, the television replaced some of film and radio’s roles.
Germ theory was still being established in 1870. In the “special century”, water filtration and chlorination was established in major cities, milk became pasteurised, and the Food & Drug Administration began enforcing safety standards. The period of 1940-70 saw antibiotics discovered to treat many bacterial diseases. Mortality rates dropped dramatically over this century.
Work roles changed in this period. Men found work shift from manual labour roles to jobs indoors, reductions in time needed to perform housework and changes in societal attitudes saw large increases in women in the workforce.
Since 1970, although information technology has been similarly transformed, other areas of life have remained similar.
Food choices have largely remained the same, with some new products and store types. Home sizes have increased somewhat, but the reliability of appliances remains similar to levels of 1970. Major new appliances in this period were limited to microwave ovens and air conditioning. Transportation has changed little since the 1970s, and the work week had already decreased to 40 hours by 1940. Medicine has not had a revolution comparable to the germ revolution, but notable improvements in health through education programs (particularly on smoking) have been seen.
Since 1970, only the electronic and IT aspects of life have been revolutionised, with some indirect effects on areas such as retail. In this period, the entire computer and internet revolution happened, phones were made portable and turned into computers, televisions grew, and access to media moved online. Gordon does not deny this revolution, but argues that a revolution in one area alone cannot have the same effects on growth as simultaneous revolutions in all areas of the economy.
These differences are seen in economic metrics which grew faster from 1920-70 than before or since.
Two of the most important graphs presented concern growth across three periods, and TFP growth in the past century.
Many inventions such as the sewing machine, telephone, motorcar, and electric light were developed in the period 1870-1920, however growth impacts were not seen until the 1920-70 period. It is argued that this is due to the slow uptake of these technologies: electric power didn’t reach 80% penetration until 1940, radio industries did not emerge until the 1920s, and motorcars were not widely affordable until the 1910s. The adoption of assembly line technologies after 1913 is argued to have cause the surge in TFP in the three following decades. Gordon also argues the effects of the New Deal and WWII impacted American productivity. Increasing unionisation during the Depression led to manufacturers increasing investment in capital stock, and the urgency of WWII spurred producers to reach new levels of efficiency.
All of the trends that led to this period of high growth are spent; there are no new trends on the horizon to replace them.
To understand the impact of the digital revolution, Gordon isolates TFP growth over the relevant period. From the data, he concludes the impact of the digital revolution was minor: it was shorter-lived and of lower magnitude than previous combined impacts.
Gordon acknowledges the criticism that this analysis relies on GDP, which does not capture effects of free internet services which create consumer surplus but not GDP (Google search, Wikipedia, YouTube). However, this is refuted by arguing that this has always been the case, and even more consumer surplus went unmeasured in the past (free TV and radio programs, liberation of the car, lives saved by penicillin), so GDP mismeasurement cannot explain the slowdown.
Therefore, high growth is a relic of history and low growth will be the new norm.
The changes of the 20th century cannot be repeated: homes cannot be re-electrified, neither can factories, cars and phones cannot penetrate the American household further. Gordon even argues computing has exhausted its contribution: business practices are largely unchanged since 2004, retail has not changed since computerised inventories, and financial markets are already computerised. Demographic changes have also run their course: high school graduation plateaued after 1970, as did the percentage of population in urban areas, female participation in the workforce peaked in 1999.
Gordon argues new technologies are insufficient to drive a revolution: drug development is too expensive, robots are not good enough to replace humans, 3D printing cannot replace mass production, self-driving cars will not shorten commutes, and self-driving trucks will not shorten loading and unloading times. He sees new technologies as palliative, and the slowdown so natural we should not be saddened.
What is remarkable about the American experience is not that growth is slowing down but that it was so rapid for so long…. the rise and fall of growth are inevitable when we recognize that progress occurs more rapidly in some time intervals than in others. There was virtually no economic growth for millennia…. American growth slowed down after 1970 not because inventors had lost their spark or were devoid of new ideas, but because the basic elements of a modern standard of living had by then already been achieved along so many dimensions, including food, clothing, housing, transportation, entertainment, communication, health, and working conditions.
The 1870–1970 century was unique: Many of these inventions could only happen once, and others reached natural limits.Robert J. Gordon
However, I argue that he hasn’t properly analysed the future of these new technologies, especially after pages of discussing breakthrough inventions, which have always gone through an immature stage before mass deployment. There is no recognition that self-driving transport may alter land use patterns and cargo logistics, despite the fact the arrival of the car did exactly this. There is also no recognition of the addressable challenges of cancer treatment, cheaper power, genetic engineering, or quantum computing. Gordon seems to treat a century of breakthroughs as a fluke.
Gordon predicts future real growth rates of 0.3%, which is valuable if taken as a warning, not a prophecy. Growth will be low in the absence of any breakthroughs, and all inventions no matter how great will eventually contribute no further to economic growth.
Full Book Details
The Rise and Fall of American Growth
Robert J. Gordon
Princeton University Press