The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War
by Robert J. Gordon
In "The Rise and Fall of American Growth," Robert J. Gordon examines the evolution of the U.S. standard of living from the Civil War to the present, arguing that the remarkable economic progress experienced from 1870 to 1970 is unlikely to be replicated. Central to Gordon's thesis is the notion that while the digital revolution (Industrial Revolution #3) has introduced significant innovations, its overall impact on productivity has been less profound than that of previous industrial revolutions. Key themes include the stagnation of progress in essential areas like health and housing since 1970, despite advancements in entertainment and information technology. Gordon highlights growing inequality as a major headwind to economic growth, with wealth disproportionately accumulating at the top, exacerbated by policies such as regressive regulations and occupational licensing. He proposes alternative fiscal measures,like drug legalization and a carbon tax,to address economic disparities without harming social safety nets. Moreover, Gordon critiques GDP as a measure of societal well-being, noting it overlooks critical aspects of quality of life. He underscores that the unique clustering of "Great Inventions" in the late nineteenth century spurred unprecedented economic growth that has since waned. The book ultimately posits that America's economic trajectory is shifting toward slower growth, driven by structural challenges and demographic changes, suggesting a need to rethink strategies for sustainable development and equity in the modern economy.
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Below are the most popular and impactful highlights and quotes from The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War:
The post-2020 fiscal reckoning does not require higher payroll taxes or lower retirement benefits, as new sources of fiscal revenue are available from drug legalization, increased tax progressivity, tax reform that eliminates most tax deductions, and a carbon tax that provides incentives to reduce emissions.
Inequality can be alleviated and productivity growth promoted by combating overly zealous and regressive regulations
Unlike IR #2, the digital revolution IR #3 had a less powerful overall effect on productivity growth, and the main effect of its inventions occurred in the relatively short interval of 1996 to 2004, when the invention of the Internet, web browsers, search engines, and e-commerce created a fundamental change in business practices and procedures that was reflected in a temporary revival of productivity growth.
If the automobile had followed the same development as the computer, a Rolls Royce would today cost $100 and get a million miles per gallon, and explode once a year killing everyone inside. —Robert X. Cringely, InfoWorld magazine
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. For the rest of what humans care about—food, clothing, shelter, transportation, health, and working conditions both inside and outside the home—progress slowed down after 1970,
Don’t be too timid and squeamish about your actions. All life is an experiment. The more experiments you make the better. —Ralph Waldo Emerson, 1841
The event happened at noon on May 10, 1869, at Promontory Summit, Utah. That moment was a pivotal episode in world history as Leland Stanford pounded a golden spike with a silver hammer and in an instant ended the isolation of California and the Great West from the eastern half of the United States.
The combined effects of growing inequality, a faltering education system, demographic headwinds, and the strong likelihood of a fiscal correction imply that the real median disposable income will grow much more slowly in the future than in the past.
If the stock market continues to advance, we know that inequality will increase, for capital gains on equities accrue disproportionately to the top income brackets.
The new element in part III is the headwinds—inequality, education, demography, and debt repayment—that are buffeting the U.S. economy and pushing down the growth rate of the real disposable income of the bottom 99 percent of the income distribution to little above zero.
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.
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.
Morris Kleiner has calculated that the percentage of jobs subject to occupational licensing has expanded from 10 percent in 1970 to 30 percent in 2008.
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. For the rest of what humans care about—food, clothing, shelter, transportation, health, and working conditions both inside and outside the home—progress slowed down after 1970, both qualitatively and quantitatively. Our
But the cable cars did not last long. They had disappeared from the streets of most cities by 1900 and from Chicago by 1906, and they remain to this day only in the single city of San Francisco, where they are primarily a tourist attraction.
Hearst was eager to stoke the flames of conflict between Spain and the United States over Cuba and sent Frederick Remington the photographer, who could find no signs of war. In a famous exchange of cables, Hearst responded to Remington, “You provide the pictures; I’ll provide the war.”10
For instance, the degree of enjoyment provided by an hour of leisure spent watching a TV set in 1955 is greater than that provided by an hour listening to the radio in the same living room in 1935.
