The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War
by Robert J. Gordon
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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.
The most important unmeasured benefit of all, the extension of life expectancy, occurred much more rapidly from 1890 to 1950 than afterward.
There was virtually no economic growth for millennia until 1770, only slow growth in the transition century before 1870, remarkably rapid growth in the century ending in 1970, and slower growth since then.
See the USA in your Chevrolet, America is asking you to call, Drive your Chevrolet through the USA, America’s the greatest land of all.[Quoting The Dinah Shore Chevy Show theme song, c. 1952, in an epigraph to Chapter 11: See the USA in Your Chevrolet or from a Plane Flying High Above.]
Pioneers in the development of particular products and industries have been described by Schumpeter as “innovators,” those “individuals who are daring, speculative, restless, imaginative and, more pertinently, eager to exploit new inventions.
Since 2000, we have seen a sharp decline in growth in output per person and its two components—growth in productivity and in hours of work per person—after corrections for the ups and downs of the business cycle. Because the basic data are unambiguous in registering a significant and deepening growth slowdown, the book’s title, The Rise and Fall of American Growth, has become a statement of fact.
both the Great Depression and World War II directly contributed to the Great Leap.
GDP omits many dimensions of the quality of life that matter to people.
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.
Although advertising began in the late nineteenth century with the development of the first branded products, its true explosion came in the 1920s, when it became increasingly tied to the newly invented radio.
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.
The economic revolution of 1870 to 1970 was unique in human history, unrepeatable because so many of its achievements could happen only once.
Both the immigration legislation and the draconian regime of high tariffs (the Ford–McCumber tariff of 1922 and the Smoot–Hawley tariff of 1930) converted the U.S. into a relatively closed economy during the three decades between 1930 and 1960. The lack of competition for jobs from recent immigrants made it easier for unions to organize and push up wages in the 1930s. The high tariff wall allowed American manufacturing to introduce all available innovations into U.S.-based factories without the outsourcing that has become common in the last several decades. The lack of competition from immigrants and imports boosted the wages of workers at the bottom and contributed to the remarkable “great compression” of the income distribution during the 1940s, 1950s, and 1960s.36 Thus the closing of the American economy through restrictive immigration legislation and high tariffs may indirectly have contributed to the rise of real wages in the 1930s, the focus of innovative investment in the domestic economy, and the general reduction of inequality from the 1920s to the 1950s.
Throughout American economic life, regulatory barriers to entry and competition limit innovation by providing excessive monopoly privileges through copyright and patent laws, restrict occupational choice by protecting incumbent service providers through occupational licensing restrictions, and create artificial scarcity through land-use regulation. They contribute to increased inequality while reducing productivity growth.
