Robert Gordon’s 2016 book The Rise and Fall of American Growth is a comprehensive history of “the U.S. standard of living since the civil war.” Gordon, a Northwestern University economist, details changes in consumption of food, clothing, shelter, and transport during a period when Americans experienced unprecedented improvement in quality of life. From brutally difficult, cold, and short lives in 1870 there was rapid growth based on new technologies. Americans came to experience unimaginable comforts. “Foreigners in countries where apartment-dwelling is still predominate continue to marvel at the living standard of typical American middle-class families, with their two-car garages and houses large enough to store their abundance of possessions.” (p. 357)
The book is a judicious mix of economic data and narrative. We learn about the transformative power of innovations: electricity, indoor plumbing, railroads, mail order catalogs, rural free delivery, automobiles, refrigeration, telephones, and canned foods.
There are several lessons for 21st Century Americans from Gordon’s book.
- Economic data understate how dramatic improvement was in our lives. Without getting into the minutia of price indices and Gross Domestic Product calculations, the evidence of improvements over the century from 1870 to 1970 is compelling. We grouse today about losing electric service for 48 hours, but even with that annoyance, our lives are a cake walk compared to 1870.
- The period from 1870 to 1940 saw the greatest change. “No other era in human history, either before or since, combined so many elements in which the standard of living increased as quickly and in which the human condition was transformed so completely (p. 287).”
- Key technologies were central to this better living. Gordon says (p. 128), “The revolutionary transformation of the American dwelling illustrates a major theme of this book – these were inventions that could happen only once…” Once the new technologies were diffused throughout society the growth they engendered slowed.
- “…the year 1970 marks a distinct break point between faster and slower growth. The ten decades between 1870 and 1970 deserve their accolade…as the ‘special century’.” (p. 522) This central thesis of the book is important today because of the promises of the new administration that a return to rapid growth is simply a matter of re-negotiating international trade deals, restricting immigration, reducing taxes on the wealthy, and deregulating American business. Those might work if trade and regulatory policies were the causes of slower growth. Gordon makes clear that they were. The post-1970 period saw a dramatic slowing in productivity due to slower rates of innovation. “…the 1920-70 upsurge in TFP (total factor productivity in economic jargon) growth reflected the importance of the great inventions of the Second Industrial Revolution…the digital Third Industrial Revolution, though utterly changing the way Americans obtain information and communicate, did not extend across the full span of human life as did (the Second Industrial Revolution)…” p. 601 In short, rapid growth that we experienced up to 1970 is not going to return.
- Several economic “headwinds” will work against even modest growth, no matter how many walls we build or environmental quality regulations we remove. Growing inequality in the American society is first among these headwinds. (See my earlier blog on inequality.) If you read just one chapter of this book, make it Chapter 18, “Inequality and Other Headwinds.” This will make it clear how misguided are the policies of the new administration in Washington.
The major problem with Gordon’s book is what he leaves out. Like many neoclassical economists, Gordon accepts that growth is the result of technological innovation that yields improvements in worker productivity. He presents technological change as separated from the natural world. He ignores how biophysical constraints of nature impose limits on growth of human societies. (See, for example, my earlier blog post on ecological economics.) I expected a book on the history of American growth would include a discussion of the “limits to growth” movement of the 1960s and 1970s. Gordon does not.
Gordon is pessimistic about the future of growth in the American economy because he does not see any more revolutionary technological innovations. Yet there is a more fundamental reason that growth will not continue in our economy. A global society of over 7 billion humans pushes the economy up against basic biophysical constraints, like the ability of the atmosphere to absorb emissions from electricity production for all these people. Gordon fails even to acknowledge this notion of biophysical limits as a possibility.
For ecological economists the idea that nature imposes constraints on the human economy is not a cause for pessimism. The way out of this pessimism is to think about human wellbeing as distinct from the consumption of ever-increasing quantities of goods and services. There is more to happiness than more stuff.
No-one wants to go back to the life of 1870. For the vast major of people it was a hard, short life. The improvements in the first half of the 20th Century were liberating, changes that billions of humans on the planet today aspire to enjoy. Ecological economists recognize the fallacy of thinking that because economic growth once improved wellbeing dramatically, the way to more wellbeing is more economic growth.
Gordon’s book is an important contribution to understanding the blessings we need be grateful for today. It is not my choice for a guide to where we should head next.
Robert J. Gordon. (2016). The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War. Princeton University Press.