The “special century” between 1870 and 1970 was not an economic transformation to repeat. It was an anomalous period of exceptional change super-powered by the remarkable inventions of the Second Industrial Revolution not to be repeated.
So argues Robert Gordon in his influential, academic and deeply researched 2016 book The Rise and Fall of American Growth. It is one of the better respected contributions to the conversation how quickly will quality of life continue to advance. Technological advances tend to not reverse, so his point is not that we’ll regress but that we’re due for a long period of languishing growth and advancement.
For millennia until the 1750s, there was very modest rates of economic growth. Then the First Industrial Revolution ushered in slightly faster growth, which setup the second, which we most commonly call the Industrial Revolution of the mid-19th century. That spurred the fastest advancement in quality of life in human history. By the 1970s, progress slowed. The third, technological revolution only resulted in a short-lived return to high grow in the decade 1994-2004. That was the lone answer to economist Robert Solow’s famous 1984 quip: “You can see the computer age everywhere but in the productivity statistics.”
In his book, Gordon argues we’re unlikely to repeat the rate of gains of that special century. It’s an interesting addition to the familiar techno-optimist versus techno-pessimist argument. Below I share some of notes from the book. It is dense and thorough, so it’s hardly light reading, but I devoured it. It’s an important addition to the economic literature. I recommend reading it.
Here are my notes:
- In 1893, urban households that only had an outdoor privy: 53% in NYC; 70% in Philadelphia; 73% in Chicago and 88% in Baltimore.
- In 1910, most lower class Pittsburgh families still accessed communal tap or outdoor spigot (45)
- Half of all New Yorkers lived in buildings with six or more families in 1885, this was true of only 1% of the residents of Philadelphia. Structures housing two or three families made up about half of the housing stock in Chicago and Boston at the same time.
- Today’s houses and apartments are much more similar to those of 1940 than those of 1940 or to their predecessors of 1900. That was the period of the most dramatic change
- 1900: 8k registered cars; 500k in 1910; 9 million in 1920, 23 million in 1930 (131)
- Train travel from Washington DC to New York in 1860 was not just a train trip but also a horse trip, requiring four separate train rides, three ferry rides and seven separate horse rides between the trains and ferries (Lincoln) 133
- William Cronon has a story of the Burroughs, Iowa merchant before and after arrival of the Chicago and Rock island railroad line at the Mississippi river in 1854. He charged mark ups before the railroad because he had to hold inventory and confront five months of frozen river boat traffic, and then he faced heavy competition after railroad and business, and his business failed. He failed to adapt; collateral damage of more efficient economy
- In 1829 the ratio of newspapers printed per person was nine times higher in Pennsylvania than the British isles, the price of the newspaper was a fifth and the price of an advertisement was a 30th. The low prices of American newspapers in their advertisements was made possible by the invention of the steam powered press in 1830 (176)
- In the early 1900s, American household purchased on average 3.1 different newspapers
- Hearst to photographer: “you provide the pictures; I’ll provide the war.”
- Newspapers started local and magazines started national because of their publication speed differences; To print daily, you needed to focus on the most accessible information
- 215 infant deaths per 1,000 live birth in 1880 was practically the same it was in the 1500s Tudor England. Then from 1890-1950 there was a remarkable change.
- Infant mortality and death before age 10 grew from 1790 until 1850
- The 1910 Flexner Report that challenged improper medical schools: will vocational schools need something like it?
- Pinker: democracy came so early to the United States, unlike Europe, because the state already had a monopoly on violence
- Gary Becker‘s 1965 theory of time: consumer welfare is a joint product of market purchased goods and services and household provided time. This is different than traditional Standard of living movement
- In 1880, 30% of 10-15 year old boys worked; 50% 14-15. This is paid employment so informal work on farms etc certainly higher
- “There was a severe depression between 1873 and 1878, and another between 1893 and 1887, with shorter downturns in the mid-1880s and after the financial crisis of 1907. Between the 1907 panic in mid 1909 fully half of the 40,000 blast furnace workers in the steel and she lost her jobs. In 1880, relatively prosperous year, 30% of all Pittsburgh’s working class men experienced unemployment lasting longer than a month.”
- Though in 1910 just 9% of American teenagers obtained a high school diploma, by 1940 that percentage had reached 51% and by 1970, it had reached 76.9%, with little growth since
- In 1890 the average work week was 60 hours by 1940 it was 40 where is mostly remain since
- From 1870 to 1940 the transition went from credit to cash back to credit in a U-shaped understanding of the American retail economy. Initially credit was dominant in rural America and played a substantial role in the form of urban pawnshops. Then why’d urbanization created a focus on cash payment, in 1910 to 1912 the ever-growing a NP food market chain a limited credit an all cash policy a change from the more familiar general and corner stores. As late as 1902 Macy’s in New York maintained an all cash policy whereas Wanamaker’s in Philadelphia had begun to offer installment payments with no down payment for large items including pianos
- The installment plan was to consumer credit with the moving assembly line was the automobile industry
- The 1920s is no known for a consumer credit boom which happened at the same time as the deployment of lots of new innovations including the electric refrigerator and the massive expansion of the automobile industry, including automobile ownership going from affectively 0% in 1900 to 29% in 1919 to 93% in 1923
- Harrison Act of 1800 was effectively the first installment loan; it was by the US government allowed for the sale of public lands to farmers
- As early as 1890 census data show that 29% of homes in the United States had outstanding mortgages. For instance in the Boston area it was typical for a family to be required to save half of the purchase price, say $1500 for $3000 house, and borrow the rest including from a mortgage company or bank and interest rate of five or 6%
- By the 1920s amortized loans which was a valuable innovation had become standard
- The origin of maritime insurance is believed to have come from the Island of Rhodes in 900 BC, protecting anyone from a complete loss by guaranteeing a small loss from everyone
- in 1931-1933 during the Great Depression, 10,000 of the country’s 25,000 banks failed. One of the many busts that resulted in New Deal major government intervention transitioned from lasseiz-faire to more regulation
- The book’s big focus is that total factor productivity has slowed since 1970 and he argues its’ a regression to the historical mean. This is still an open debate and there’s lots of good writing about this like this
- Real GDP doesn’t count removing horse shit from city streets
- The more focused Digital (Industrial) Revolution did impact productivity from 1995-2004 (the answer to Solow’s paradox in 1987) but the impact petered out. Contrast it with the first and second industrial revolutions that lasted far longer
- Supermarket sales accounted for a share of total food sales of 28% in 1946 then 48% in 1954 and by 1963 had reached 69%
- Going to the kitchen of a Taco Bell today, and you’ll find a strong counter argument and emotion at the US has lost its manufacturing edge
- US income in equality was high between 1890 and 1920s and fell sharply during the great depression and World War II. The period between 1945-1975 was called “The Great Compression”, after which income inequality shrank in a multi-decade shared economic growth period
- According to Elizabeth Cline: a total of 650,000 apparel jobs disappear in the United States between 1997 and 2007, the prime period when the supply of imports from China multiplied rapidly. (This is an example of how free trade did disrupt blue collar workers)
- He argues via Consumer Reports that from 1938-1986, effectively little in major advancements in any household appliances came after that mid 1970s (aside from energy efficiency). Microwaves was the latest and by then was pretty familiar
- Fall of 1879: internal combustion engine and commercialization of electricity within 10 weeks
- 1949 study of TV owners: a third said they primarily got one to watch sports: in 1946, Joe Louis-Billy Conn heavyweight fight in 1946 was first coaxial tv cable connection NYC to philadelphia to DC; five years later AT&T built national coast to coast network. Start of national programming, and over time radio became Local and tv National rather than opposite
- In 1943, first automatic toll switch for phones happened in Philadelphia
- In 1951 AT&T introduces direct distance dialing
- The basic flaw in this faith in an acceleration of technological change that even if the contribution of computers economic growth were increasing share of total GDP were presented by computers too small to overcome the great majority of economic activity where the piece of innovation is not accelerating and indeed in many aspects of slowing down
- Richard Coase: “ if you torture the data long enough it will confess to anything”
- Jan Vijg: regulation and risk aversion in medical research contributes to slowing advancements
- The American fertility rate peaked at 3.8 in 1956
- Housewives spent 56 average weekly hours on domestic chores and child rearing ; more than husbands spent at work and household
- Percentage doctors were white males: 1963 94%; 2008 63%
- Private pensions covered 7% of labor force in 1940 to 28% in 1960; 45% in 1970. 30% 1983 and 15% in 2013
- 35% elderly poor in 1959, to 10% poor in 2003
- 1900: 60 hour work week; 1940: 40 hour work week standard
- Rise of women and Black professionals accounted for 15-20 percent of US economic growth from 1960-1990, but progress plateaued in both
- Infant mortality 1890 22% to 1950 1%
- 1930s marked by heavy patents and diffusion of electrical appliances
- Pent up demand and new deal legislation raising wages caused employers post World War to “economize labor” leading to massive productivity gains
- Robert Solow’s 1950s “growth accounting” subdivided growth in labor productivity into four categories
- increase in labor quality (education)
- increase in quantity of capital
- increase in quality of capital
- total factor productivity (or “the residual” which Abramovitz calls “the measure of our ignorance”
- In 1942, The Henry Kaiser Ship Building Company in Richmond California took eight months to produce a Liberty Freighter Ship and due to the pressure of World War II by 1943 could build the same ship in a few weeks. They did one in four days with input and suggestions from 250 letters from employees
- Big inch and little big inch oil pipelines built by federal government to replace seafaring pipelines that were threatened by German submarines
- From 1940-1945 the number of American machine tools doubled, mostly paid by the federal government
- Alfred Kleinknecht (1987) counted up patents to account for innovation by decade, but this author feels he overestimates minor inventions. He prefers Alexopoulos and Cohen (2010) who look for manuals published indicating commercial application
- Great Leap Forward of the 1928-1940, when productivity growth surged, attributed to Ford assembly line and electric power. Also he argues the Great Depression led to New Deal legislation which lowered hours and increased wages which helped boost productivity. Depression also forced businesses that survived to get more efficient, and they swapped “capital” for “labor,” investing in new models. Technological advance never goes backward
- The establishment by Herbert Hoover of the National Bureau of Standards was an important more moment in creating and fulfilling the promise of the American standardization machinery system
- Solow’s residual or TFP is about innovation. Before 1750, there was little incentive to get educated or move to cities. Innovations gave a reason as economic growth ensured greater prosperity
- American patent system was Intentionally more democratic (lower cost and more transparent, making public the patents, and well defended) than those in Europe. Famously though on Feb 14, 1876 Alexander Graham Bell beat Elisha Gray by just hours to file the telephone patent, an Italian Antonio Meucci had his own plan years earlier but could not afford the Italian patent.
- Innovation in climate change is fight against bad rather than one to create good. They are to stop a decline in quality of life
- The Great Compression of wages: top wages grew more slowly between 1929-1945 (in part the depression) allowing for closing income inequality and then major growth for all between 1948-1972, before top wages started growing
- Goldin and Margo ^ argue unions, and the decline of trade and immigration caused higher inequality (immigration has actually more hurt other foreign born workers)
- David Autor shows imports from China between 1990-2007 accounted for a quarter of the decline of manufacturing employment
- Automation another factor on middle income earners: it hollowed out manufacturing rather than creating mass unemployment as once feared (this is called the “polarization hypothesis”)
- Erosion of the minimum wage is another widespread factor
- Levy and Temin add that the Detroit consensus of 1940s to Washington’s census from Reagan in 1980s offered a tax regime to add here too
- Sherwin Rosen on economics of superstars https://www.jstor.org/stable/1803469
- Three categories of super high income earners: (1) superstar: celebrities helped by electronic media that allows their audience to be nearly limitless, (2) CEOs: controversial CEOs and (3) top talent: highly in demand professionals
- “ according to the Federal Reserve study, a majority of Americans below the top 10th percentile of income earners who did hold equities sold off portions of their stock-holdings in the period 2009-2010 at the worst of the Great Recession, while a majority of the wealthiest Americans increased their holdings over the same period.”
- College completion rate sold for households in the top quarter of the income distribution road between 1970 and 2013 from 40% to 77%, whereas for those in the bottom it increased only from 6 to 9 percent
- On pre-k: “Across rich nations, an average of 70% of 3 year olds are enrolled in some kind of education program , whereas in the United States that is 38%”
- Boomers retiring are an inescapable trend in reducing hours per person worked
- (Controversial) Charles Murray’s book on Fishtown still gets heat
- This author repeatedly notes that 1994-2004 showed the productivity gains from the digital Revolution (he calls it the third industrial Revolution) but it was short lived because it was someone limited
