Off Its Pinnacle

Author:Robert J. Gordon
SUMMARY

Is the United States entering a period of sustained low economic growth?

 
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Off Its Pinnacle Finance & Development, June 2016, Vol. 53, No. 2

Robert J. Gordon

Is the United States entering a period of sustained low economic growth?

The average American family of 1870 would have been astounded by the living standards of their 1970 descendants. From electric lighting to healthier and longer life spans, in but a century the American standard of living changed dramatically from the primitive conditions of 1870 to the modern world of today. Those sweeping improvements were in no small way due to technological changes that may never be rivaled for their broad impact on growth, productivity, and well-being.

My recently published book, The Rise and Fall of American Growth, chronicles those changes, examines their sources, and looks at why productivity grew rapidly before 1970 and much more slowly since then. It also forecasts muted growth in productivity and income per person from 2015 to 2040.

The special centuryThe 100 years after 1870 witnessed an economic revolution in which households were freed from an unremitting daily grind of painful manual labor, household drudgery, darkness, isolation, and early death. In only a century daily life changed beyond recognition. Manual outdoor jobs were replaced by work in air-conditioned environments, housework was increasingly performed by electric appliances, darkness was replaced by light, and isolation was replaced not just by travel, but also by color television images that brought the world into the living room. Most important, a newborn infant could expect to live not to age 45, but to age 72. The economic revolution of 1870 to 1970 was unique in human history.

The foundation of the book’s analysis is that economic growth is not a steady process that creates economic advance at an even, regular pace. Instead, progress occurs much more rapidly in some eras than in others. There was virtually no economic growth for millennia until 1770, only slow growth in the transition century before 1870, and remarkably rapid growth in the century ending in 1970. Growth has been slower since then because some inventions are more important than others. The revolutionary century after the U.S. Civil War was made possible by a unique clustering, in the late 19th century, of “great inventions,” principal among which were electricity and the internal combustion engine.

The first industrial revolution, between 1770 and 1830, witnessed the arrival of the steam engine, railroads, steamships, and mechanized cotton spinning and weaving. The most important industrial revolution was the second, with inventions centered on the period between 1870 and 1940, including not just electricity and the internal combustion engine but also communication and entertainment devices such as the telephone, radio, and motion pictures, as well as chemicals, plastics, antibiotics, and the tools of modern medicine. The second industrial revolution is also notable for its radical improvement in working conditions on the job and at home. The third industrial revolution comprises the digital inventions since 1960, including the mainframe and personal computer, the Internet, and mobile telephones.

The economic growth since 1970 created by the third industrial revolution has been simultaneously dazzling and disappointing. This seeming paradox is resolved when we recognize that advances since 1970 have tended to be channeled into a narrow sphere of human activity involving entertainment, communication, and the collection and processing of information. Technology for processing information evolved from the mainframe to networked personal computers, search engines, and e-commerce. Communication advanced from dependence on landline phones to ever smaller and smarter mobile phones. But for the rest of what humans care about—food, clothing, shelter, transportation, health, and working conditions both inside and outside the home—progress slowed both qualitatively and quantitatively after 1970.

Any consideration of future U.S. economic progress must look beyond the pace of innovation...

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