The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War (The Princeton Economic History of the Western World Book 70) by Robert J. Gordon (PDF)

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How America’s high standard of living came to be and why future growth is under threatIn the century after the Civil War, an economic revolution improved the American standard of living in ways previously unimaginable. Electric lighting, indoor plumbing, motor vehicles, air travel, and television transformed households and workplaces. But has that era of unprecedented growth come to an end? Weaving together a vivid narrative, historical anecdotes, and economic analysis, The Rise and Fall of American Growth challenges the view that economic growth will continue unabated, and demonstrates that the life-altering scale of innovations between 1870 and 1970 cannot be repeated. Robert Gordon contends that the nation’s productivity growth will be further held back by the headwinds of rising inequality, stagnating education, an aging population, and the rising debt of college students and the federal government, and that we must find new solutions. A critical voice in the most pressing debates of our time, The Rise and Fall of American Growth is at once a tribute to a century of radical change and a harbinger of tougher times to come.

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Reviews from Amazon users which were colected at the time this book was published on the website:

⭐I regret having to disagree with several esteemed economists, many of whom may be unfamiliar with American economic history. Prof. Gordon focuses efforts on the way in which technological change affected American history, and by extension, how the American standard of living improved dramatically between the end of the Civil War and the bellwether year of 1940. Nineteen forty was chosen because it essentially replicates the modern era, meaning that every substantial invention that we use today had its recognizable counterpart seventy-five years ago. We had automobiles; typewriters and Linotype machines with the analog of today’s home and business computers; telephones electric lighting, and so on.Several times I started writing a review of Prof. Gordon’s book; and the more I wrote, the more I realized was missing from his narrative. The American standard of living is not simply the sum total of the inventions and technological developments that he recounts, it is the growing complexity of life itself. It is the spillover effects that accompany displacement of one form of technology with another. Prof. Gordon essentially ignores the political consequences that accompany new inventions and their increasing complexity.As a free-marketeer, he is entitled to champion the cause of consumer preferences as the touchstone of modern economies and how they grow. But where he goes astray is to downgrade the way government at all levels has been called upon to mediate between conflicting elements within the national economy. In He decries ‘unnecessary regulation’, but regulation is precisely what the American people demanded in the face of abusive business practices by those who controlled emerging technologies. That was the natural reaction one would expect regarding the growth of the Grang and er Movement consisting of coalitions of farmers and small businessmen in response to discriminatory rates charged by railroads and warehousemen. It was the source of the antitrust movement in the 1890s; and it was the impetus for regulation of investment securities during the 1930s.Gasoline-powered automobiles might’ve been curiosities in the 1890s, but they began to make serious inroads into the American economy by 1915. Fast forward forty years, and the Interstate Highway System that Congress chartered in 1956 by its very nature required a foundation of urban planning and programming that many states had in their most rudimentary forms. It took about a decade for most of the states to build much of the intercity segments of that highway system, but very soon they ran into strong opposition from those who saw their parklands and recreation areas being paved over, simply because it was easier to do so. The 1970 saw significant legislation mandating clean air, clean water, environmental protection, and relocation assistance for those being displaced by the new highway programs. What had been straightforward (and sometimes hidden) highway location decisions suddenly became very complex, and also very expensive. What used to be fairly clear delineations of what had been federal power, state power, and local power, also became very complex as intergovernmental relations saw a blurring of responsibilities, and more often not, intervention by the courts.Prof. Gordon tells a good story, in fact many good stories; but that’s not the half of it. And that’s a shame, because even with 762 pages in his book, is not nearly enough to make sense of the tale he tells.What else was highly relevant to American prosperity that could have been addressed, or at least mentioned? A great deal more; for example consider the following –One of the largest of the Roosevelt administration’s new deal programs for cheap electric power to the rural South and Pacific Northwest in the 1930s. These included construction of numerous dams capable of generating significant hydroelectric power, thereby spurring development of industry, resulting in significant population growth. Much of this new industrial capability proved to be crucial to winning World War II.From the end of World War I, the American farm economy had been plagued by overcapacity, generating large agricultural surpluses that could not be sold overseas or consumed domestically. The Roosevelt administration adopted a system of commodity crops supports and marketing insurance that had the effect of supporting the purchasing power in those areas that were highly dependent upon agriculture to make their living. The federal government also pursued efforts to market American agricultural products abroad, developing and expanding existing markets for American farm products.For a period of fifty years, funding national defense needs proved to be an enormous impetus to industrial growth, resulting in thousands of high-skill, well-paid jobs. National defense expenditures also spurred enormous amounts of scientific research, which in turn, funded tens of thousands of students who eventually became scientists, technologists, engineers, or mathematicians.In 1944, Congress passed was called the Servicemen’s Readjustment Act, often referred to as the G.I. Bill, that funded at government expense college tuition and other types of training for returning serviceman. At the time, the president of Harvard University opposed the measure, but afterward he conceded that he had been wrong about the need for publicly funded university training for returning serviceman.The boom in postwar higher education also led to expansion of state-funded public colleges and universities that made higher education affordable to millions of students who would not otherwise have been able to develop their knowledge and skills. The presence of these graduates in the postwar economy had a multiplier effect, greatly increasing the gross domestic product from what it otherwise might have been without that educational investment.Foreign aid to military allies and other friendly governments also had the effect of supporting tens of thousands of jobs in American domestic companies and businesses, as significant fractions of those aid funds were spent within the United States for products and services provided by American business.Beginning in the Roosevelt administration, Americans for the first time were protected against the consequences of bank failure through a system of deposit insurance and regulation of national banks, savings and loan institutions, and credit unions. Similarly, both the federal government, and state governments regulated the promotion and sale of investment securities. During the 1920s, investment bankers began to market investment securities to employees of public utilities, and to the public at large. The market for investment securities grew from half a million to more than 10 million customers within the space of less than a decade. Many of those securities were purchased ‘on margin’ using borrowed funds, and sales campaigns that were rampant with fraud and abuse.Prof. Gordon’s about preference for entrepreneurs and risk-takers may be part of a professional bias, but when were talking about a national economy, most people opt for stability and predictability. In emerging business, ‘innovation’ and ‘disruption’ are buzzwords used by promoters of sketchy business proposals that might, or might not, work out. In point of fact, the vast majority of startup businesses fail. Prof. Gordon might also have said so.One of the principal issues I had with Prof. Gordon’s book was his failure to differentiate between businesses that are strictly private, and those that are affected with the public interest. The law has long recognized that certain businesses by their very nature are impressed with the public interest, either because of their centrality to the economy or because they constitute natural monopolies, such as railroads, canals, were similar businesses where competition is lacking. Prof. Gordon never addresses the issue of ‘market failure’, in which the concept of a market is so incomplete or flawed as to be ineffective; in fact, the term ‘market failure’ does not even appear in his index.Under the heading of “Regressive Regulation”, Prof. Gordon argues that regulatory barriers to commercial business entry and competition, specifically excessively broad copyright and patent laws, stifle competition. He further argues that occupational licensing restrictions unjustifiably protect income and service providers, and that land-use regulation creates artificial scarcities, all of which contribute to increased inequality while reducing productivity growth. I will give him the benefit of the doubt on matters of patent and copyright because it is undeniable that claims to intellectual property rights have become yet another way to squeeze consumers and others by making extortionate demands without providing value for the money. It is all the more obnoxious when rogue pharmaceutical companies acquire rights to obscure, but long-available drugs, and then jack up the cost to medical patients and their insurers by as much as 5,000 percentage points.On the other hand Prof. Gordon’s argument that occupational licensing restrictions unjustifiably protect incumbent service providers is a nonstarter. Any number of examples would suffice to expose the hollowness and illogic of those assertions. Barbers, cosmeticians, and nail and hairstylists use potent chemicals and solvents in their business, exposing themselves and their clients to aerosols and acrylic dust that are known health hazards. Likewise, landscape workers, agricultural workers, those involving chemicals to control pests and invasive plant species are frequently sickened by inadvertent exposure to industrial toxins. And these people occupy the bottom of the social ladder.Members of the building trades require occupational licenses for obvious reasons, because buildings collapse and people are killed or injured due to shoddy workmanship or improper construction materials.Financial advisors counseling clients on investment opportunities and retirement planning need to be regulated to discourage self-dealing and overreaching.Lastly, Prof. Gordon argues that land-use regulation creates artificial scarcities. That, too, is a nonsensical argument. Land-use involves infrastructure, occupational densities, externalities, such as hazardous waste products released into the environment and incompatibilities with surrounding uses, and their ripple effects. There is no place that is wholly unaffected by environmental pollution occurring elsewhere, not when atmospheric pollution generated in China is readily detectable in North America, and increasingly so.In fact, the entire third section of his book, in which he attempts to sum up and explain why our standard of living is going into relative decline reads like something he cobbled together within a short period of time in order to meet the publisher deadline. He does not go into any degree of detail other than to condemn the aforementioned ‘unnecessary regulation’ and a few other free marketeer bogeyman. Instead, he substitutes glib generalities and truisms for what should have been a much more thoroughly analyzed exposition of his conclusions. I would certainly agree with Prof. Gordon’s ultimate conclusion that the century and a quarter of economic growth and improvement in the American economy is not likely to be replicated. There is no longer an open frontier, and the spillover effects of economic growth are everywhere to be seen. Instead of economic growth as the road to prosperity, in today’s world, the foremost requirement is to first do as little harm as possible. It is still possible to make money, but it is no longer a zero-sum game that much of our nation’s economic growth proved to be.

⭐I immensely enjoyed reading “The Rise & Fall of American Growth” and found it repeatedly thought-provoking. I don’t have any professional or much academic background in economics, but find the book highly readable and entertaining and would certainly recommend the book to anyone who has even a bit of wonkish interest in economics and history (I assume you know who you are).1. The book’s central message is surprising at first. For years I have heard that “the pace of change in business is accelerating faster and faster” This relentless message was so drummed into my head that I would not have dreamed to question it prior to reading this book. I’d always pictured the office worker of mid-20th century America languidly composing letters to his secretary to type and mail, having a 3-martini lunch and playing golf – in contrast to today’s worker firing off e-mails, writing blog posts and white papers, participating in international conference calls, etc (sometimes all at the same time). Surely we are creating more productivity growth today? Professor Gordon’s book makes a convincing case we are not.2. The single most thought-provoking element in the book for me was the thought experiment of imagining how much technology completely transformed the day-to-day life of Americans over the period between 1870-1920. I am curious to see this thought experiment carried into more recent periods — especially given that much of disagreement with the book is that most people cannot accept that each passing decade is not necessarily seeing an exponential jump in technological advances in our lives. I found myself analyzing friends and family’s day-to-day technology experiences throughout the last century and especially more recently — a. My grandmother (and great grandmother) described to me a life that went from a frontier “Little House on the Prairie” level of hardship around 1900 to modern comfort by 1930 perfectly capturing the author’s central theme. b. My parents experienced a largely unchanging day-to-day routine from roughly the late 1950s all the way into the early 2000s — not much beyond television turning to color and cooking with a microwave. But suddenly around 2000 they embraced internet shopping, the Kindle, DVR & streaming, etc. c. My own day-to-day life was transformed between 1995-2005 from totally being centered around my office desk and world of paper and phone tag, to a peripatetic existence focused on my laptop and e-mail (and mobile phone to less extent). In contrast, technologies’ day to day effect on my life since 2005 has been very incremental. d. My nephew’s life hadn’t particularly liked using a computer, but then his life totally and completely changed around the year 2010 — centering around work from TaskRabbit., texts and social media — he reaches for his phone as he wakes up and hardly puts it down.I imagine for the average person this thought experiment is more interesting than productivity growth statistics..3. Experience of air travel — As a young boy my father took me to the Boeing 747 plant to gawk at one of first of this new line of aircraft. At that time only a bit more than 60 years had passed since the Wright Brothers had first taken flight and my relatives patted my head and repeatedly exclaimed how “when I get older planes will be so much bigger and faster and more comfortable”. I thought about this as I was crammed into coach on a delayed 11-hour flight to Tokyo. Almost 50 years have passed since this childhood memory and planes have not improved in the manner I was led to expect. Even the Boeing’s 787 Dreamliner — no question a marvel of engineering with its millions of miles of wiring and carbon-fiber construction — was a relatively disappointing improvement in terms of passenger’s flying experience from the perspective of my historic timeline. The book brilliantly puts my experience into context.4. Autonomous vehicles — I have to disagree with the author’s dismissal of the potential disruption of driverless vehicles. Yes, it is not nearly the transformation of moving from horses to cars, but potential household savings ($6,500/household), environmental impact, potential change in city planning and the way people live their day-to-day lives would at least start to rival some of the early 20th century technological advances. Couldn’t one expect a virtuous/vicious economic cycle similar to the one that the book describes between 19010 and 1930 when reduced automobile price and spiraling costs for transit and other transport options that led to vehicle registration exploding?5. Author correct SO FAR on productivity growth — I just read that annualized US Total Factor Productivity Growth has been well under 2% over the past 3 years — roughly the time since the book was published. Even 2% was considered a very pessimistic projection. So for the moment at least Professor Gordon is completely correct and his critics quite wrong about the productivity effect of artificial intelligence and other IT advances.Whether or not you agree with The Rise and Fall of American Growth’s predictions about the future impact of technology on productivity and quality of life, the historical context the book provides is extremely valuable.

⭐Between 1870 and 1940 the lives of the vast majority of Americans had changed to an extent that would have been unimaginable previously. The impact of mechanisation, urbanisation, automation and “networking” – the provision of utilities including water and waste disposal, electricity, the postal service and telephony – freed Americans from much of the drudgery of their previous rural existence, gave them decent houses to live in with sanitary environments, shifted many into jobs which paid better but imposed less wear and tear on their bodies, gave them heat and light on demand thereby increasing the amount of time they had to pursue activities other than work, and enabled them to receive a cornucopia of consumer goods from mail order companies. Houses filled up with refrigerators, washing machines, televisions and other consumer electricals. Eating food was no longer one of the daily hazards they faced.The years 1940 to 1970 were, if anything, even more spectacular. Wages increased even more as productivity boomed. Highways were built which enabled easy travel from all corners of the nation to all of the others. Driveways filled up with automobiles. Air travel became increasingly accessible to everyone, not just the financial elite. And on long hot humid summer days Americans could take refuge in their air conditioning.Then, with the exception of a brief spurt between 1996 and 2004, the helter skelter growth slowed to an amble. A rust belt developed in areas previously frenetic with production of steel, cars and other goods. The ICT “revolution”, heralded as the bringer of new industrial and domestic advances on a par with those of electricity and the internal combustion engine, has so far failed to deliver in such a grand manner. There’s a limit to the extent to which cat videos and 140-character prattlings can improve the standard of living.Robert J Gordon’s story of this great unfurling of the American dream is captivating in two ways: first in showing how the meteoric rise and subsequent plateauing (it’s overdramatic to characterise it as a fall, really) came about, using some of the same old sources, though in slightly different ways, maybe, and also drawing on resources such as back-issues of the Sears catalogue to trace the way in which American households advanced from home-made everything, including virtually all clothes, to the ability to order everything – clothes, white goods, musical instruments (the number of musicians who made their start on Sears catalogue instruments, which Gordon doesn’t go into, is phenomenal), and so on – via the postman.But he also tracks how things have stagnated: with all of the waiting around at airports and all the other attendant hassles of flying it now takes longer by jet to fly New York-LA than it did in the day of propeller-driven aeroplanes, and with all the little extras, like paying for luggage to be carried and food on the flight, both of which used to be included in the fare, it’s more expensive too.Gordon is not, however, blaming anyone or anything in particular. The problem is, he suggests, that all the good stuff has been done, and everything now is just new ways of doing those things (emails for letters, online orders for mail orders, incremental improvements in TV picture definition, DVDs or Netflix for videos or the cinema, and so on). Likewise with productivity: ICT may be able to achieve improvements, but the potential is nowhere near as striking as that for advances of previous industrial revolutions.In his final chapter, then, he advances proposals not so much for kick-starting a productivity revival as for alleviating the fallout of its demise. Like Thomas Piketty, whom he makes a point of acknowledging and citing, he recognises the enormous chasm that has opened up between top and bottom of American society. In a particularly poignant chart he shows how between 1945 and 1975 – the years of the “great compression” – incomes advanced at similar rates across American society, and how since then the top 10% have continued to enjoy steady growth (those at the very top, as Piketty pointed out, have enjoyed obscene growth in their wealth in comparative terms) whilst those at the bottom have suffered ongoing contraction.In all, I would rate this book, as a piece of economic history, almost on a par with the works of Landes (The Unbound Prometheus and The Wealth And Poverty Of Nations), as a research piece at least in the same ball park as Piketty’s Capital (yes, I have read it), and as a piece to dip into alongside Porter’s three best-known works (yep, I read them too; I didn’t just look at the pictures).Nevertheless, like all of those publications, it also deserves, demands even, critical appraisal. For starters, I find the central thesis too alarmist, like the head of the US Patent Office at the turn of the 20th Century believing he could close it down as everything had already been invented. There are many reasons for guarded optimism. The Economist recently ran a Special Report outlining some of the many potential productivity improvements in Agriculture in the pipeline (if only we could get past the Frankenfoods pitchforks and torches in the dark mentality some of them may one day get used). Additive Manufacturing (3D Printing to most of us) has only just begun to find its role, so far in specific niches, but plenty of work is being done on breaking loose of that straitjacket. And who knows, somewhere within ICT there is that killer app like the motor car or electric lighting waiting to be found (I don’t think the so-called “internet of everything” is it, though; I don’t need my fridge to tell me I’m out of milk, thanks).Secondly, Gordon appears to dismiss out of hand the role of government in revitalisation, but as Mariana Mazzucato and Carla Perez, among others, have pointed out, without government there would be no internet, no ICT revolution, no (shock horror) iPhone. In The Entrepreneurial State, Mazzucato advanced the idea that government could be doing far more for the development of alternative energy.Furthermore, without the government-built network of Interstate Highways, what would Americans do with all those cars?Thirdly, Gordon gives a very confusing account of the benefits of immigration. First he assigns responsibility to immigration for bringing down wages in some sectors, then seems to be saying that it is really only the wages of immigrants that are affected. He partly credits immigration control in the US after the second world war for rising wages, but makes no mention of the many Mexicans who moved, under the Programa Bracero, to the US during the period covered by that war and the one in Korea in order to fill in for the Americans serving in the armed forces, which saw the Mexican population in the US double to five million. And he proposes a points system for permitting immigrants to enter the US, making the classic economist’s mistake of commodifying people, in the belief that a price can be put on everything.And finally, at least for this review, there is Gordon’s US-centricity, almost to the exception of everywhere else. One of the great strengths of Piketty’s work was that whilst it spoke of “Les Trente Glorieuses”, it did so in an international context. Gordon’s “Great Leap Forward” only applies to the US. There is nothing in Gordon about how improving economies in the rest of the world may benefit the US. The rest of the world more or less doesn’t exist in the bubble he constructs.However, to reemphasise my earlier point, notwithstanding a few quibbles I consider this book to be of extraordinary value: a record of spectacular progress and how it was achieved, and a warning that, unless somebody brings more beer, the party’s over.

⭐Should you be tempted by this book, bear in mind two factors: firstly, it’s written by an American economist and secondly, the title says it all. Essentially the entire book is a comparison of American Gross Domestic Product (GDP) and how this was influenced by a relatively small number of key inventions. According to Robert J. Gordon, this particular group of inventions are all only influential once, after which they may only be subject to what might be considered additional fine-tuning, for example (and this is far from a complete listing), the internal combustion engine, the Ford model T automobile, aircraft, the telephone and last but not least, electricity, indoor plumbing, heating and air-conditioning. Gordon argues that these are all what could be termed one-off inventions. All highly significant, particularly the automobile, which due to its relatively quick reduction in cost, coupled with credit payment schemes enabled all but the destitute to experience a significant change for the better in their lifestyle. The book spans three time periods: 1870 to 1940; 1940 to 1970 (and these two periods are probably the most significant, since the major developments took place over this century) and finally, 1970 to 2004, at which point American growth stuttered. Now it is not unreasonable to flag-up the so-called digital revolution as an example of a more recent one-off invention but Gordon argues that all may not be quite what it appears, after all, are some of these just global recycling, the ubiquitous email in place of typed or hand-written letters, mail order shopping now online shopping. Agreed, email and online shopping are more convenient but the point Gordon is making is that these inventions did not and still do not have quite the same impact as the automobile or for that matter, the telephone. There will no doubt be much heated debate on the overall argument but nonetheless, Gordon does have a point but bear in mind, the arbiter in this whole issue is the slide and reasons behind the reduction in GDP since 1970, that period from the end of the Civil War to what might be considered the end of really big inventions. One last point, on page 21 of the paperback imprint, Gordon seems to have overlooked one very significant British inventor, Tim Berners-Lee. Now in case its escaped anyone’s notice, he’s the chap who invented the World Wide Web! The research and presentation of Gordon’s argument are excellent and raise some interesting points.

⭐This is an excellent book on economic growth and an implicit critique of its measurement.It is rich in detail and well supported with evidence.As a reader it is well written therefore it’s length was not an issue for me though it could be a consideration for some (it is a heavy book even in paperback form).If I am going to say anything critical I would say a more ruthless editor could have made a difference and not lost any of the central message. Secondly I would point out that the policy prescriptions in the final chapter are a bit on the weak side and less sophisticated than the historical analysis that supports them.

⭐Reading this book is a major project but very worthwhile. Having spent all of my working life in Manufacturing and Engineering ( in the UK) I found the vast amount of information in the book fascinating, informative and thought provoking.Robert Gordon and his team are to be congratulated on the amount of information they have gathered and put into a single book.The Postscript at the end lists a number of policy changes that should be seriously considered going forward if we are to avoid the severe impact of protracted very low growth when a lot of people think we can keep on growing at a significant rate forever.Not sure how we get the Politicians to understand that things need to change as it will take time and significant effort, something today’s politicians do not understandSadly the book is the absolute opposite of today’s off the cuff ( non measured fact based ) quick fix populist politics.

⭐An unusual perspective​ on the US economy, and with conclusions that are applicable in the UK. One has to respect the author. Books without a positive ending are a publishers nightmare.

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