The subtitle is The U.S.
Standard of Living Since the Civil War and the author is Robert J. Gordon
(2016).
The overarching premise is that American growth apexes in the period
from 1870-1970, and has been in steady decline ever since (with a short blip in
the period from 1994-2004). Part of the
explanation is that many of the most important innovations and inventions that
improved quality of life happened in that period, and were the sorts of the
things that could only happen once – such as the internal combustion engine
that brought cars and railroads to replace horses, electricity and the light
bulb, clean water and municipal sewer systems, and refrigeration that enabled
far less contamination of food. All of
these contributed to efficiencies in productivity and improvements in mortality
rates and the overall standard of living, drawing people off the farms and into
urban centers.
By contrast, in looking at the period since 1970 (defined as the “computer
age”), beyond seeing only incremental improvements to the earlier ideas, the
presence of greater income inequality has also compounded problems when looking
at more recent growth and productivity statistics. With respect to technological innovation, the
author feels that good, steady, middle-level jobs have been lost to robots and
algorithms, but also to the accompanying globalization and outsourcing, leaving
behind mostly lower wage positions. And
in drawing the nexus to a more prevalent wage inequality since 1970, the author
suggests looking at it top down and bottoms up.
In other words, at the higher end, Gordon believes that incomes have
increased meaningfully because of changing economics for superstars, changing
incentives for executive compensation, and capital gains on real estate and
stocks. Looking at the other end, he
sees weakened labor unions, increased automation, declining purchasing power of
the minimum wage, greater imports hollowing out the manufacturing sector, and
greater immigration as contributors to lower wage rates for everyone outside
the top percentiles. What’s interesting,
though, is in looking at the golden age of growth from 1945-1975, the author
attributes the rise of unionization and the decline of global trade and immigration
as explanations to the greater wage equality.
Ponder that last bit.
Anyway, as a last point, the author delves into an area that I find
interesting, which is the question of whether WW2 brought economic prosperity
to this country after the Great Depression.
He does generally support the premise, but with seemingly more nuance
than the typical economist who says that any spending will do as fiscal
stimulus, regardless of the purpose in mind.
To put a finer point on it, it was not simply the act of government
spending in the war effort, it was in the technological innovation that came
out of firms that were forced to boost output in spite of limited capital and
labor. Those innovations and changes did
not regress simply because the war ended, and therefore, when paired with pent-up demand after wartime rationing, allowed productivity to
remain high. In other words, without that
level of technological innovation, fiscal stimulus, even on the scale of war, does not automatically produce the
ends that are often ascribed to it.
