Book Review: “The Rise and Fall of American Growth”

Blog reader Richard Pitkin recently read “The Rise and Fall of American Growth” by Robert Gordon (2016) and shares his observations with us:

This is an important work that covers the fundamentals of the change in the American economy over approximately the last 170 years. In many ways this book talks to the way capital has been used in the U.S. within some of Thomas Piketty’s work on capital. The scope of the book is to establish a context of multiple economic and social areas that help illuminate improvements both fast and slow in the American society. I enjoyed this work even as I struggled to cover different chapters. This book will likely be referenced by many in the years to come, owing to the scope and detail presented. I did find that my previous reading had touched on many of the topics, but not in the detail that this book provides. Some additional thoughts follow.

Part 1 1870-1940 The Great Inventions Create a Revolution inside and outside the Home

The first section covering 1870 to 1940 is quite amazing. During this time the interaction of different technologies created a slow but steady improvement in a number of items. The critical item presented is that a number of life requirements were ‘automated’ in a cost effective way. The investment in running water and sewage treatment provided the greatest benefit. This was followed by lighting and transportation improvements. The details and rate of change had no precedent. One item I think that was overlooked was the willingness of the political system in most of the country to tax and invest in this infrastructure for the improvement of civil society. This section is the foundation of the U.S. economy in the twentieth century. Additionally we find expenditure information in table 2-2. Here we see that consumer expenses on food dropped from 51.9% in 1869 to 9.2% in 2013. So where do we now spend this 40%? On services that did not exist in 1869, including health care, household utilities, transportation, recreation, financial, and others. A delight to read.

Part 2 1940-2015 The Golden Age and the Early Warnings of Slower Growth

The second section covering from 1940 to 1970 and somewhat beyond are the times in which I have lived. Here my opinions impacted some of what I read. Generally my experience and thoughts about the direction of the economy has been reinforced by the detail in the book. The comment that airline deregulation did not helping reduce costs, rather that the introduction of wide body planes, where the number of passengers per pilot was the main contributor, was one of many items that detailed experiences that I previously could not explain. Generally I agreed with this section even when I had quibbles with parts that I personally experienced. Another delight to read the detail and breadth of the coverage of the economy.

Part 3 The Sources of Faster and Slower Growth

The third section where the details and trends from the previous sections are used to look into the future are both interesting and disturbing. The chapters on the great leap of the first half of the twentieth century and innovation, in my view speaks to the ‘market’ opportunities. Given the physical state that most people lived in during the ninetieth century, and the difference from what science and technology had provided to educated people, hindsight shows that large opportunities existed for water, heat, clothing, and health to be improved. As these fundamental needs have been satisfied, fewer new needs and opportunities have been identified for markets to be established. All this and the cost of maintenance on the infrastructure creates in part the headwinds that are identified. My opinion is that the political class has abandoned the majority of the body politic and solutions to headwinds, such as demographics, climate/environment and globalization remain beyond the politicians’ efforts to benefit the majority of citizens. This section has remarkable concerns that are not simple economic numbers. These items are the challenges that the economy must be enlisted to solve, if the twentieth century successes are to be maintained.

Concluding Remarks

For me this book fits a broad pattern of issues that ought to be confronted in the decades to come, for our society that will continue to “promote the general welfare, and secure the blessings of liberty to ourselves and our posterity”. The investments that communities made in the infrastructure from 1870-1940 now need maintenance and further investment and the society seems to parsimonious. The recent events in Flint Michigan, where it has been reported that city health suffered when the state financial officer decided that safety was too costly, points out the failures of government. How did this happen? I find some insights in the Thomas E. Ricks book “The Generals”, where military leadership competence is shown to decline, and expect some of the non-investment in business shown in part three concerns about the third industrial revolution being over, is related to a similar decline in business leadership. Adding to this for me is the John Adams quote: “I must study politics and war that my sons may have liberty to study mathematics and philosophy. My sons ought to study mathematics and philosophy, geography, natural history, naval architecture, navigation, commerce, and agriculture, in order to give their children a right to study painting, poetry, music, architecture, statuary, tapestry, and porcelain”. Given that the strides made in the third industrial revolution are communication and entertainment, have we reached an end? I found great value in this book and enjoyed the historical insights that it provided me. How the society responds to the challenges enumerated, is the next step in the American Democracy experiment. For my children and grandchildren I hope we find reasonable solutions.

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