Book review: The Rise and Fall of American Growth

Why continued growth is so hard to come by

I recently finished reading The Rise and Fall of American Growth. The book itself is at least partially responsible for the ongoing plight of deforestation. Weighing as much as a dumbbell, it’s useful for smashing medium-sized rats and propping open aircraft hanger doors. I spent more than a month on this tome but I think the payoff was worth it.

Where did all the growth go?

Emil Kalinowski has persuasively argued that we’re in a silent depression. If you compare American GDP growth to the rate of growth you would expect based on the last 100 years, we’re trillions of dollars below trend. Hugh Hendry has also made the same point.

In addition, there’s the popular website WTF Happened in 1971? Said website shows an astonishing slurry of graphs and charts which reveal stagnation in the real economy ever since the United States went off the gold standard.

The silent depression and WTF Happened in 1971 are the two examples of lagging growth that I’m most familiar with, but I’m sure many other people have come to similar conclusions.

The core thesis of The Rise and Fall of American Growth is that the 100 years of unprecedented expansion from 1870 to 1970 are unlikely to be repeated. That’s due to how much “low hanging fruit” growth there was for the picking. The world of 1870 was so underdeveloped that the next 100 years of inventions would radically transform how Americans lived.

• Carrying water into and out of the house to hand wash the clothes - replaced by the washing machine

• Cooking with wood or coal - replaced by gas stoves

• Horses and horse manure - replaced by cars and trucks

• Sluggish train travel - replaced by airplanes

• Disease - radically reduced via new medicines and better sanitation

• The newspaper - replaced by radio and then television

• Carrying water - replaced by plumbing

• Common sense - replaced by television

Robert Gordon makes the point that if you took someone from 1870 and put them in 1970, the world would be nearly unrecognizable. Imagine the difference between riding a horse and jet travel. Or slogging water into the kitchen to do dishes, replaced by the faucet. These are radical transformations that led to incredible GDP growth.

Now compare 1970 to today. Although the products we have in thise lovely era are superior in quality to what was available 50 years ago (except for jet travel, which Gordon argues has only gotten worse since the seventies), our modern trinkets are by and large unrevolutionary. In 1970 the average person,

• Owned a car

• Traveled on an airplane

• Had electricity and running water

• Watched television

• Ate processed foods

• Etc.

A person from 1970 would recognize our modern life. They would be tickled pink by iPads and the internet, but the way we live now wouldn’t be difficult to comprehend.

Peter Thiel expressed it well when he said, “we wanted flying cars, instead we got 140 characters.” We’ve had the internet revolution which has been epic, but if you discount what’s happened with digital technology, our lives are rather unchanged. Hence the lack of GDP growth and all of the negative externalities that engenders. That’s the argument of the Rise and Fall of American Growth, anyways. Do you agree with it?