The rise and fall of American growth: the US standard of living since the Civil War

TLDR: The Rise and Fall of American Growth by Robert Gordon as mentioned in this paper is a well-known history of the United States economy, and it has been widely cited as a seminal work in economic analysis.

Abstract: The conclusion of Robert Gordon’s The Rise and Fall of American Growth is, in the author’s own words, “startling.” According to Gordon, a Northwestern University economist, the United States has entered a period of permanent economic stagnation that will be marked above all by growing social inequality and poverty. The tone of the reviews of Gordon’s book points to growing anxiety at the commanding heights of the financial aristocracy. “Perhaps the future isn’t what it used to be,” writes Paul Krugman in the New York Times. “And you have to wonder about the social and political consequences of another generation of stagnation or decline in working-class incomes.” In the Wall Street Journal, Edward Glaeser’s review, titled “Those Were the Days,” notes that “Mr. Gordon has data on his side.” Glaeser writes, “Looking toward the future, whatever miracles come from Silicon Valley, they are (as Mr. Gordon convincingly argues) likely to have a relatively modest impact on GDP. But I suspect they will do little to help the employment prospects for the more than 15 percent of men aged 25 to 54 who are jobless.” Similar concerns can be found in Foreign Affairs and the Financial Times. Writing in Prospect magazine, former Treasury Secretary Lawrence Summers calls Gordon’s findings “disturbing.” He writes, “I wish that I could convincingly rebut his claims.” In other words, the period of relative capitalist stability in the United States has come to an end. According to Gordon, the postwar period of rapid growth was an aberration that will not be repeated. The “social and political consequences” of this are, as Krugman suggests, immense. The New York Times columnist, speaking on behalf of the ruling class, fears that tens or hundreds of millions of workers and young people will be forced into social struggle against the corporations and the government. This increasingly self-conscious fear of social revolution, bound up with a frantic and existential drive for profit, will further animate the deeply anti-democratic, authoritarian tendencies in the ruling class. The essential conclusion that flows from Gordon’s book, which the author himself avoids, is that the world political situation is headed toward either social revolution or war and dictatorship. The value of Gordon’s book lies in its synthesis of economic empiricism and historical analysis. He begins in the year 1870, in the aftermath of the Civil War, which abolished slavery and marked the triumph of the wage labor system throughout the entire US. Gordon divides the history of post-bellum capitalist development into distinct periods: 1870 to 1920, 1920 to 1970, and 1970 to the present. A major strength of the book is the fact that Gordon tracks changes in the productive capacity of the US economy not only through standard measures of gross domestic product and annual income, but also by taking into account the impact of technological innovation on the living standards of the population. After analyzing 145 years of American growth, Gordon concludes that annual growth from 2015 to 2040 will be 1.20 percent, with all measures of productivity as well as GDP growth per person remaining drastically lower than during the periods of 1920 to 1970 and 1970 to 2014. That is, the United States economy is in terminal crisis and living standards for the vast majority of the population will continue to deteriorate.