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Book Review: The Rise and Fall of American Growth (Robert Gordon)

This book is just not very good.  I was excited to read The Rise and Fall of American Growth; it was extensively and positively reviewed and it promised to illuminate an important topic by giving extended, specific analysis.  In particular, I wanted to learn about changes in productivity over time.  Instead, I first got an interminable, plodding exposition, which repeated commonly known facts ad nauseum for its first 600 pages.  But I soldiered on, knowing that the last 100 pages were analysis of current problems and of future productivity.  I should have cut my losses—those last 100 pages are exemplars of rank illogic and incoherence.  It didn’t end there, either—the book is then, at the last, capped by shrill, unsupported demands that America ingest a massive dose of insufferable and, at best, non-effective, leftist nostrums, considerably more pernicious than the 19th Century patent medicines the author unoriginally decries.  When I finished this book, I had to drink a fifth of cheap whiskey just to dull the pain, but now that the hangover is gone, I am rousing myself to write this review.

I will say one thing for this book—the reader can be in no doubt what the themes of the book are, because they are explicitly announced.  Over, and over, and over.  Thus, we can state with certainty that the book’s major theme is, roughly, that from 1870 until 1940, inventions of various types created existential leaps forward in Americans’ standard of living, only some of which are captured in standard economic measures.  From 1940 until 1970, such improvements were slower and more incremental, although this was masked by certain structural tendencies that increased productivity based on earlier events, such that most people see this period as a period of greater advancement than the earlier period, even though it was not.  Finally, since 1970, growth and improvement has been much slower—a trend the authors expect to continue into the indefinite future, techno-optimists be damned.

All this could easily have been said in 100 pages.  But it wasn’t, so I am here to condense it for you.  The author, Robert Gordon, is an elderly economist whose primary focus is macroeconomics.  He begins with both a summary of his book and with a basic overview of relevant economics concepts on which he relies, notably the calculation of GDP, total factor productivity (TFP), and the difference between output per person and output per hour.  It is also here that he introduces a second constantly repeated theme, that that GDP does not account for all increases in the standard of living, so-called “quality bias.”  I will grant that all this is easy to read and clearly organized.

Gordon then turns to describing life in 1870, both by statistics and anecdote.  This is also where the insufferable repetition begins.  We are, for example, treated multiple times within the span of a few pages to the exact same quote about dilution of milk.  Once would have been sufficient.  I lost track of the times that Gordon points out that GDP increases do not capture that nobody today has to clean up human and animal waste.  Which is certainly true, but one reference would have been enough.  Some of this is interesting, or would have been in ten pages, though none of it is new to anyone even moderately well-informed about history.  Gordon next focuses on improvements made on the world of 1870 during the next seventy years, including in food, clothing, energy, electrification, communication, transportation and medicine.  The sole fairly original point made here is that while we focus on antibiotics, the real advances in reducing mortality, particularly infant mortality, occurred earlier, due to increased sanitation and the implementation of other responses to the Pasteur germ theory.  (He offensively uses the phrase “A Generation of Midgets” as a chapter subheading; I am surprised that for such lack of celebration of diversity and inclusion he has not been dismissed from his post at Northwestern.)  This goes on for nine chapters and more than 300 pages; at the end of each chapter the chapter is didactically summarized (in fact, you could read only those summaries with some profit).

The occasional errors and frequent kneejerk ideological asides start to show up here, too.  For example, Gordon ascribes the “quantum leap in the amount of reading” after 1870 to cheaper paper, but mostly to “the government provision of free public libraries.”  This is ignorance.  As of 1930, more than half (around 2,000) of the free public libraries were Carnegie libraries; and most of the rest were created by other private philanthropy (although ongoing funding was usually a local government responsibility).  This may not seem important, but we will see how this more-government-is-always-awesome attitude of Gordon’s ultimately destroys his analysis.  And ideological “tells” appear—for example, Gordon concludes his chapter on improvements in medical care prior to 1940 by moaning that “The most important negative feature of American exceptionalism was the inability of the political system to adopt universal health insurance, defined as insurance that is a right of citizenship.”  Bismarck did it, says Gordon, why couldn’t we?  Of course, this is not “a failure of the political system” but something rejected, over and over again, for more than a hundred years, by the American people, despite the demands of their betters.

After a summary between sections pretentiously labeled “Entr’acte,” Gordon turns to the “Midcentury Shift from Revolution to Evolution.”  Basically, for another 200 pages, covering 1940 to today, and breaking that into the periods until 1970 and until today, Gordon covers the same areas as in the earlier section, but with the focus on how improvements were not as great.  Thus, instead of a momentous shift to varied, refrigerated food, we got fast food.  Instead of a shift to “networked” (via electricity, sewer, etc.—I think use of this term is supposed to be clever) homes we got more, but cheaper, and no bigger until recently, homes.  But generally, until 1970 or so, there was a “narrowing scope of progress.”  And he notes “the year 1970 marks a distinct break point between faster and slower growth.”  He notes that the key is finding why productivity decreased around 1970, while keeping in mind that when productivity falls, it is by definition from some combination of lower output per person and fewer hours worked per person.

Gordon notes in this section that dishwashers improved living conditions, and there was incremental improvement thereafter, “a steady improvement in the basic function of getting the dishes clean.”  He utterly fails to note that aggressive government regulations to supposedly help the environment and reduce energy usage have caused a massive backtrack in that basic function, such that no modern dishwasher gets dishes clean in anything like a dishwasher of, say, 1995.  This, and other blind spots, are the first clue that Gordon is not even going to consider whether the slowdown, even stoppage, of improvement and productivity post-1970 might have something to do with hugely expanded and intrusive government regulation beginning at precisely that point in time.

Gordon then turns to “The Sources of Faster and Slower Growth.”  Here he explores the seeming paradox that while real improvements slowed after 1940, productivity growth was at its maximum in the 1950s.  He ascribes this to the Depression and World War Two—to, roughly, the effects, delayed by the Depression and accelerated (and largely caused) by massive capital investment during the war, partially hidden by being characterized as government spending.  Moreover, it was only in the 1950s that some of the benefits of prior innovation, such as electrification, really were reflected in output statistics.

He next turns to asking, and mostly answering negatively, “Can The Future Match the Great Innovations of the Past?”  He correctly notes that “every source of growth can be reduced to the role of innovation and technological change,” and ascribes much of this to individual entrepreneurs who are willing to take risks.  Neither here nor later does he suggest that he understands that government, both directly through choking regulation and indirectly through defects like permitting excess litigation, can easily squash that willingness to take risks.  “Entrepreneurs contribute to economic growth far more than the narrow word ‘innovation’ can convey.”  This section is somewhat confused, though, since Gordon, like most academics, doesn’t actually understand entrepreneurship.  He measures entrepreneurship by patent issuance.  But that makes little sense—most successful entrepreneurs rely not on intellectual property, but on their drive and their own skills, and of those skills, the most important is simply the ability to get things done—many things, constantly, without fail.  Most people simply can’t do that, and most people can’t take the mental pressure necessary to be a successful entrepreneur.  I know this from personal experience.  Thus patents are totally irrelevant to these characteristics that really drive success, and what really makes a successful entrepreneur is actually opaque to Gordon, as it is to most or all academics.  And, critically, the amount of government regulation substantially affects an entrepreneur’s willingness and ability to put forth the effort necessary to succeed, which problem as I say Gordon completely misses.

As far as the future, Gordon rejects the idea that massive, unforeseeable changes will come from unforeseen inventions.  He thinks that the general outline of future inventions is clear, and it is very much incremental, contrary to what the techno-optimists say.  Gordon rejects that 3D printing will revolutionize industry, but points out that it will probably never be used for mass production, rather just for one-off manufacture.  He rejects (as I do) the idea that artificial intelligence will ever be used for all that much, and points out that both AI and big data are almost exclusively used for marketing purposes, and therefore increase productivity little or not at all.  Similarly, TFP has grown not at all in response to the smartphone and smart tablet (and as to the earlier first impact of computers, which was positive, Gordon points out that computers “between 1974 and 1994 . . . masked an even more severe slowdown in productivity growth than would have otherwise occurred in the rest of the economy.”)  He points out that even if driverless cars do come about, they will not likely increase productivity, but merely allow people more leisure time (and he points out that most truck drivers help load and unload at stores, etc., thus making driverless trucks less attractive than they appear).  Ultimately, Gordon does not deny that there is innovation in various areas—he simply ruins the techno-optimist party by pointing out that none of it is increasing, or is likely to increase, productivity.  Nor is there any reason to think this will change, despite vague promises to the contrary from techno-optimists.  We have heard for decades that somehow Something Big will upend the system and allow tremendous growth.  Maybe, but there is no evidence that will happen, and after all, hope is not a plan.

Finally, Gordon talks about the “headwinds” he thinks will keep American growth slow, and which have slowed growth since 1970.  This is where it all goes off the rails.  While he names and briefly discusses various headwinds, he very clearly thinks that the only relevant headwind is “inequality,” the only one he discusses at length.  In fact, this whole ultimate chapter is titled “Inequality and the Other Headwinds,” and the epigraph is a quote about inequality.

Gordon drones on and on about inequality, telling us it is “blowing at gale force,” focusing on inequality of income (though he does touch, for a sentence or two, on inequality of assets).  Bizarrely, at NO POINT AT ALL does he tell us why inequality retards growth.  I read all this, twice, and literally have no idea what Gordon’s argument is; there are a lot of charts and no argument or discussion as to why any of this slows growth.  And the book is sprinkled with related virtue signaling statements such as that during World War Two, “The reduction in the economic distance between the least well-off and the rest of the population significantly lifted everyone’s sense of well-being.”  There is no evidence given for this statement.  It is apparently just supposed to be obvious that inequality is the source of all our economic problems.  This is a spiritual belief, or a cultural one, not an economic argument.

As he maunders on about inequality, relying heavily on Thomas Piketty, Gordon does acknowledge that “recent criticism of [Piketty’s] and Census Bureau data has complained that they reflect only market income and ignore the effect of taxes and transfers.”  This is obviously an enormous failing, and Gordon treats the criticism as true (it’s not just “taxes and transfers,” though—Piketty et al. also ignore noncash employer payments, income from most home sales, and the presence of multiple earners in a home when discussing household income).  So Gordon revises his analysis of inequality accordingly, thus undercutting much of his claims—an effect he then ignores.  After that he goes on his merry way, alleging without discussion that what matters is median income growth rather than average income growth, the measure he’s previously used throughout the book.  Why, the reader is never told, nor is the reader told why any of this matters to growth.

Income inequality may be a problem for many reasons—but Gordon does not even attempt to demonstrate that impact on growth is one of them, and given that’s his major “headwind,” that’s a big problem for his book.  One wonders where his editors were.  Presumably they were entranced by the topicality of his focus, and therefore ignored the huge hole at its heart.  Too bad—being told to return to the drafting table at this point might have saved Gordon’s book.

Even within his discussion of inequality, and leaving aside that he does not relate it competently to the theme of his book, Gordon makes numerous errors.  One is that he fails to understand or acknowledge that the individuals in various income groupings change extremely rapidly.  The composition of the “rich” and the “poor” changes continuously, and many actual people who are “poor” at one point in their lives are “rich” later.  As Thomas Sowell has pointed out, “To say, as [Piketty] does . . . that ‘the upper decile is truly a world unto itself’ is to fly in the face of the fact that most American households—53 percent—are in the top decile at some point in their lives, usually in their older years. . . . This is not even ‘class warfare,’ but confusion between social classes and age cohorts. . . . . Even the vaunted ‘top one percent,’ so often discussed in the media, is a level reached by 11 percent of Americans at some point in their lives.”  But Gordon treats all income groups as composed of static individuals, which, even if he tried to and could demonstrate that inequality affected growth, would erode his analysis of inequality.  Another, less critical but indicative, error is his treatment of unions.  He repeatedly refers to some states as “nonunion right-to-work,” and implies unions are forbidden in such states, when anyone who’s even modestly well-informed knows right-to-work laws don’t make anything nonunion, they merely prohibit requiring joining a union being made a condition of employment.  Again—these are problems that could have been fixed with a decent editor.

Now, it may well be that inequality is a real problem, either in general or as related to growth.  This is especially true to the extent that inequality of income is caused by inequality of opportunity, rather than inequality of talent or effort.  It is true (though Gordon ignores it) that economic mobility in America has decreased over the past few decades, to now be lower than some areas of Europe.  This suggests that equality of opportunity has decreased, and is perhaps related to the decline in entrepreneurship Gordon mentions.  There is a strong argument that the “clerisy,” the upper American classes, has geographically and intellectually largely separated from the rest of America, and that this is problematic both economically and culturally (and is obviously related to the rise of Trump).  Forced “diversity” in many industries; that is, taking from the excellent who achieve and giving unearned rewards to the undeserving based on their immutable characteristics, exacerbates this problem.  To get at this, a cultural analysis is necessary, along with real statistics, not Piketty-type cherry-picked statistics.  But about all this, there is silence in this book.  For Gordon, inequality is just an excuse to demand the government forcibly redistribute money, which is supposed to, in some undefined way, increase American growth.  This reminds me of the famous South Park Underpants Gnomes, who have a foolproof way to get rich.  Namely:  Step 1. Collect underpants.  Step 2. ?????  Step 3.  PROFIT!!!!  Substitute “reduce inequality” for “collect underpants” and “increase growth” for “PROFIT” and you will have the core of this book.

On I slogged, but I found (no longer to my surprise) that when he gets to his other “headwinds” Gordon is little better.  They include education, demographics, and government debt.  And then, of course, to add to the predictable tedium from which the reader is suffering, he adds global warming, globalization, and environmental pollution (by which he means global warming, presumably by effectively citing it twice emphasizing how au courant he is).

With respect to education, he says, in essence, that we have reached diminishing returns to education (and then he wholly erroneously equates spending per pupil with educational attainment, bemoans that “wealthy suburbs provide lavish facilities to their students,” and demands that the US “follow the lead of other nations in providing free preschool education,” all without any argument as to why these things are good or relevant).  On demography, he says very little, but basically he says people are getting older and hours per person are therefore going down; he also mentions working-age people dropping out of the work force entirely, but falsely ascribes this to solely to their being “victims of deindustrialization.”  Gordon then spends only three paragraphs on government debt, presumably because the problem he identifies with government debt is that it will have to be paid for by taxes, which will slow growth, and focusing on that might suggest that government could be a problem.  Then he calls for a large carbon tax, naturally, to meet government debt, because everyone knows that carbon taxes have no negative impacts.  Like unicorns whose bodily wastes are rainbows, according to Gordon, a carbon tax is a magical balm for all that ails society.

But then Gordon does say, briefly, that the lower classes have broken down socially (even quoting Charles Murray!), and ascribes part of inequality and stagnant income growth to this.  However, he promptly drops this line of thought like a hot potato, and does not mention it at all in his earlier lengthy screed on inequality, even though it may largely explain the supposed problem he identifies.  It’s like he felt obliged to acknowledge one elephant in the room (the other, totally unacknowledged, elephant being government regulation choking the life out of the economy), but didn’t want to highlight it in any way.

His section on global warming, globalization, and more global warming is wholly perfunctory and tacked on, as is a Postscript on “The Path Ahead,” which merely spews out demands for yet more leftist nostrums without evidence or argument.  Gordon does mention fracking and increased oil and gas production, but his focus is that it may reduce carbon emissions due to a shift away from coal, rather than the obviously vastly more relevant potential impact of cheap energy on increasing growth, which is, you know, the subject of this book.  He calls repeatedly, again, for a carbon tax.  He demands an increase in the minimum wage, without evidence or argument, while oddly claiming that “a substantial body of economic research indicates little or no employment effect.”  He demands massive increases in the earned income tax credit (i.e., welfare payments), explicitly in addition to minimum wage increases, not as substitution.  He demands higher taxes to counter “the inexorable rise of inequality.”  He demands drug legalization and less incarceration (and tells us that both will necessarily improve marriage rates).  He demands, in a chapter subheading, “Greater Equality of Outcomes”—to be achieved by punitive taxes on the rich, both income taxes and death taxes.  He demands college loans be forgiven for those making less money, without any acknowledgement that those who make less money usually do so from their college choices and actions, such as choosing a social capital-destroying Women’s Studies degree.  Nowhere, though, does he explain what any of this has to do with American growth.  It is just a wish list of left-liberal demands.  Presumably when this book was published in 2016 Gordon was angling for a position in the upcoming Hillary Clinton administration as a minister or éminence grise.  Sadly, he is now instead stuck in the bankrupt city of Chicago, which has so effectively applied the principles Gordon advocates over many decades.

Once, only once, I glimpsed a possible nod to reality:  “Inequality can be alleviated and productivity growth promoted by combating overly zealous and regressive regulations” (although note which of the two goals which comes first, and that separating them implies he realizes they are different things).  I was jolted out of my stupor—maybe this was the turn to reality, and, like J.R.’s shooting, what had come before would just be a dream?  But for Gordon, the only bad regulations (and this entire topic is covered in all of two paragraphs) are occupational licensing, over-lengthy patent and copyright protection, and excessive zoning regulation.  And only because they increase inequality, to which Gordon repeatedly refers to while discussing regulation.

Gordon totally fails to understand the real origin and costs of regulation on the “business dynamism” he desires and correctly identifies as an engine of growth.  In all areas, on all levels, federal, state and local, all businesses are subjected to crushing regulatory burdens.  These include health care, employment law, finance/banking, supposed disabilities, environmental law, and many, many, many other areas, both in general and specific to each industry.  The burdens are crushing both because they are expensive, due to staff time and paying third parties for compliance, but even more so because they distract and deter small businesspeople from getting business done, and also deter them from starting or expanding businesses.  Gordon ignores this; presumably he, like Hillary Clinton, feels like “’I can’t be responsible for every under-capitalized small business in America!”  Suck it up, buttercup, implies Gordon, and let’s get back to talking about what’s really crimping your “business dynamism”—societal inequality!

I found, having staggered across the finish line, that 100% of Gordon’s recommendations are half-baked, warmed-over leftist claptrap.  Surprisingly, we are spared at least one leftist demand, for gun control, of which there is no mention.  I would have expected to see a plea for gun control, to further establish Gordon’s ruling class bona fides.  However, in lieu we get a plea for more abortion—Gordon essentially endorses, as the only theory he mentions to explain the modern reduction in crime, that it is due to increased abortion, by “reducing the number of unwanted births and uncared for children.”  By this he means it kills future members of the lower classes, primarily and disproportionately black people.  But, of course, lethal racist eugenics is nothing new for left-liberals in America, from Margaret Sanger to Ruth Ginsburg, so here Gordon is in good company.

The reality is that all of these “headwinds” are almost certainly small beans compared to the likely real reason that productivity and growth have plummeted since 1970.  That reason is massive increases in government regulation and interference with business that began at precisely that moment in American history.  Such regulation and interference are both direct, through the ever-expanding, rapacious, and power-hungry administrative state, and indirect, through the rise of crony capitalism that uses regulation to insulate itself from competition, and through excessive transactions costs such as those paid to lawyers (both in the tort system and as compliance costs).  Nowhere does Gordon advert to this as even a possible cause of the slowdown in growth, despite the time match being precise, and despite his book being filled with examples from prior eras that point toward the impact of government regulation.  For example, Gordon discusses “Henry Ford’s mammoth factory that built B-24 bombers,” one per hour, which was “built in less than a year.”  Does anyone think it would take less than decades to build such a plant now?  Or, for an analogous peacetime example that Gordon does not mention, the Empire State Building was built, in 1931, in one year and 45 days, from start to finish.  Complying with environmental impact regulation alone today might take a decade and cost more than that building itself.  Similarly Gordon notes that approval of new drug applications plummeted from 1965 on.  But Gordon never suggests that this could be due to regulatory overreach (in part, due to the furor over thalidomide, which made the FDA extremely cautious about approving new drugs).  These are self-inflicted wounds on our society, and they are wholly ignored by Gordon, even though, to a rational observer, they dwarf the minor or irrelevant “headwinds” that he claims explain lower growth and productivity.

Of course, regulation and government interference don’t necessarily explain it all.  Regulation may be both cause and effect, in an aging society where the 20th Century American dynamism and spirit has waned in vigor.  I have, coincidentally, been watching the first season of The Twilight Zone, first broadcast in 1959.  What I noticed is the feeling depicted there of looking forward, of taking risks, of going places and doing things, along with sub-themes of personal responsibility and excellence.  The moon landing was 66 years after the Wright Brothers’ first flight; it has now been 48 years since the first moon landing, and in terms of daring and the search for excellence, we are behind 1903.  Our society focuses on comfort and safety, even for astronauts, not achievement and excellence.  Maybe more regulation is just indicative of a decline of our society, in ways that also affect productivity and growth, not the cause of that decline.  Nor is there any indication this will change for us, or even that some other society will make possible further fast global growth by adopting that future-looking attitude that created all the advances on which Gordon focuses in the first parts of his book—which, after all, were nearly all made by Americans or Europeans.  No other society has ever made real, global contributions to human flourishing, and there is no indication any will in the future.  If we, America, cannot regain our past dynamism, there is plenty of indication that Gordon is right about his conclusions, if not his analysis, and stagnation is our future.  How we can break out of this, and obtain both economic and cultural renewal, is the great challenge of our time.  But this book contributes nothing to the challenge.

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