No matter how bizarre things got in the presidential campaign we’ve just lived through, American voters—alarmed and agog—could take comfort in this: both candidates promised that the economy will get better. It was the one thing they agreed on.
Trump said he’d be “the greatest jobs president that God ever created,” and pledged to “make America great again.”
Hillary said America’s already great, but vowed to make it greater. “The measure of our success will be how much incomes rise for hardworking families,” she said.
So, beleaguered fellow voters, whatever havoc this election may bring, it won’t be long before the good economic times start rolling in, right? A chicken in every pot, two cars in every garage, and good-paying jobs for everyone?
I put that question to someone who should know—economist and Northwestern University professor Robert J. Gordon. Earlier this year, Gordon published a much-discussed book on this very subject, The Rise and Fall of American Growth.
I’ll admit, the title gave me pause. It could have been more upbeat. Like, say, The Rise and Rise of American Growth. But maybe it could be some academic-economist way of saying everything is coming up roses. So when I got the professor on the phone last week, it was the first thing I asked about. “You know,” I said, “your title seems to suggest that we can’t make America great again.”
“That’s right,” Gordon replied. “Because the great heyday of American growth is over.”
Not only that, he said, but it’s been over for a while—more than 40 years. And as far as he can tell, it’s not coming back.
Here’s what happened: As you no doubt remember from high school history, there was an industrial revolution that began in the 18th century and created a bunch of Dickensian factories. Well, starting about 1870, there was a second industrial revolution, even bigger than the first. It ran for 100 years, peaked in the middle of the 20th century, and gave us most of the amenities of modern life we now take for granted—electric power, indoor plumbing, the internal combustion engine, telephones, radio, and television. And American manufacturing was at the center of it.
“Between 1890 and 1940, there was a complete change that revolutionized every aspect of business and household operations and included enormous improvements in health,” Gordon said. “Life expectancy in 1900 was age 47; by 1970 it was 72.”
Here’s another example: in 1900 there were 8,000 automobiles in the United States; by 1930 there were 26.8 million, replacing the horses that had been dropping thousands of tons of manure on city streets—and then dropping dead in harness. (In Chicago alone, according to his book, 7,000 horse carcasses had to be cleared from the streets every year.)
We may think that we’re living in a time of rapid transformation, but nothing that’s happened since 1970 has brought change at the same pace and scale.
“In the last 40 years, we’ve had the computer revolution,” Gordon said. “That has changed business operations, but hasn’t had the same impact. Much of the innovation is going for things that are really of fringe importance. Think of the number of companies trying to develop virtual-reality goggles. Or the so-called Internet of things, where sensors inside your refrigerator automatically signal to your smartphone that you’re running out of milk. Is that as important as inventing the refrigerator in the first place?”
This slowdown in life-changing innovation and productivity means that the American dream of a continually rising standard of living will suffer: instead of doubling every generation, as it has in the past, Gordon said, it’ll take 100 years or more to double.
“And, because many people fall below the average, we’ll see that their standard of living does not exceed [or, perhaps, even equal] that of their parents.”
He’s got some sobering numbers: Productivity growth was roughly 3 percent annually between 1920 and 1970. Over the last 45 years it was cut in half. And during the last 6 years, it slowed to only 0.5 percent per year.
Still, he’s forecasting that productivity will grow at 1.2 percent annually during the next 25 years. But, he says, growth in the median income per person, affected by “headwinds” like income inequality, debt, and an aging population, will be only about 0.4 percent annually.
So nobody will be creating 25 million new jobs anytime soon? It was all just campaign rhetoric?
“I’m not claiming that all innovation is over,” Gordon said. “I’m predicting only 25 years out. There could be all sorts of miracles that could happen 50 or 100 years from now.”
Maybe then America will be great again. v