The End of Americas Economic Miracle
Among the many and various claims put forward by the opposing camps in the election just passed, one was made by both sides: they, and only they, had a prescription that would deal with America’s less-than-stellar economic condition, the years of slow growth and the lack of sustained real improvements in the standard of living of normal Americans, like the improvements that had occurred back in Eisenhower and Kennedy’s time. With American productivity resurgent under the future president’s new policies, each side promised, the country would once again thrive.
Yet what if, due to deeply entrenched historical and structural factors, that future is highly unlikely to happen? What if those Eisenhower boom times have to be understood as a one-off phenomenon? What if we should all just get used to modest (that is, 1%-2%) long-term growth as “normal”? What will our politicians’ promises be worth then?
Before rejecting this as too gloomy a prospect to be contemplated, readers might want to ponder Marc Levinson’s “An Extraordinary Time.” This is a smoothly written account of the U.S. and the world economy during the 1970s and parts of the 1980s as told by the one-time economics editor of the Economist magazine and author of other important works (such as “The Box,” about the emergence and implications of the shipping container revolution).
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Employing appropriate extracts from personal memoirs as well as official economic reports, Mr. Levinson takes us back to the whirlwind of the very early 1970s, when a plunging-dollar crisis was soon followed by even worse shocks: oil and gas prices going through the roof; the global economy shuddering; the collapse of banks and firms; and then (here the author is very good) the half-hearted recovery that would defy the policy prescriptions of one administration after another.
This was not a temporary tripping-up but a new economic era. All of the growth that consumers, politicians, government planners and economists had taken for granted over the preceding quarter-century was at an end. Factories closed up. Boom towns became bust towns. Weird things happened, now lost to public memory. Anyone living in Europe in, say, 1973, can remember “car-free Sundays,” when the population was encouraged to stroll with their families, or play pick-up soccer games, along the closed-off highways and autobahns of Europe. The idea was that one day off driving a week saved one-seventh of the short supply of gas. It was funny, but wasn’t it a bit scary and ominous, like some scene from a science-fiction novel?
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The big point that Mr. Levinson is making is that historically special circumstances were at work that pushed America into abnormally high rates of growth that wouldn’t last forever. Interestingly, then, while the 1973 “oil shock” caused the economy to fall back, it wasn’t the chief culprit. The United States was coming to the end of a special period economically; it was becoming a mature society.
If that is so, and this is the hard conclusion to be drawn, then presumably nothing will get us back to the golden age. A change of administration has little real effect on such things. When it comes to the key measure, total-factor productivity, the post-1973 American economy has been equally unresponsive—this may surprise some readers—to newer technologies in the workplace. Faster communications, improved construction materials, better energy use, the transformation of the firm, increased population demand, even the internet: Nothing has done the trick. The Clinton years in the mid-1990s looked pretty good, at least for a while. But nothing ever got things back to that “extraordinary time” when productivity went up and up without missing a beat. Mr. Levinson is, moreover, not alone in this argument. The respected economic historian Robert Gordon, at the end of “The Rise and Fall of American Growth” (2016), suggested as much, even more emphatically.
Mr. Levinson ends his book abruptly, rather too abruptly for this reviewer’s taste. How nice it would have been to have this very smart writer tease out more implications from his story. Instead he closes with a 1981 reflection by the great Nobel laureate economist Paul Samuelson: “The third quarter of the Twentieth Century was a golden age of economic progress. It surpassed any reasoned expectations. And we are not likely to see its equivalent soon again.” But is there not more to say? What we have here is a giant economic claim, that modernizing societies (America included) have but one special period of great productivity growth and then return to normal. Either it’s true, and we have troubled times ahead, or it’s not yet proved. But what could bring us a second sustained boom?
http://www.wsj.com/articles/the-end-of-americas-economic-miracle-1480377926
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