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A Great Leap Forward

A Great Leap Forward: 1930s Depression and U.S. Economic Growth

Alexander J. Field
Copyright Date: 2011
Published by: Yale University Press
Pages: 288
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  • Book Info
    A Great Leap Forward
    Book Description:

    This bold re-examination of the history of U.S. economic growth is built around a novel claim, that productive capacity grew dramatically across the Depression years (1929-1941) and that this advance provided the foundation for the economic and military success of the United States during the Second World War as well as for the golden age (1948-1973) that followed.

    Alexander J. Field takes a fresh look at growth data and concludes that, behind a backdrop of double-digit unemployment, the 1930s actually experienced very high rates of technological and organizational innovation, fueled by the maturing of a privately funded research and development system and the government-funded build-out of the country's surface road infrastructure. This significant new volume in the Yale Series in Economic and Financial History invites new discussion of the causes and consequences of productivity growth over the last century and a half and on our current prospects.

    eISBN: 978-0-300-16875-4
    Subjects: Economics

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Preface
    (pp. vii-x)
  4. Introduction
    (pp. 1-16)

    This book is built around a novel claim: potential output grew dramatically across the Depression years (1929–1941), and this advance provided the foundation for the economic and military success of the United States during the Second World War, as well as for what Walt Rostow (1960) called the “age of high mass consumption” that followed. This view, if accepted, leads to important revisions in our understanding of the sources and trajectory of economic growth in the second quarter of the century and, more broadly, over the longer sweep of U.S. economic history since the Civil War.

    The argument will...


    • 1 The Most Technologically Progressive Decade of the Century
      (pp. 19-41)

      It was not principally the Second World War that laid the foundation for postwar prosperity. It was technological progress across a broad frontier of the American economy during the 1930s.

      Because of the Depression’s place in both the popular and academic imagination and the repeated and justifiable emphasis on output that wasn’t produced, income that wasn’t earned, and expenditure that didn’t take place, it will seem startling to propose the view that the years 1929–1941 were, in the aggregate, the most technologically progressive of any comparable period in U.S. economic history.¹ The hypothesis entails two primary claims: first, during...

    • 2 The Interwar Years
      (pp. 42-78)

      The acceleration of productivity growth during the Depression years and the expansion of potential output to which it gave rise are best appreciated when considered within the context of a broader overview of twentieth-century U.S. economic growth. This chapter brings together quantitative and qualitative material to tell the story of why TFP growth during the Depression years (1929–1941) was higher than it had been during the 1920s (1919–1929). It compares the sectoral sources of advance during the two periods and lays groundwork for chapters that follow. Chapters 3, 4, and 5 cover, respectively, the Second World War (chapter...

    • 3 The Second World War
      (pp. 79-105)

      The historiography of the Great Depression in the United States has been overwhelmingly concerned with the sources of the deficiencies in aggregate demand responsible for more than a decade of double-digit unemployment over the twelve-year period 1929–1941. The narrative has been infused with leitmotifs of failure and loss: of output, of employment, and of expenditure. In contrast, the macroeconomic history of the golden age, the quarter century following the end of demobilization, has, on balance, radiated the bright glow of success. The emphasis has been on an American economic colossus standing astride the world in a position of dominance...

    • 4 The Golden Age and Beyond
      (pp. 106-120)

      The quarter century running from 1948 through 1973 has come to be known as the golden age of U.S. productivity growth. Over these years output per hour in the private nonfarm economy grew at a compound annual average rate of 2.75 percent per year. The distinctiveness of this achievement, as well as its implications for the U.S. material standard of living, is reflected in the fact that the long-run growth rate of U.S.outputfor over a century has been a little over 3 percent per year.

      Of this 2.75 percent, approximately .9 percentage point per year can be attributed...

    • 5 The Information Technology Boom
      (pp. 121-145)

      Between 1989 and 2000, TFP in the U.S. private nonfarm economy grew more than twice as rapidly as it had during the years 1973–1989. Between 2000 and 2007 TFP growth inched higher still—driven by strong gains in the years 2002–2004. Much of this revival, both before and after the tech stock market crash, can be credited to information technology. But the close identification of the boom with IT is reflective of why economy-wide TFP growth was so much lower than during the Depression years: the locus of advance was much narrower than it had been between 1929...

    • 6 Fin de Siècle: The Late Nineteenth Century in the Mirror of the Twentieth
      (pp. 146-166)

      In this chapter, we return to an issue first addressed in the introduction: how the character and drivers of late nineteenth-century growth may have differed in relationship to what took place in the twentieth. In the immediate postwar period, Moses Abramovitz and Robert Solow both examined data on output and input growth for the United States and reached similar conclusions. The pattern of disembodied technical change appeared to be markedly different in the twentieth century as compared with the nineteenth. In the twentieth century, a much smaller fraction of real output growth could be swept back to the growth of...


    • 7 Procyclical TFP
      (pp. 169-191)

      This is the first of three chapters extending or reflecting upon the narrative developed in chapters 1–6 as a way of shedding light on issues of broader macroeconomic or historical significance. This chapter asks how generalizable is the phenomenon of Depression-era TFP procyclicality. Chapter 3 showed that total factor productivity growth was strongly procyclical across the Depression years. When the unemployment rate went up, the level or rate of growth of TFP went down, and vice versa, with this cyclical dynamic overlaid upon a very strong trend growth rate. That relationship was used to make a cyclical (and upward)...

    • 8 The Equipment Hypothesis
      (pp. 192-205)

      In several articles published in the 1990s, Brad DeLong and Larry Summers argued that investment in producer durables had a high propensity to generate externalities in using industries, resulting in a systematic and substantial divergence between its social and private return. They maintained, moreover, that this was not the case for structures investment. Together, these claims constitute the equipment hypothesis. This chapter explores the degree to which the growth narrative for the United States in the twentieth century developed in chapters 1–5 actually supports it.

      Equipment—producer durables—has long enjoyed a privileged position in thinking about economic growth,...

    • 9 General-Purpose Technologies
      (pp. 206-228)

      In the last decade one of the more successful memes in economic history has been the concept of a general-purpose technology. Timothy Bresnahan and Manuel Trajtenberg published the seminal article in 1995, and the list of publications building upon, amplifying, and drawing from the concept includes Helpman (1998), Rosenberg (1998), Caselli (1999), Crafts (2004), Crafts and Mills (2004), David and Wright (2003), Gordon (2004), Goldfarb (2005), Lipsey, Carlaw, and Bekar (2005), Jovanovic and Rousseau (2005), and Rousseau (2006, 2008).

      Bresnahan and Trajtenberg built on earlier work by David (1990, 1991), and David and Wright’s 2003 paper, “General Purpose Technologies and...


    • 10 Financial Fragility and Recovery
      (pp. 231-276)

      This book has been built around a reinterpretation of the economic history of the Great Depression that, if accepted, leads us to rethink many aspects of the growth narrative for the United States since the Civil War. The traditional historiography of 1929–1941 focused almost exclusively on cyclical issues. The emphasis in chapters 1 and 2 and elsewhere in part I, in contrast, has been on a Depression-era growth of economic capacity obscured by the large output gaps that characterized the period. But obviously, both growth and cycle matter, in particular, as chapter 12 suggests, because there may be some...

    • 11 Uncontrolled Land Development and the Duration of the Depression
      (pp. 277-293)

      In the four years following the Depression’s trough in 1933, recovery was rapid and dramatic, with striking revivals in equipment investment, manufacturing output, and income to both capital and labor (chapter 10). But the fact remains that at the local peak in 1937, unemployment was still 14.3 percent, and the economy ended up experiencing double-digit unemployment for the entire decade, from 1931 through 1940. Some of this was due to the high rates of TFP advance characterizing the Depression years, which allowed output to grow with only modest increments to employment or hours.

      But part also was due to continuing...

    • 12 Do Economic Downturns Have a Silver Lining?
      (pp. 294-311)

      Chapters 1–6 and 8–9 of this book are primarily about growth. Chapters 7 and 10–11 have a greater focus on cyclical issues. It is natural, in this concluding chapter, to ask about their possible interaction. In particular, do economic downturns somehow on balance provide a long-term boost to the growth of potential output? It would be comforting to answer in the affirmative. The Depression-era experience suggests that although there can be positive consequences, the effects are mixed, and the answer we give must be nuanced.

      What long-run effects, if any, does the financial cycle, and the cycle...

  8. Epilogue
    (pp. 312-314)

    The 1939–1940 New York World’s Fair took place within the shadow of the Second World War, but it was a paean to modernism, a hopeful celebration of technological and human potential as the United States emerged from a decade of double-digit unemployment. The most popular exhibit was General Motors’ Futurama, designed by Norman Bel Geddes, the patron saint of modernism’s aerodynamic aesthetic. Visitors lined up for hours for an opportunity to gaze at vistas of modern infrastructure with cars moving along fourteen-lane freeways. From everything we can tell, it appears that Americans contemplated these vistas with a complete lack...

  9. Appendix: A Brief Description of Growth Accounting Methods
    (pp. 315-318)
  10. Notes
    (pp. 319-350)
  11. Bibliography
    (pp. 351-370)
  12. Index
    (pp. 371-387)