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America’s Best Days Are Not Behind Us
 
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Rise? Sure. Fall? Nope.

America’s Best Days Are Not Behind Us

I generally read books that I expect to enjoy. But based on reviews I had seen, I was prepared to be more frustrated than fascinated by Robert Gordon’s new book, The Rise and Fall of American Growth. So you can imagine my surprise when I discovered how much I liked it.

Most reviews have focused on the “fall” indicated in the title: the last hundred pages or so, in which Gordon predicts that the future won’t live up to the past in terms of economic growth. I strongly disagree with him on that point, as I discuss below. But I did find his historical analysis, which makes up the bulk of the book, utterly fascinating. (And, at 743 pages, the book has a lot of bulk. Gordon’s two-part piece in Bloomberg View is a helpful summary for anyone who won’t get through the whole thing.)

Gordon paints a vivid picture of the years between 1870 and 1970, a century of unprecedented growth in the United States. This was the century that brought us the great inventions that fundamentally changed our standard of living—inventions like the electrical grid, indoor plumbing, automobiles, and antibiotics.

Gordon does a phenomenal job illustrating just how different life was in 1870 than it was in 1970, through both an economic analysis and engaging narrative descriptions.

Consider that in 1870, most homes were lit by candles and whale oil lamps. To use the bathroom, your choice was an outhouse or a chamber pot. Your world was confined to the distance your horse could travel. You would spend long hours of your short life doing backbreaking labor, owning only two changes of clothes, and eating a whole lot of pork and grain mush.

By 1970, homes—and people—became, to use Gordon’s term, networked. The advent of electricity, cars, indoor plumbing, and telephones meant that people were more connected than ever, dramatically improving quality of life and increasing productivity to previously unseen levels.

“In 1910, there were 2.3 cars for every 100 homes. By 1930, there were eighty-nine.”

What really amazed me was not the speed of innovation but the speed of adoption. In 1910, there were 2.3 motor vehicle registrations for every 100 households. By 1930, there were eighty-nine.

In its impact on the standard of living, the arrival of the automobile was rivaled only by the commercialization of electricity. It’s hard for many of us to imagine living in the dim, smelly, and smoky dwellings of 1870, washing clothes by hand, heating irons on a gas or wood stove, and eating only food that didn’t require refrigeration. By 1970, you could walk into most houses and see a refrigerator, an iron, a washing machine. It would look pretty much the same as any house you’d walk into today, with a couple notable exceptions like the microwave (and color schemes with a lot less harvest gold).

I found Gordon’s historical analysis eye-opening. And that’s why I think the attention that reviewers have paid to his predictions for the future, which make up only two chapters, distracts from the impact of the book.

Gordon argues that American growth can never be what it was between 1870 and 1970 because the fruits of the digital revolution will not live up to the legacy of the great inventions that transformed life in the 19th and 20th centuries.

I couldn’t disagree more.

Gordon’s premise is that what he calls the third industrial revolution, the one driven by computers and digitalization, is limited to communication, information, and entertainment. I believe it’s far broader than that.

The digital revolution affects the very mechanism of the marketplace. How buyers and sellers find each other, how we amass information, how we can create models to simulate things before building them, how scientists collaborate across continents, how we learn new things—all of this has changed dramatically thanks to digital innovation. Yes, household appliances look pretty much the same now as they did in 1970, but that doesn’t mean our lives in 2070 won’t be profoundly different.

As Gordon acknowledges many times, we don’t have a good tool for measuring the impact of innovation on people’s lives. Like other economists, Gordon uses something called Total Factor Productivity (TFP), which is meant to capture efficiency due to innovation. TFP is based on GDP but takes into account the hours we work and the equipment we use.

The truth is, while economic measurements like TFP can be useful for understanding the impact of a tractor or a refrigerator, they are much less useful for understanding the impact of Wikipedia or Airbnb.

“GDP may not grow as fast as it did in the past, but that alone doesn’t tell you whether people’s lives are going to get better.”

How do you calculate the value of millions of pages of free information at your fingertips? How do you calculate the impact of the entire hospitality industry flipped on its head? In the future, GDP may not grow as fast as it did in the past—or, for all we know, it may—but that alone doesn’t tell you whether people’s lives are going to get better.

Implicit in Gordon’s analysis is that nearly all the big problems have been solved, and any improvements over the coming decades will be at the margins. Gordon’s refrain, referring to automobiles and refrigerators and telephone systems, is “These achievements could happen only once.” This is true—but it’s true for things in the future, too. By Gordon’s definition, a robot that’s better at seeing and manipulating things than humans will only happen once. A cure for Alzheimer’s will only happen once.

And when they do happen, the change in our standard of living will be anything but marginal. Think of a cure for Alzheimer’s. That disease costs the U.S. $236 billion per year, mostly to Medicare and Medicaid. A cure would immediately alter the budget of every state in the country, not to mention millions of lives.

In the final chapter of the book, Gordon mentions “headwinds” that he predicts will further hamper U.S. growth and progress in the coming decades, including inequality, a broken education system, an aging population, and government debt.

I certainly agree that these are big problems. Reducing inequality and making sure every child in the country is ready for college and the workforce has been a major focus of our foundation’s U.S. Program. But America had problems with inequality and education in the past, and they didn’t prevent great inventions from having a big impact. Moreover, I’m optimistic that some of the great inventions of the future will be considered great because of their success at addressing these problems directly.

And I should add that Gordon limits his scope, understandably, to the U.S. But you can’t read his book without thinking about the billions of people around the world for whom a quality of life equal to the America of 1970 would be a vast improvement.

Learning about the speed at which the U.S. was able to spread innovations—from sanitation to electricity—makes me more hopeful about what is possible for the world rather than less hopeful about what is in store for America.

The book was a fantastic read, and well worth the time. When it comes to choosing a side in the debate between optimism and pessimism, my money is on the incredible forces of technological progress at work every day. Although the book is called The Rise and Fall of American Growth, I am confident that “fall” will not be the final word in America’s story.

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