Charles I. Jones, an economist at Stanford University, has “disassembled” American economic growth into component parts, such as increases in capital investment, increases in work hours, increases in research and development, and other factors. Looking at 1950–1993, he found that 80 percent of the growth from that period came from the application of previously discovered ideas, combined with heavy additional investment in education and research, in a manner that cannot be easily repeated for the future. In other words, we’ve been riding off the past.
Oddly, it is the so-called \”economic right\” — which complains bitterly about decades of increasing taxes and regulation and litigation and government privilege — which finds such a claim hardest to accept.
No, no, this \”economic rightist\” is simply overjoyed to accept, even promote, that argument.
For it\’s is saying that the great Post WWII economic expansion was nothing to do with high unionisation rates, Bretton Woods, restrictions upon capital movements, high marginal tax rates, fixed exchange rates or any other of the \”liberal\” or \”social democratic\” (use one for the US, the second for Europe) theories that are so often advanced.
It was driven by the lack of economic growth in 1929-1945, a lack of economic growth which was accompanied by technological and productivity advances. That is, Post WWII growth happened not because of the policies enacted but despite them.
Another way of looking at this: we all know that growth when you\’re well behind the possible technological production frontier is easier than growth when you\’re at it. This is why a poor place like China or India can grow at 8-10%, year after year, for decades even, while mature economies struggle to manage a consistent 2.5-3%.
There was somewhere between none and fuck all economic growth in the US (and many other economies) in the 1929-1945 period. But the production frontier continued to move outwards, indeed, the 30s are one of the all time great decades for both technology and productivity improvements. The 50s to the 80s were simply playing catch up, in the same way that China and India are now.