Robert Gordon’s The Rise and Fall of American Growth has attracted widespread interest because of its scepticism about the productivity advances associated with modern technologies. Whether this techno-pessimism is right or wrong we do not yet know. However, there is no need to doubt the lessons for global development in Gordon’s compelling and encyclopedic account of the rise of American living standards between 1870 and the 1970s. The extraordinary burst of industrial change that had its apex in the late nineteenth century laid the technological foundations for the organization of cities, advances in production and the modernization of homes that are the material elements in raising life expectancy, broadening opportunities and advancing social welfare. The trajectories of these advances are not identical in developing countries in the late twentieth or early twenty-first centuries, but the underlying technologies no longer have to be invented. Progress in development rests strongly on the adoption of these known technologies, and their adaptation to local circumstances.
Gordon’s central thesis is that “some inventions are more important than others” in their contribution to living standards. The introduction of electricity, the light bulb, electrical motors, telecommunications, the internal combustion engine, factory production methods and modern agriculture brought about changes that within a century enabled almost all Americans to achieve living standards that had been available to only a small minority in the mid-nineteenth century. Electric power made the elevator possible, allowing buildings to extend vertically in concentrated urban areas. Progress in medicine lengthened life expectancy; advances in communication and education brought learning and entertainment opportunities to all.
Gordon illustrates in robust detail just how different life became in rural homes when women did not have to fetch water every day, wash clothes by hand or individually make every garment they wore. He describes the transformation in cities brought about by the automobile, ending the daily clearing of animal waste from the streets and reliance on fully a quarter of American grassland devoted to feeding horses. He documents the rapid progress in communication, learning, travel and lifestyles made possible by transport networks, the telephone, radio, film and television. As urbanization advanced, the construction of water, sewerage, electricity and telecommunications networks; the industrialization of home-building; and the growth of household credit markets made middle-class suburban living a practical reality for a rising share of the population.
The diffusion of new technologies and streamlined production processes in factories was extraordinarily rapid, even during the calamitous years of the Great Depression. At the end of this period American industry could be mobilized on an historically unprecedented scale in producing the machinery of war. Within a few years after World War 2, this capacity was largely redirected to the mass production of refrigerators and washing machines, color television and video, further advances in vehicle design, and commercial air travel.
Progress in material living conditions was rapid, in part because productivity growth was so rapid. Gordon draws on a lifetime of studying national accounts indicators and productivity measures, in presenting evidence that progress after 1970 was slower than before and the associated improvements in living standards less significant.
This is surely right – electricity, potable water and basic sanitation; improved nutrition associated with diversified food baskets; the commercial availability of clothes, furniture and household appliances; radio and the telephone; and improvements in home-building are advances in meeting basic living standards. Technological developments in the twenty-first century cannot be expected to contribute comparable improvements in human well-being. Societies should surely prioritize investment in these known capabilities and production possibilities before putting substantial capital at risk in uncertain frontiers.
In recent decades, a rising share of the world’s population has benefited from industrial progress, modern household amenities and improved basic living standards. Uneven progress in Latin America and Southeast Asia in the second half of the last century has been followed by extraordinary advances in China and India. A convergence is evident globally in the planning and design of cities, the engineering of power and water networks, the logistics of trade and transport systems, the structure of consumer goods markets, the layout of homes, and tastes in fashion and entertainment. The narrowing of differentials between nations in living standards is far from complete, but the trend is unarguable.
The globalization of production networks, financial integration and the opening up of markets have hastened this convergence. The global relocation of manufacturing and the growing tradability of services have enabled productivity and savings rates in low-income countries to rise rapidly. Perhaps most importantly, there is alignment or convergence internationally in the institutional architecture of trade, finance, corporate organization and local government. Differences between cultures do not disappear, but sharp divides between institutional arrangements give way to linkages, common learning modalities and stronger transaction capabilities.
Modern technology undoubtedly contributes to the rate of diffusion of knowledge and capabilities. In technical appliances and communication, costs have fallen rapidly while the quality of goods and services has improved. In education and entertainment, in healthcare and in home conveniences, many things are possible today that were impossible half a century ago. However, Gordon argues compellingly that the advances in living standards achieved in America between 1870 and 1970 were far greater in human welfare terms than the changes modern improvements have brought. Correspondingly, the progress that is now being achieved in rapidly growing developing countries, although facilitated by advances in technology, is largely about reproducing and adapting governance and planning systems for urban development, constructing infrastructure networks, adopting home-building standards, and improving productivity in food production, transport and household goods and services in ways that have been known and understood for many decades.
The lessons for development economics are not straightforward. A sustainable balance has to be found between modern production technologies and those that suit local resources and capabilities. There may be tensions between mobilizing indigenous capital and entrepreneurship, and accelerating change through foreign investment or partnerships. Urbanization brings opportunities for diversification and greater productivity, but rural development also requires investment. There are formidable institutional complexities in managing rapid growth. If the essential technologies are known, and the shortfalls in food production, housing, water and sanitation, electrification, transport infrastructure and access to basic household amenities are evident, then a substantial part of a development strategy has to be about strengthening the impetus of investment, both public and private, in the adoption of these known technologies and capabilities.
Francis Fukuyama called it “the end of history”; Thomas Friedman proposed that “the world is flat”. They were animated by late twentieth-century globalization dynamics. Perhaps the more important foundation of global convergence in our time is the extraordinary technological break that began in the 1870s.