We need to look back and get some perspective on US economic growth. We keep hearing that according to the President, we are just about to break out of a period of seven years when we have been on a 2% growth path, and get up instantly and effortlessly to 3% or 4%.
So, let me give you some numbers in that context of 2% or 4%. For a century, from 1870 to 1970, the US economy grew at close to 4%. That was a period propelled by what I call the great inventions: electricity and the internal combustion engine. Electricity made possible electric light. Machines. Elevators. Subways. The whole urban density that created productivity as we moved off the farm.
The internal combustion engine gave us motor transport and air transport. We had a revolution in speed, we had a revolution in temperature control. A revolution in infant mortality and life expectancy. All of those things happened in a very compressed period. Primarily, remarkable changes happened just between 1890 and 1930.
After 1970,…growth slowed down from around 4% to close to 3%. And much of that was a decline in productivity growth. Growth didn’t fall off as much as productivity did because we had very rapid growth in the labour force in the1970s,1980s and 1990s.… Our growth path over the last decade has only been 1.3%, well under half of what it was over the previous 35 years.
From “Can the US Economy Recapture Its Past Growth?”