Your Lying Eyes

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01 December 2008

What Could Have Been

From 1947 through the 60's, the U.S. economy grew at a nearly 4% annual rate. The annual growth rate for the sixties was over 4.3%. Had our economy continued to grow at the '47 - '69 rate, Americans would be 43% richer today. Had we grown at our 60's pace, we'd be 67% richer. Even if we had only grown at a modest 3.5% pace, we'd still be 22% better off. Instead, our economy has only grown at a bit less than 3% since 1970. Astonishingly, our economy's growth has slowed down despite the labor force participation rate rising to 64% in the last decade from 57% in the late-sixties. Put another way, GDP per worker (in 2000 $$) was $47.1k in 1966 vs. 79.6k in 2007. This represents a measly annual productivity growth per worker of 1.3%, in comparison to 1950 - 1966, during which per worker output increase at a 2.6% annual rate*. Our productivity growth has slowed, and so has the pace of technological progress.


Sources:
GDP - http://www.bea.gov/national/nipaweb/SelectTable.asp?Selected=Y
Labor - ftp://ftp.bls.gov/pub/special.requests/lf/aat1.txt

* 7:30am I had originally posted a much higher figure for this last night but woke up this morning with "Shit - there's no way that number's right" and fixed my error and reposted the correct figure. I apologize to anyone who might have read that wrong number overnight.

4 Comments:

Anonymous Anonymous said...

Technological growth has been flat because industrial growth has been non-existent. Growth in technology is spurred by advances in capital equipment development; a country getting rid of its productive capacity doesn't need much investment in capital equipment. And if you don't believe that, just read the work of my close personal friend Eamonn Fingleton.

December 02, 2008 2:16 AM  
Anonymous Derek Copold said...

Is it really fair to use a period like 1946-7? I mean, up until the late 50s, we were the only full operational industrial power in the world. Everyone else was recovering from WWII. Even the the 1960s is questionable, given LBJ's massive spending increases at home and abroad.

December 03, 2008 2:37 PM  
Blogger ziel said...

Derek - it's tough to say. I'm trying to find some time to look for data on how our investments were spread around. One thing I've noticed is that trade wasn't a big portion of our economy back then. While our imports have gone through the roof, so have our exports. Through the 50's and 60's, exports constituted about 3 - 4% of GDP, while now they make up 13% of GDP, so it's not clear to me that supplying the rest of the world was a big part of our growth during that period.

December 04, 2008 7:31 AM  
Blogger gcochran said...

A lot of important technical developments (like TV) happened but didn't reach the commercial market (or not much) during the Depression and WWII. After WWII, they were implemented pretty rapidly. That said, sure, things have slowed down in the last generation.

December 04, 2008 3:22 PM  

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