Tim Worstall gets it

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.


For it’s…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.

The full post is here.


For some reason I'm never offended by "fuck" in the economic context.

He "gets it" because he's British. In the U.S. we are not used to hearing arguments that growth is *because* of leftward policies. Even the leftward among us generally view unionisation, etc, as merely spreading the wealth not creating it. In other words: their lefties are different from our lefties.

I was referring to the 2nd statement. Still not sure I *get* the first, but I'll try it on on the 25th and see if it fits.

"high unionisation rates, Bretton Woods, restrictions upon capital movements, high marginal tax rates, fixed exchange rates or any other of the “liberal”...theories that are so often advanced"

This is an interesting sentence for the following reason: many of today's liberals would not advance those theories. I consider myself a liberal, and I don't believe that high unionization rates, restrictions upon capital movements, high marginal tax rates, or fixed exchange rates lead to growth.

In fact, today's liberals often even oppose some of those policies. Personally, I oppose restrictions on capital movements, fixed exchange rates, and marginal tax rates as high as those we had in the 1950s (I'm shocked by the 1950s top rate of 90%, not by one of 39.6%). Most Democrats I've met in the policy world agree with me on those issues. Remember it was Clinton who pushed through NAFTA and mostly right-wingers who are pushing for fixed exchange rates and the gold standard.

It really tells you how the world has changed. If you were to put a typical Democrat in a time machine back to the 1950s, he would be indistinguishable from an Eisenhower Republican.

More economists should be willing to advocate the small role of economic policy in long-run growth rates. Endogenous growth is a self-aggrandising dead end on the part of the profession.

I've felt the same way for years -- that the 1930s were a period in which productive potential increased extraordinarily. But I don't how to quantify this vague hunch largely derived from early Heinlein books.

Indy's link provides a remarkable summary of world history- for roughly 1000 years after the fall of the Roman Empire, the list is entirely dominated by Arabs and Chinese; then towards the end of the 16th Century it switches remarkably abruptly towards Europeans. Not news, of course, but interesting to see it reflected so starkly.

If you look at this graph of real GDP since 1871, it is hard to believe that government policies matter for economic growth, or at least that policies that do damage are changed so they do not effect long term growth rates.

I think this topic is a little too macro for my taste and expertise (but still excited to read the book).

Bear in mind that technologies which had been invented but not fully exploited in 1950 included electricity, the automobile, the airplane and the transistor. There's an awful lot of growth to be had getting those to full market penetration.

Real per capita GDP growth from 1946 to 1960 average about 1.5%, one of the weakest eras of growth in US history.

The 1950s saw three recessions as the Fed kept money tight to wring the post war -- including Korea -- inflation out of the system.

Why does everyone think of the 1950s as an era of economic boom?

Remember, JFK ran for president on a campaign of getting the economy moving again.

Am I the only one surprised that this is the one thread in which mulp has not commented?

Comments for this post are closed