George Terborgh’s *The Bogey of Economic Maturity*

Since the idea of secular stagnation has reemerged in economic discourse, I thought I would go back and reread this 1945 critique of Alvin Hansen.  It is uneven, overly polemic, but definitely interesting in places.  The author argues for instance that rates of population growth simply don’t predict spurts of economic growth very well.  It is also interesting to see how much commentators of that time blurred together demand-side and supply-side approaches to stagnation.  Is that insight or misunderstanding?  Perhaps we still don’t know.  Here is one excerpt from Terborgh:

There is thus no evidence that investment in major innovations as a class, including the young and old ones alike, has had any higher growth rate than investment in minor innovations as a class.  There is no evidence that one “great new industry” is any more dynamic in its impact on capital formation than ten small new industries.  The important thing is the total flow of technological development, not its degree of concentration.

And I enjoyed this rhetoric:

Capital formation is not a polite game in which replacements meekly and decorously await, like dutiful heirs, the natural death of existing assets.  It is a ruthless and cutthroat struggle in which new capital goods rob the function of the old.

You can buy the book here, and here is a Questia link to the text.  And here is his 1966 book The Automation Hysteria.  It seems he had the temperament of a debunker.  I don’t know much about Terborgh, but for a while he was a private sector economist and also a research economist at the Fed.


Actually, that prize goes to Ricardo and Marx who both foresaw the inherent tendency toward a fall in the rate of profit in the 19th century.

This is what Marx says of Ricardo's observation:

"The rate of profit is the motive power of capitalist production. Things are produced only so long as they can be produced with a profit. Hence the concern of the English economists over the decline of the rate of profit. The fact that the bare possibility of this happening should worry Ricardo, shows his profound understanding of the conditions of capitalist production. It is that which is held against him, it is his unconcern about "human beings," and his having an eye solely for the development of the productive forces, whatever the cost in human beings and capital-values — it is precisely that which is the important thing about him. Development of the productive forces of social labour is the historical task and justification of capital. This is just the way in which it unconsciously creates the material requirements of a higher mode of production. What worries Ricardo is the fact that the rate of profit, the stimulating principle of capitalist production, the fundamental premise and driving force of accumulation, should be endangered by the development of production itself. And here the quantitative proportion means everything. There is, indeed, something deeper behind it, of which he is only vaguely aware. It comes to the surface here in a purely economic way — i.e., from the bourgeois point of view, within the limitations of capitalist understanding, from the standpoint of capitalist production itself — that it has its barrier, that it is relative, that it is not an absolute, but only a historical mode of production corresponding to a definite limited epoch in the development of the material requirements of production."

That is terribly clumsy English. Did Marx think in German?

He wrote in German...

Is his German just as clumsy?

Nice misdirection.

"It seems that he had the temperament of a debunker." Nice turn of phrase. I guess a debunker is a skeptic who takes action.

'It is a ruthless and cutthroat struggle in which new capital goods rob the function of the old.'

So, how is land treated in this framework, particularly farmland? Because till now, land is something where new is generally not robbing the function of the old. People in Germany or Ireland or Italy did not stop farming merely because America, Australian, and Argentinean land became available.

How much of the Northeast US is under cultivation? It was once, but better land made the small farms uncompetitive.

That is an interesting question - do you think the land that one can buy Northern Virginia costs more or less than when it was played out farmland? In case the answer may not be immediately clear, the answer is much, much more - farmland is generally the cheapest form of productive land, not the most expensive, at least on a square foot/square meter basis.

So much so that some people gain significant wealth by being able to change farmland into residentially zoned property, and then sell it - like one of GMU's most prominent benefactors. (For additional family profit, have a brother own a construction company, particularly one that specializes in things like sewage connections for suburban subdivisions.)

If I may be allowed to refer my own thoughts on the topic of Stagnation:

i.e. I agree that past innovations were not exactly low hanging fruits as far as our forefathers were concerned... I think that relates nicely to his point about 'big new industry' versus 'small' ones...

Basically a per capita GDP graph still look like a line with a constant growth... even post 70s.

When he published his book on stagnation he worked for the Machinery and Allied Products Institute.

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