This book’s main thesis is bold and provocative. The book develops and extends the idea originally published in Field’s (2003) article that “the years 1929–1941 were, in the aggregate, the most technologically progressive of any comparable period in U.S. economic history” (Field 2003, emphasis in the original).
The claim is particularly powerful given the simplicity of the arithmetic that supports it: during the 1930s, nonfarm output increased around 30–40%. Yet total hours remained quite stable, as did the private physical capital stock. Hence, most output growth was accounted for by an unparalleled increase in total factor productivity (TFP), or the efficiency with which the economy transforms factors of production into output.
This is the starting point, in itself an important observation and one conveyed by walking the readers (even noneconomists) through the technical perils of ‘‘growth accounting.” And it raises two key questions. First, why did TFP increase so much in the 1930s? Second, what does this imply for other conventional stories about US growth?
Regarding the first question, Field’s posits three main reasons:
1). A high growth of TFP in manufacturing, which constituted a growing share of the economy. The roaring twenties are thought of as the key years of the transformation of industry with a revolution in organization and technology, and they were. The thirties, however, continued to show very high annual rates (near 3%) of manufacturing TFP growth. This was partly due to the increase in private Research and Development (R&D) spending and employment, but also to the fact that the innovations of the twenties were still paying off even if at lower rates. [End Page 171]
2). Public infrastructure spending, and specifically the countrywide road network which Field argues had important spillovers to trucking and also to railroads, was essential for an acceleration in TFP growth within transport and public utilities (growing at 4.5% per year!), as well as in wholesale and retail distribution (growing at 2.33% per year, but constituting a larger share of the economy).
3). The idea that the Depression itself may have caused innovations to deal with adversity. This “silver lining” of the Depression was not present across the board, but Field claims that at least in the railroad system, hardly hit by the downturn, productivity grew faster than in the 1920s as “railroad organizations changed their operating procedures, introduced new technologies, and reduced their trackage, rolling stock, and employees, in most cases dramatically” (p. 311).
On the second question, the first part (and core) of the book offers a “new growth narrative.” Placing the Depression years in such a prominent position in terms of productivity growth leads to a revision of several of the accepted interpretations about each of the key periods in US growth. For instance, the increase in productivity in the 1990s with information technologies, while first order, is not comparable in scope to what happened in the 1930s. Another key point is that it was not, as many argue, the Second World War that transformed the US economy. Field argues that the big progress in technology occurred well before the USA got involved in the war. And, more importantly, that unlike the advances of the 1920s, the expansion of output caused by the war was very unbalanced, not driven mainly by innovation, and the technological improvements were narrowly targeted at the war effort.
This new interpretation implies that, rather than being a period of technological stagnation that finally came to a full end with the Second World War, the 1920s prepared the ground for US success during the war years and output growth in the subsequent golden age. Overall, Field’s reexamination is very convincing as far as one finds the TFP calculations credible, which he carefully defends. But some claims that should ultimately rely on much more detailed microanalysis, like that the war innovations had few significant spillovers later on, are much harder to establish and, to be fair, possibly beyond the scope of the book...