A Great Leap Forward: 1930s Depression and U.S. Economic Growth by Alexander J. Field (review)

The findings of Alexander J. Field’s provocative study of the changing patterns of U.S. labor productivity have great relevance to historians of science and technology, particularly those interested in industrial and service sector innovation. Field, an econometrician, revisits and extends to the contemporary era the earlier work of Robert Solow, Moses Abramovitz, Paul David, and others who analyzed productivity trends through the first three quarters of the twentieth century. Like his scholarly antecedents, Field concentrates primarily on evaluating Total Factor Productivity (TFP), a metric that estimates how much of productivity change is attributable to two factors: the quality of labor and capital inputs, and the extension of knowledge in technology and management. Although not measurable directly, TFP is a residual that represents the difference between the change in real output during a period from the change in real labor and capital inputs.

A principal finding of Field’s study pertains to the Depression, when the U.S. economy experienced a massive cyclical downturn in labor and financial markets but also registered some of the highest annual rates of TFP growth (average 2.31) during the twentieth century. Several factors conjoined to facilitate high TFP growth. First, manufacturing enterprises that had benefited from strong research and development expansion during the 1920s continued to sustain these capabilities at high levels in the following decade. The employment of scientific personnel and engineers in this sector, for example, actually increased fourfold from 6,274 in 1927 to 27,777 in 1940. Second, new modes of management, such as statistical quality control, developed late in the 1920s and augmented operating efficiency in the 1930s. Third, spillovers from extensive public sector–financed road building created opportunities for innovation in transportation, wholesale and retail trade, communications, and electrical power. Highway and road building, for example, made possible the establishment of more efficient linkages and operating routines between railroads and trucking organizations in the distribution of goods. The introduction of pneumatic tires facilitated more efficient truck utilization. The displacement of steam as a factory energy source by small electric motors and improved incandescent and later fluorescent lighting benefited wholesale and retail distribution by allowing the design of more efficient warehouses and stores. The telephone industry enhanced efficiency by exploiting new technologies for message switching, signal transmission, and message load.

Field further notes that the strong Depression-era TFP growth carried over to influence trends during World War II and the postwar era. Although the Depression gains contributed positively to the war effort, the benefits remained limited to a relatively few defense industries. More significant, however, was that the strong foundations laid down during the 1930s helped to sustain a much broader base take-off in TFP and other productivity metrics well into the 1970s.

Field’s analytical compass also includes the latter half of the nineteenth century, for which the earlier data aggregation practices for calculating TFP had provided a misleading picture of long-term growth patterns, a picture that was disturbingly inconsistent with the findings of historians of business and technology. Previous estimates placed the long-term annual rate at only .36 percent by averaging performance from 1855 to 1892. However, Field points out that the inclusion of the devastating impact of the Civil War and its aftermath on American society seriously distorted those estimates. A recalibration limited to the more tranquil period 1869/78–92 (the base year adjusted to accommodate the author’s analytical methodology) yielded a more robust 1.27 percent average annual rate of growth for TFP for the private domestic economy. The latter results are more consistent with Alfred D. Chandler’s analysis of the rise of the modern business enterprise, a process that began with the development of new management techniques—first in the railroads and later in manufacturing oligopolies that exploited economies of scale and scope. Similarly, the revised TFP is also more consistent with...