As we enter a period of suboptimal economic performance we should recall that this has happened before, in the 1930's and in the 1970's. Below the fold is a table providing growth rates in GDP divided by total employment or GDP/worker, which can be considered as a crude definition of productivity.
The dates chosen correspond to business cycle peaks. This is necessary to remove the effect of the business cycle in order to see the underlying or "trend" growth. Shown in bold are the two "bad decades" for growth.
Period Years Covered GDP/wrkr Growth
1890's 1890-1899 2.5%
1900's 1899-1909 0.9%
1910's 1909-1918 2.0%
1920's 1918-1929 1.1%
1930's 1929-1937 0.7%
1940's 1937-1949 3.2%
1950's 1949-1957 2.6%
1950's 1957-1960 3.1%
1960's 1960-1969 2.5%
1970's 1969-1981 0.8%
1980's 1981-1990 1.4%
1990's 1990-2001 1.6%
2000's 2001-2008 1.6%
Prior to the New Deal and after 1981, conservative economics ruled.
The Depression after the 1929 was not unreasonably blamed on conservative (classical, pro-capital) economic policy that preceded it. Similarly the bad times of the 1970's were blamed on the liberal (Keynesian, pro-labor) economic policy that preceded it. Below I summarize growth over these two periods by first giving the growth before the bad decade that followed and then giving the overall growth including the bad decade.
- Classical/pro-capital era: 1890-1937
1890-1929 1.6%
1890-1937 1.4%
- Keynesian/pro-labor era: 1937-1981
1937-1969 2.9%
1937-1981 2.3%
Since 1981 we have been in a new neoclassical/pro-capital era:
1981-2008 1.5%
Note that growth during this era is practically the same as it was in the earlier conservative era. It does not seem to be the case that growth is slower today than it was in some "golden era" of the past. It is just about as good as it was in the 1890's through 1920's period, often considered the golden age of capitalism.
Compare these growth rates with the 2.9% growth that was achieved under liberal management. Even when you factor in the 1970's stagflation, the overall growth rate over the 1937-1981 period is much better than the 1.6% seen during the heyday of capitalism before the Depression.
In fact, even if you place both the Depression and the 1970's into the liberal period you get
1929-1981 2.1%
Over this 52-year period, liberal economic management toasted the record obtain in either the 39 years of the 1890-1929 capitalist heyday (1.6%) or the Reagan era 1981-2008 (1.5%).
The 0.5% growth advantage of 52 years of liberal economic management over the 66 years of conservative management both before and after translates to a 30% gain for our economy because of liberal versus conservative management. Our parents and grandparents got these benefits and that is why American became a middle class nation in the 1950's.
Had liberal management continued our economy would be 14% richer than it is. Perhaps we would still be a middle class nation.
For years it was taken as an article of faith that Republicans/conservatives were better at fiscal management than Democrats/liberals. This idea was maintained despite the deficits of Nixon, Ford Reagan and Bush and the surplus of Clinton. It has only been since Bush II converted the Clinton surplus into a deficit that it has become clear to most Americans that Republicans = deficits.
For years it was taken as an article of faith that Republicans/conservatives were better at hard-headed management than Democrats/liberals. After the debacle of the Iraq occupation and Katrina, it has become clear that Republicans cannot manage their way our of a paper bag. The stupidity of corporate management, which has been made manifest to an entire generation of professionals and middle managers has also gone a long way to disabuse the public of any notion of Republican or conservative managerial competence.
For years it was taken as an article of faith that Republicans/conservatives were better at economic management than Democrats/liberals. As the table above shows there was never any reason to believe this, but then there was never any reason to believe either of the other two claims.
Now as we head into the economic troubles of the 2010's, when peak oil, peak credit and the regime shift in interest rates (you may be more familiar with the movie version, Helicopter Ben Drops a Load) are all scheduled to happen, what will Americans come to believe about the capability of conservative notions to guide this nation?