Devon Bull

ECON 765

Professor Rosenbloom

Examining Economic Growth between the Great Depression and WWII

The Great Depression is considered to be the worst period in U.S. economic history.

Consequently, it is commonly thought that little scientific progress and with it technological

developments were made in this period. However, using Solo’s model and other historical data

researcher Alexander Field hypothesizes that the period from 1929-1941 was the most

technologically progressive period in U.S. history. Despite huge economic setbacks Field

believes much of the economic boom during the Second World War has its roots in the Great

Depression. Field examines the roles increased technological and organizational advances,

critical infrastructure creation, and the role of R&D spending in this period. Field tests his

assumption by comparing two radically different periods of extraordinary economic growth in

the twentieth century to determine what was responsible for these advances.

To start Field examines multifactor productivity growth which appears to have peaked in

the second quarter of the twentieth century (pg. 1399). This growth seems to start in 1929 and

work by a variety of researchers such as Gordon suggest it slowed after the Second World War.

Field then argues that this growth is mainly due to technological advancement and uses Solow’s

work to explain the TFP growth rates of other time periods relative to the Great Depression.

Specifically Field believes the period from 1929-1941 is critical to understanding long-term

technical change in the U.S. up to the present day (pg. 1400). Primarily he is concerned with

whether these “extraordinarily high rates of MFP” are attributable to the war or prior technical

advances (pg. 1400).

In order to answer these question of what caused this jump in MFP growth he must

separate these timeframes into roughly comparable periods. To do this he must select years in

which the economy is at similar stages of the business cycle (pg. 1402). This is not a simple task

and we will examine Field’s decisions in depth later on. Field relies on Kendrick’s data for his

examination of the periods. Field analyzes and explains his decisions as he makes slight

modifications to Kendrick’s data to get what he believes is a “more accurate representation” of

the period (pg. 1403). He then arrives at the two periods of 1929-1941 and 1941-1948. The

endpoint of 1941 is chosen over Kendrick’s 1937 because Field argues unemployment was

relatively more similar to 1929 than 1937 was. Field also states notes that in 1941 military

spending and production hadn’t increased enough to make a large difference in our analysis, a

point we will revisit later. Using these timeframes Field finds multifactor productivity growth of

the private domestic economy to be 2.27% from 1929-1941 and 1.51%, using Kendrick’s data.

Clearly then there appears to be critical differences between the periods and Field then goes on

to compare and contrast them for further analysis.

During the Great Depression period of 1929-1941 Field finds evidence of rapid

technological and organizational advances in the United States. Breakthroughs and new

products/technologies occurred in a wide variety of fields. Field lists breakthroughs in fields

such as: aeronautics, transportation, communication, chemical engineering and many others.

All these breakthroughs took place before the war (pg. 1401). Field also notes that “during the

1930’s, industry R&D expenditures more than doubled” (pg. 1406). The amount of employed

research scientists grew by 72.9% from 1929-1933 and almost tripled during 1933-1940 (pg.

1406). Furthermore, this time period saw large amounts of critical infrastructure development

creation such as highways, roads, residential housing, and wholesale/retail distribution

facilities. The combined effects of technological innovations and government infrastructure

development (which literally paved the way for long-term growth) arguably led to the

incredible growth of this period.

The alternative period of 1941-1948 saw a significant increase in total output,

specifically the war period of 1942-1945. There were also a number of advances in things like

radar, atomic energy, metal working, etc. Certain sectors saw increases in labor productivity of

160% during the war (pg. 1402). This explosive growth isn’t the average across all industries,

other sectors saw more modest increases of 25% (pg. 1401). Field also states that these

increases in productivity could be explained by the movement of workers from fields with

relatively low labor productivity to ones with significantly higher labor productivity such as

airframe construction. Thus, this shift could account for the increased output during the war

but this growth is unfeasible after the war as military demand for these products dropped

substantially. Field also notes: “there is relatively limited evidence of beneficial feedback from

wartime production to civilian activity post WW2” (pg. 1402). Ultimately he finds the war hurt

productivity growth by draining skilled workers and even the increased labor productivity there

was little net economic gain during the war. In sum, Field argues the war was detrimental the

high growth rate the U.S. experienced from 1929-1941.

There are several notable things to point out in Field’s work. Firstly, his choice of the

year 1941 as the endpoint instead of Kendrick’s choice of 1937. As Field notes, U.S. military

spending had increased by a total of 5% of the U.S. GDP in 1941. We could use this to argue

that this increase in military spending is responsible for the fall in unemployment that makes

1941 a “better comparison” to 1929. However, this is a spurious comparison in my mind since

we want to analyze the economy before the economic impact of the war and then compare the

two. If we already accept that military spending artificially lowered unemployment then we

won’t have an accurate representation of what actually occurred. I will admit I’m not sure what

the correct year to use is, that would require multiple calculations, but I would argue that it is

most likely to be found between Kendrick’s choice of 1937 and Field’s choice of 1941. While

you may not have the most comparable business cycles (at least I’m assuming that without

actually knowing the data) it could theoretically still be a more accurate representation than

either choice.

In addition to the data interpretation we also have to consider how Field contrasts the

two periods in his individual analyses. He uses arguments to explain the growth of the 1929-

1941 period such as the increase in R&D researchers and their employment numbers. How

much of an impact did hiring more R&D researchers have on the number of scientific

breakthroughs? I would argue that the sheer amount of R&D researchers has a limited

correlation with the actual number of technological breakthroughs.

Field’s work introduced a number of ideas and facts that occurred during a time that I

had formerly associated with little growth and development. His findings raise a number of

questions related to the role of technological advances in fueling economic growth. His work

also highlights the role of the private and public sectors in driving this growth. While the

findings are arguable imperfect due to his data choices, I believe it does give us great insights

into this historical period. We can all learn something from his research.