THE GLORIOUS THIRTY

For the thirty-odd years that separated the end of the Second World War from the OPEC crisis, economic growth in Western Europe, the United States, and Canada was faster than it had ever been in history.

Between 1870 and 1929, GDP per person in the United States grew at a then unheard of rate of 1.76 percent per year. In the four years after 1929, GDP per person went down by a catastrophic 20 percent—it is not called the Great Depression for nothing—but it recovered fast enough. The average yearly growth rate from 1929 until 1950 was actually slightly higher than in the previous period. But between 1950 and 1973, the yearly growth rate went up to 2.5 percent.² There is more difference than there might appear to be between 1.76 percent and 2.5 percent. It would take forty years for GDP per head to double with a growth rate of 1.76 percent, but only twenty-eight years at 2.5 percent.

Europe had a more checkered history before 1945, partly because of its wars, but after 1945 things really exploded. When Esther was born, late in 1972, France had about four times the GDP per capita than when her mother, Violaine, was born in 1942.³ This was typical of the Western European experience. GDP per capita in Europe increased by 3.8 percent every year between 1950 and 1973.⁴ It’s not for nothing that the French call the thirty years after the war les Trente Glorieuses (“the Glorious Thirty”).

Economic growth was driven by a rapid expansion in the productivity of labor, or the output produced per hour worked. In the United States worker productivity grew at 2.82 percent per year, which meant it would double every twenty-five years.⁵ This rise in labor productivity was large enough to more than offset a decline in hours worked per head that was going on at the same time. During the second half of the century, the workweek went down by twenty hours in the US and in Europe.

What made workers more productive? In part, they were becoming more educated. The average person born in the 1880s studied only up to seventh grade, whereas the average person born in the 1980s had on average two years of college education.⁶ And they had more and better machines to work with. This was the age in which electricity and the internal combustion engine came to assume their central role.

Making somewhat heroic assumptions, it is possible to guesstimate the contribution of these two factors. Robert Gordon reckons that rising education explains about 14 percent of the increase in labor productivity over the period, and the capital investment that gave workers more and better machines to work with explains a further 19 percent of the increase.

The rest of the observed productivity improvement cannot be explained by changes in things economists can measure. To make ourselves feel better, economists have given it its own name: total factor productivity, or TFP. (The famous growth economist Robert Solow defined TFP to be “a measure of our ignorance.”) Growth in total factor productivity is what is left after we have accounted for everything we can measure. It captures the fact that workers with the same education level working with the same machines and inputs (what economists refer to as capital) produce more output today for each hour they work than they did last year. This makes sense. We constantly look for ways to use our existing resources more effectively. This reflects in part technological progress: computer chips become cheaper and faster, so one secretary can now do in a few hours the work a small team used to do; new alloys are invented; new varieties of wheat that grow faster and require less water are introduced. But total factor productivity also increases when we discover new ways to reduce waste or shrink the time either raw materials or workers are forced to stay idle.

What made the few decades before 1970 extraordinary compared to much of history is that total factor productivity increased particularly rapidly. In the United States, TFP growth was four times faster between 1920 and 1970 than between 1890 and 1920.⁷ In fact, it was this rather than growth in education or capital per worker that gave the later period its special mojo. TFP growth in Europe was even faster than in the United States, especially after the war, partly because Europe adopted innovations already developed in the US.⁸

Rapid growth was not only to be seen in national income statistics. By any measured outcome, quality of life was radically different by 1970 compared to what it was in 1920. The average person in the West ate better, had more heat in the winter and better cooling in the summer, consumed a larger variety of goods, and lived a longer and healthier life.⁹ With a shorter workweek and earlier retirement, life was no longer quite so dominated by the drudgery of daily labor. Child labor, omnipresent in the nineteenth century, had more or less disappeared in the West. There, at least, children could now enjoy their childhoods.