A commentator here says that “from 1869 to 1879, the US economy grew at a rate of 6.8% for real GDP and 4.5% for real GDP per capita. That far exceeds the growth in real GDP post WW2.”
The book cited for this data is M. Friedman and A. Schwartz, A Monetary History of the United States (Princeton, 1963), though I rather suspect it is taken via Rothbard (2002: 154), who cites Friedman and Schwartz and gives these figures.
Now I don’t have the Friedman and Schwartz book at hand (and if anyone wants to save me time by looking it up, I would be grateful), and don’t know what estimates Friedman and Schwartz were using. The standard estimates for pre-1914 real US GNP are based on the work of Simon S. Kuznets (1938, 1941, 1946, 1961), whose work was developed by Gallman (1966) and Kendrick (1961). The resulting data is normally called the Kuznets-Kendrick series or Gallman-Kuznets-Kendrick series. Presumably Friedman and Schwartz were using that, or some version of it.
But the Kuznets-Kendrick series has been challenged by modern scholars, and the best place to start is with the two widely-cited estimates of 19th century GNP by Romer (1989) and Balke and Gordon (1989).
For the period 1869 to 1879, we have these estimates in Romer (1989: 22; I have added the annual growth rates by my own calculation):
Year GNP* Growth RateNext let us look at the estimates of Balke and Gordon (1989: 84; the annual growth rates are my own calculation):
1870 76.464 1.13%
1871 76.952 0.638%
1872 89.605 16.4%
1873 94.863 5.86%
1874 96.205 1.414%
1875 97.684 1.53%
1876 104.628 7.10%
1877 110.797 5.89%
1878 118.906 7.31%
1879 127.675 7.37%
* Billions of 1982 dollars
Average real GNP growth rate, 1870–1879: 5.46%.
Year GNP* Growth RateWhat conclusions can we draw from the data? We can say that
1870 84.2 7.67%
1871 88.1 4.63%
1872 91.7 4.08%
1873 96.3 5.01%
1874 95.7 -0.62%
1875 100.7 5.22%
1876 101.9 1.19%
1877 105.2 3.23%
1878 109.6 4.18%
1879 123.1 12.31%
* Billions of 1982 dollars
Average real GNP growth rate, 1870–1879: 4.69%.
(Balke and Gordon 1989: 84).
(1) There was no modern data collection for GNP growth in the 19th century that is comparable to modern calculation of GNP. We can only ever have estimates, whose reliability is based on the soundness of methodology employed and surviving output data used.Now how does this compare with, say, the figures for US real GNP between 1960–1969 during the Golden Age of Capitalism? We can cite the figures here:
(2) It is astonishing how discrepant the growth estimates are. In most years there are very significant differences. E.g., in 1879 Romer has a real GNP growth rate of 7.37%, yet Balke and Gordon’s estimate is 12.31%.
(3) It is therefore clear that we will never have completely reliable figures, and that being so one should be wary of using this sort of data, except with the proviso that it is an estimate only, and we should compare the range of estimates by different scholars.
(4) the assertion that “from 1869 to 1879, the US economy grew at a rate of 6.8% for real GDP” is not supported by Romer’s data. Since I do not have figures for 1868, I cannot calculate the growth rate in 1869, but average annual real GNP growth was 5.46% between 1870–1879.
(5) By the estimates of Balke and Gordon average real GNP was 4.69% for 1870–1879, lower than the 6.8% figure allegedly cited by Friedman and Schwartz.
Year GNP* Growth RateSo in fact the average real GDP growth rate for this period from 1960–1969 is similar to that of Balke and Gordon.
1960 2,830,900 2.47%
1961 2,896,900 2.33%
1962 3,072,400 6.05%
1963 3,206,700 4.37%
1964 3,392,300 5.78%
1965 3,610,100 6.42%
1966 3,845,300 6.51%
1967 3,942,500 2.52%
1968 4,133,400 4.84%
1969 4,261,800 3.10%
* Millions of 2005 dollars.
Average real GDP growth rate, 1960–1969: 4.43%.
This is of course only a sample of 10 years from the Golden Age of Capitalism. I will calculate the average for the 1945–1973 in another post and compare this with figures from a comparable period in the 19th century.
But there are a number of considerations to be taken into account with regard to US real GNP growth in the 19th century:
(1) the US in the late 19th century was a newly industrialising nation with growth rates higher than normal for mature Western industrialised nations like the UK in that period. In this respect, it was somewhat like China today with its very high growth rates by the standards of Western Europe or the US.Finally, if we want much better data for comparative purposes, it is far better to look at the average real GDP growth rates estimates across the whole OECD:
(2) The US had massive unused resources waiting to be exploited and mass immigration in the late 19th century, raising its population and capacity to attain economic growth.
(5) The US average real GNP growth for 1946–1973 would be a far better measure to compare with growth rates from the late 19th century (say, from 1870-1897). Balke and Gordon have estimated that for the 1869–1890 period the average US real GNP growth was 4.16% (Maddison 1995: 137). I have yet to do proper calculations using the figures of Balke and Gordon for 1870-1897, but even if it was higher than the average US real GNP growth rate for 1945-1973, factors (1) and (2) would explain this.
1700–1820 – 0.2%Of all the periods, the era 1950–1973 – the era of classic Keynesianism – had the highest estimates. Even with many Western nations experiencing industrialisation in the 19th century, they had superior real GDP growth rates from 1950–1973. As stated above, Balke and Gordon estimate that for 1869–1890 average annual US real GNP growth was 4.16% (Maddison 1995: 137), which is lower than the OECD average for the 1950–1973 period. That is to say, the mature capitalist economies under Keynesian macroeconomic management in 1946-1973 attained better average real GNP growth than the average for their industrialising phase and for that of the US too: that is quite an insight.
1820–1913 – 1.2%
1919–1940 – 1.9%
1950–1973 – 4.9%
1973–1990 – 2.5%
(Davidson 1999: 22).
N.B.: Anyone is welcome to check my calculations. Please report any errors, and I will correct them.
Balke, N. S., and R. J. Gordon, 1989. “The Estimation of Prewar Gross National Product: Methodology and New Evidence,” Journal of Political Economy 97.1: 38–92.
Davidson, P. 1999. “Global Employment and Open Economy Macroeconomics,” in J. Deprez and J. T. Harvey (eds), Foundations of International Economics: Post-Keynesian Perspectives, Routledge, London and New York. 9–34.
Friedman, M. and A. J. Schwartz, 1963. A Monetary History of the United States, 1867–1960, Princeton University Press, Princeton.
Gallman, R. E. 1966. “Gross National Product in the United States, 1834–1909,” in Output, Employment, and Productivity in the United States after 1800 (Studies in Income and Wealth, vol. 30), Columbia University Press, New York.
Glasner, D. and T. F. Cooley (eds). 1997. Business Cycles and Depressions: An Encyclopedia, Garland Pub., New York.
Kendrick, J. W. 1961. Productivity Trends in the United States, Princeton University Press, Princeton.
Kuznets, S. S. 1938. Commodity Flow and Capital Formation, National Bureau of Economic Research, New York.
Kuznets, S. S. 1941. National Income and Its Composition, 1919–1938 (2 vols), National Bureau of Economic Research, New York.
Kuznets, S. S. 1946. National Product since 1869, National Bureau of Economic Research, New York.
Kuznets, S. S. 1961. Capital in the American Economy: Its Formation and Financing, Princeton University Press, Princeton, N.J.
Maddison, A. 1995. Monitoring the World Economy, 1820–1992, Development Centre of the Organisation for Economic Co-operation and Development, Paris.
Romer, C. D. 1989. “The Prewar Business Cycle Reconsidered: New Estimates of Gross National Product, 1869–1908,”Journal of Political Economy 97.1: 1–37.
Rothbard, M. N. 2002. A History of Money and Banking in the United States: The Colonial Era to World War II, Ludwig von Mises Institute, Auburn, Ala.