Year GNP* Growth RateThe unemployment figures in Romer (1986: 31) are as follows:
1890 $183.9 1.43%
1891 $189.9 3.26%
1892 $198.8 4.68%
1893 $198.7 -0.05%
1894 $192.9 -2.91%
1895 $215.5 11.7%
1896 $210.6 -2.27
1897 $227.8 8.16%
1898 $233.2 2.37%
1899 $260.3 11.6%
1900 $265.4 1.95%
* Billions of 1982 dollars
Average real GNP growth rate, 1890–1900: 3.62%.
(Balke and Gordon 1989: 84).
Year Unemployment RateI make the following points:
1892 3.72%
1893 8.09%
1894 12.33%
1895 11.11%
1896 11.96%
1897 12.43%
1898 11.62%
1899 8.66%
1900 5.00%
(1) There is a question here about whether movements in the labour force – especially involving women – were pro-cyclical or countercyclical in the 19th century. If it was countercyclical, this adds to unemployment, as women, young adults, and perhaps even children go out and look for employment when their husband/fathers/breadwinners lose employment (for relevant literature, see James and Thomas 2007; Weir 1986, 1992).BIBLIOGRAPHY
(2) There is also the issue of the effect of immigration on unemployment in these years. For example, America had immigration at this level in these years:Years Average Yearly TotalDid these people find work?
1881–1893 525,102
1894–1899 276,547
http://eh.net/encyclopedia/article/cohn.immigration.us
(3) Another issue here is that the US was a newly industrialising economy in the late 19th century and in this respect was very much like China in the last three decades. With a large reserve of urban labour, coming from the countryside and from overseas in the case of the US in the late 1800s, an industrialising economy requires very high growth rates to maintain employment levels. In the case of China, a GDP growth rate of less than 7–8% leads to serious unemployment:“‘China needs a growth rate of at least 7 per cent to avoid massive unemployment’ (www.economist.com, 10 November 2008). ‘The original estimated for China’s minimum rate of growth, which was made in the mid-1990s, was 7 per cent’ (The Economist, 15 November 2008, p. 88).In other words, a growth rate of less than 7% in China today is the functional equivalent of a recession for workers in terms of its effects on unemployment. I suspect a similar phenomenon was going on in 19th century America: just because there were positive growth rates does not mean unemployment was always falling. A research question I would propose is: what level of real GNP growth was necessary in 1890s America to mop up idle labour and reduce high unemployment? If there was a certain level of positive GNP growth required to prevent falling unemployment, a moderate recession (in technical terms) with a contraction of 2.96% in GNP may well have been a disaster for employment levels. In fact, it is possible that positive growth rates of 1%–4% may have been insufficient to maintain employment. All in all, this suggests to me that America’s actual GNP was well below its potential GNP in these years.
More recently somewhat higher figures for minimum GDP growth have been mentioned. ‘Most economists estimate that 8 per cent growth is needed to prevent urban unemployment from rising, which could trigger demonstrations and undermine the country’s social stability’ (www.iht.com, 20 October 2008; IHT, 21 October 2008, IHT, 21 October 2008, p. 11).
‘The government is expected to supply a fiscal stimulus to keep growth above 8 per cent’ (The Economist, 11 October 2008, p. 110). ‘China's own leaders believe they need growth of at least 8 per cent a year to avoid painful unemployment’ (The Economist, 15 November 2008, p. 14).” (Jeffries 2011: 10).
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.
James, J. A. and M. Thomas, 2007. “Romer Revisited: Long-Term Changes in the Cyclical Sensitivity of Unemployment,” Cliometrica 1.1: 19–44.
Jeffries, I. 2011. Political Developments in Contemporary China: A Guide, Routledge, Oxon, England and New York.
Romer, C. D. 1986. “Spurious Volatility in Historical Unemployment Data,” Journal of Political Economy 94: 1–37.
Weir, D. R. 1986. “The Reliability of Historical Macroeconomic Data for Comparing Cyclical Stability,” The Journal of Economic History 46.2: 353–365.
Weir, D. R. 1992. “A Century of U.S. Unemployment, 1890–1990: Revised Estimates and Evidence for Stabilization,” Research in Economic History 14: 301–346.
Without talking about the previous points that you did not bring up in the last thread.
ReplyDelete(From previous post)
"This is the point at which there's no need ot take you serously.
(1) straw man: I didn't say "everyone is doing poorly".
(2) the existence of labor unrest suggests some labour problems from some groups, which could include unemployment, nothing more, nothing less. "
You are trying to argue that unemployment ranged from 8-18% for a sustained period of time in the 1890s. I would consider that a labor problem for "everyone". Just like you said:
"(3) Then there is the extraordinary labour unrest in this decade. How do you account for that if unemployment was not a serious problem? "
My position has always been "(2) the existence of labor unrest suggests some labour problems from some groups, which could include unemployment, nothing more, nothing less. "
"(1) There is a question here about whether movements in the labour force – especially involving women – were pro-cyclical or countercyclical in the 19th century. If it was countercyclical, this adds to unemployment, as women, young adults, and perhaps even children go out and look for employment when their husband/fathers/breadwinners lose employment (for relevant literature, see James and Thomas 2007; Weir 1986, 1992).
(2) There is also the issue of the effect of immigration on unemployment in these years. For example, America had immigration at this level in these years:
Years Average Yearly Total
1881–1893 525,102
1894–1899 276,547"
If the growth rates were what was suggested, then yes. Remember, theoretically, full employment could coincide with a shrinking economy. All that it requires is wages to be very very very flexible. I'm not saying this occurred, but give the wage flexibility back then, especially due to those "scab immigrants" and "children laborers" etc (according to the Unions), but if those people needed to find work, with the Balke and Gordon estimates I think they could.
I'm not saying there was no rise in unemployment. I'm just saying it rapidly subsided during the expansions, and was less than what Romer and Lebergott suggest.
"(3) Another issue here is that the US was a newly industrialising economy in the late 19th century and in this respect was very much like China in the last three decades. With a large reserve of urban labour, coming from the countryside and from overseas in the case of the US in the late 1800s, an industrialising economy requires very high growth rates to maintain employment levels. In the case of China, a GDP growth rate of less than 7–8% leads to serious unemployment:
ReplyDeleteIn other words, a growth rate of less than 7% in China today is the functional equivalent of a recession for workers in terms of its effects on unemployment. I suspect a similar phenomenon was going on in 19th century America: just because there were positive growth rates does not mean unemployment was always falling. A research question I would propose is: what level of real GNP growth was necessary in 1890s America to mop up idle labour and reduce high unemployment? If there was a certain level of positive GNP growth required to prevent falling unemployment, a moderate recession (in technical terms) with a contraction of 2.96% in GNP may well have been a disaster for employment levels. In fact, it is possible that positive growth rates of 1%–4% may have been insufficient to maintain employment. All in all, this suggests to me that America’s actual GNP was well below its potential GNP in these years."
1)Again, much of what I said about China would prove applicable to many of the countries rapidly industrializing for the first time (or since prior to WWI) in the post war era. The countries that were the farthest behind had the highest growth rates.
2)There are some major differences between China and the United States. Firstly, the United States since its founding was always viewed as a very attractive place to live, especially for colonists, mainly because of its vast resource endowments. For most of the 1800s, the majority of the population worked as farmers, and lived better than European farmers. This started to drastically change in the Second Industrial Revolution (circa 1870) as Americans went to work in the cities. But the difference is that these people worked on farms in a system of private enterprise and generally lived a good life, whereas many of the Chinese who were farmers had very poor diets throughout history (See Allen, The British Industrial Revolution in Global Perspective, he talks about the Chinese food basket and how it was much less than the British/American) and were forcibly displaced and required to work farming certain things under the Maoist regime. Those people wanted to get off the rice paddies as fast as they could once the government let them in the late 70s, and China was faced with a massive influx of labor from the countryside. Much more "STOP-GO" then America's gradual but steady "industrialization"
China in the 1970s was horribly backwards compared to what it could attain if it operated in a market economy. The situation is not analogous to America, which was always relatively prosperous and farmers left the fields for the cities voluntarily. In fact America was so prosperous it attracted a vast immigrant population force from countries that had not industrialized (including China). America never had a massive swath of unemployed laboerers during "normal growth".
If potential GDP was much higher than what was attained in the 1890s (average 4%), then potential GDP had to have been much higher throughout all of the late 1800s and then sustained high unemployment must have occurred in the Second Industrial Revolution. Like I said, the U.S economy wasn't experiencing strong growth 1870s/1880s and then in the 1890s continued such a pattern while dumping about a 10-15% of its labor force as it hired robots.
"Again, much of what I said about China would prove applicable to many of the countries rapidly industrializing for the first time (or since prior to WWI) in the post war era. The countries that were the farthest behind had the highest growth rates."
ReplyDeleteThe OECD nations in 1945-1974 were not "rapidly industrializing for the first time".
Some of course expericenced a greater degree of industrialization, but hardly "rapidly industrializing for the first time".
The OECD nations in 1945-1974 were not "rapidly industrializing for the first time".
ReplyDeleteHe said WW1, not WW2, and he was speaking of those countries rapidly industrializing post WW1, which exist, not that all countries in the OECD were rapidly industrializing for the first time.