A Great Leap Forward: 1930s Depression and U.S. Economic Growth

This book makes a surprising claim. In A Great Leap Forward, economic historian Alexander J. Field challenges the notion that the Second World War single-handedly saved the U.S. economy from the Great Depression. In fact, the recovery from the collapse of 1929 to 1932 was very rapid and generated the second fastest increase in economic productivity of any decade in American history.  Fields argues that it was the spread of innovations in technology and infrastructure begun during the 1920s (the decade with the highest productivity gains ever) that set the stage for the unprecedented growth during and after the war.

The technological advances of the Fordist era revolutionized American industry and life in the interwar period.  This was the epoch that brought into being the assembly line, electrification, internal combustion engines, mass production of automobiles, single-wing aircraft, radio broadcasting and much more.  Along with the new machine age came major advances in corporate business organization and management and the laying down of essential infrastructure of highways, power grids and waterworks.  Major advances in structural engineering paved the way for massive public works like Boulder Dam and the Golden Gate Bridge.

As the economy went into its tailspin of 1929-33, old factories were shuttered by the thousands and as it recovered the new production methods were triumphant and spread to every corner of the economy.  Field lays particular stress on the expanding transportation network of trucking for more efficient distribution of goods during the 1930s (accompanied by a radical pruning of the railway network).  It is often forgotten that the biggest single public works program of the New Deal was hundreds of thousands of miles highway and road construction across the country.   According to Field, FDR’s New Deal and Eisenhower’s Interstate Highway Act benefited far more from underlying advances in mass production, engineering and concrete than most historians recognize.

Field bases his argument on extensive reworking of basic data on productivity and economic cycles, showing that expansion during the 1930s has been systematically underestimated by using the census brackets of 1930 to 1940 rather than the correct years in the periodicity of business cycles (peak-to-peak, 1929 to 1942).  Conversely, he shows that the Second World War did not improve US productivity; it merely expanded upon a mass industrial base and transportation infrastructure already in place.  Looking back at earlier eras, Field further argues that the Civil War has been given too much credit for the economic expansion of its time, which was already well underway in the antebellem upswing of 1845-55 and continued to generate impressive productivity gains after the war.

A Great Leap Forward is a very significant contribution to American economic history. Moreover, Alexander Field has provided a radically different lens through which to look at the success of New Deal era, which is too often interpreted in purely political and social terms – the economic story being taken as given.  That is, the Great Crash of 1929 brought on the Great Depression, World War II pulled the nation out the mire, and in between FDR’s attempt to balance the budget in 1937 brought on a secondary plunge into recession.  Politically, Hoover failed to respond adequately to mass misery from unemployment and was thrown out of office to be replaced by Franklin Roosevelt in 1932; FDR and his team initiated a bunch of programs they called ‘The New Deal’ that stopped the bleeding and helped distressed American workers, but never lowered unemployment below 10% nor brought full recovery.

But this standard story is almost wholly false.  The American economy was already the greatest powerhouse in the world by the end of the 1920s, before it was brought down by a combination of a typical decennial downturn and an epochal financial collapse. The financial implosion was arrested by FDR’s banking and monetary reforms in 1933 and a dramatic recovery ensued in which the economy grew by almost double-digit rates 1933 to 1936, whereupon it hit another cyclic downturn made worse by budget balancing and monetary shrinkage by the Federal Reserve Bank.  After a brief downturn in 1937, however, it accelerated again through 1942, when wartime mobilization took over.  The US economy had already equaled the output peak of 1929 by the end of 1936 and was back on its long-term growth trajectory by the end of 1941, when the US entered the war. True, the war absorbed the last of the unused labor force, but the standard figure of 15% unemployed in 1940 (from Stanley Lebergott) is 5% too high because it fails to include the millions employed by New Deal make-work programs.

The exact impact of the New Deal and its deficit spending, employment programs, infrastructure investment and social security may never be sorted out from the effects of the business cycle, which cleared out most of the obsolete plant and equipment and put in place the new Fordist industrial regime.  In personal correspondence I have debated this with Alex Field, who gives less credit to FDR & Co. than I do.  But the conventional wisdom that the 1930s was merely lost decade of stagnation is utterly false, on that we agree.  Unfortunately, most liberal supporters of Roosevelt’s policies regularly repeat this canard, while right-wingers like Amity Schlaes howl their version of the New Deal’s ‘failure’ across the desiccated plains of the neo-liberal political landscape of today.  Thanks to the work of economic historians like Alexander Field, Christine Romer, and Michael Darby, we now know that the New Deal was a success in economic as well as social terms and aided the country in its climb back to prosperity.

Reviewed by Richard Walker

Richard Walker is the director of the Living New Deal.
By Alexander J. Field | New Haven: Yale University Press | 2011

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