World Economy – Rise of the United States
British Failure or American Success?
Best e.g. of late 19th C success was the USA
• First to overtake UK in output per head
• First to overtake Britain in labour productivity
• First to overtake UK in world market shares
In what ways was the USA exceptional?
• Accumulated capital with ‘take-off’ investment rates
• Developed modern production and sales techniques
• Shifted towards human capital production
Sources of US growth
• Early 19th C growth due to longer working hours
• Late 19th C saw a switch from greater working hours to labour productivity which led to
growth.
• TFP growth between 0.2-0.4% in 19th C – not exceptional
• 20th C labour productivity due to TFP – human K and R&B matter eventually!
Manufacturing Productivity Hypothesis
Conventional literature equates USA success with manufacturing:
• USA K deepening greater than UK’s
• Investment in large scale factories and machinery exceeded UK levels
• Extensive K intensive approach would need changes in management, research and
marketing.
• Demands on human K and business organisation sustained later growth
This led to the term ‘American System of Manufacturing’
American System of Manufacturing
• Large scale production
• Capital intensive production
• Use of machines in production
• Assembly line – division labour and specialised tasks.
US rise to prominence
How do we explain these features of USA success?
1) Cheap energy, expensive scarce labour – Habakkuk Thesis
2) British capital flows – railroad investment
3) European migration – Homestead Act
4) Education – universal, primary, secondary and tertiary education
5) Tariffs – Infant Industry Argument
Habakkuk Thesis
Implications of Rothbarth (1946) and Habakkuk (1962):
• USA had cheaper K, expensive L, cheaper natural resources
• Tech change more rapid when using K
• Resource use linked to industrialisation and manufacturing.
British Failure or American Success?
Best e.g. of late 19th C success was the USA
• First to overtake UK in output per head
• First to overtake Britain in labour productivity
• First to overtake UK in world market shares
In what ways was the USA exceptional?
• Accumulated capital with ‘take-off’ investment rates
• Developed modern production and sales techniques
• Shifted towards human capital production
Sources of US growth
• Early 19th C growth due to longer working hours
• Late 19th C saw a switch from greater working hours to labour productivity which led to
growth.
• TFP growth between 0.2-0.4% in 19th C – not exceptional
• 20th C labour productivity due to TFP – human K and R&B matter eventually!
Manufacturing Productivity Hypothesis
Conventional literature equates USA success with manufacturing:
• USA K deepening greater than UK’s
• Investment in large scale factories and machinery exceeded UK levels
• Extensive K intensive approach would need changes in management, research and
marketing.
• Demands on human K and business organisation sustained later growth
This led to the term ‘American System of Manufacturing’
American System of Manufacturing
• Large scale production
• Capital intensive production
• Use of machines in production
• Assembly line – division labour and specialised tasks.
US rise to prominence
How do we explain these features of USA success?
1) Cheap energy, expensive scarce labour – Habakkuk Thesis
2) British capital flows – railroad investment
3) European migration – Homestead Act
4) Education – universal, primary, secondary and tertiary education
5) Tariffs – Infant Industry Argument
Habakkuk Thesis
Implications of Rothbarth (1946) and Habakkuk (1962):
• USA had cheaper K, expensive L, cheaper natural resources
• Tech change more rapid when using K
• Resource use linked to industrialisation and manufacturing.
