That’s the subject of my latest column for Bloomberg. Here is one main part of the argument:
There are many theories as to why [the Great Stagnation started in the early 1970s]: oil price shocks, stricter government regulations, increased emphasis on environmental protection for economic growth, and the collapse of the Bretton Woods international monetary system. In my 2011 book Great StandingI blame the disappearance of low-hanging fruit caused by powerful machines and the abundance of fossil fuels.
Some of those possibilities are features. Now economist, Nicholas Reynolds of the University of Essex, says he has found a new villain in this economic story: negative shocks to the quality of people’s capital in America.
Americans born after 1947 and before the mid-1960s — the first of whom had just entered their prime working years in 1971 — saw no economic gains compared to their predecessors. But the group’s problems are far-reaching. They had many problems as young children, and did very poorly in school in the 1960s, which accounts for the decline in education of that era, such as low test scores and high dropout rates.
Birthweights also declined in the 1980s, a sign that the post-1947 cohort was not healthy, especially when it came to maternal health. You might think that development is due to intervening economic conditions. But the post-1947 world is still richer than before, so it’s not clear why there is an economy slow downbut not a complete decline, it should have caused significant health problems.
It’s not just that Americans born after 1955 stopped getting high, while Europeans didn’t. There are serious problems, such as the alarming increase in the death rate among animals since 1999. This “death of despair” may also be a legacy from this 1947 break in the health quality of the American population.
I am not sure that all of that is true, but if it is it is very important and would constitute a significant update to our understanding of the economic history of the 20th century. And what happened in the late 1940s? When it gets difficult:
The obvious question is what exactly happened around 1947 to put the US on this less constructive path. There is no obvious smoking gun, but the decline of the group is seen first in youth, before entering the labor market. So maybe it’s something in the structure of American society, or in US public health practices, rather than from traditional macroeconomic factors.
One possible cause is the increased use of post-war automobiles, as well as higher levels of lead exposure, given the lead additives in gasoline at the time. There is no direct evidence for this claim, but lead has been shown to have a very negative effect on human development, and some researchers blame this for the high crime rate of the US later.
However, it is not clear why the lead should lead to a sharp break in the data. And if lead is the main culprit, there should be major improvements to come, as lead additives were completely banned from American gasoline in 1996, with phase-outs beginning in the 1970s.
The second possibility is that the baby boom generation was so large that the level of care provided to each child decreased.
It is more important to meditate, then something else.
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