Economic Growth and Recovery in the United States: 1919-1941

Abstract

This paper has two main sections and an appendix. The first provides an overview of what lay behind record productivity growth in the US economy between 1929 and 1941. The second considers the role of rigidities and other negative supply conditions in worsening the downturn and slowing recovery. While I argue consistently that the overarching explanation of the Great Depression will and should continue to emphasize a collapse and slow revival of the growth of aggregate demand, I spend relatively little time on what drives this, since the literature deals extensively with this elsewhere. The paper instead concentrates on the aggregate supply side - both the broad array of positive shocks that I argue propelled potential and, eventually, actual output forward, and the negative conditions which, in interaction with aggregate demand, may have increased the size of the output gap and prolonged its persistence. An appendix offers detail discussion and updated calculations of productivity growth rates for the critical period 1929 through 1941.