Output expanded robustly after 1933. Between 1933 and 1937, the
US economy grew by 8% a year. Between 1938 and 1941, growth
averaged more than 10%. Rapid output growth without equally
rapid capital-stock or employment growth must have reflected
rapid productivity growth. This is the paradox of the 1930’s.
Despite being a period of chronic high unemployment, corporate
bankruptcies, and continuing financial difficulties, the 1930’s
recorded the fastest productivity growth of any decade in US
history. How could this be? As the economic historian Alexander
Field has shown, many firms took the “down time” created by weak
demand for their products to reorganize their operations.
Factories that had previously used a single centralized power
source installed more flexible small electric motors on the shop
floor. Railways reorganized their operations to make more
efficient use of both rolling stock and workers. More firms
established modern personnel-management departments and in-house
research labs. There are hints o