4.1 U.S. FARM LABOR PRODUCTIVITY, 1925-86

In each instance, labor productivity has risen more than tenfold. This rise had steadily reduced prices. A bushel of wheat averaged $1.05 during the 1870s. An equivalent price in the 1980s would have been about $12 per bushel, about three times the actual price. Enchantment of crops will continue. Genetic engineering offers many of the same opportunities as cross-fertilization and cross-breeding, but with much greater speed and flexibility.

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Food production, once the dominant activity of society, has been permanently relegated to the margin. The trends that produced this transformation are readily identified.

One was mechanization. The subsistence farmer scratched the earth with a few hand tools and, if he was comparatively prosperous, an ox-drawn plow. Contrast modern agribusiness. A grain combine harvests more than one hundred acres of grain in a day, compared to about one acre for a man with a scythe. Such combines, rare as recently as 1920, numbered more than a million in the United States by 1960. Tractors represented nearly as great an improvement over horses for plowing. Milking machines reduced the required labor per dairy cow fourfold. Mechanization brought similar gains across a broad range of farming, ranching, and fishing activities.

Meanwhile, improvements on nature sharply increased output. Chemical fertilizers are higher in plant nutrients and cheaper to apply than manure and other organic fertilizers. Worldwide usage now exceeds 100 billion pound annually (about twenty pounds for each person on the planet), not only raising yields, but also reducing the need for crop rotation in advanced economies. This allowed increased scale and specialization, but at the cost of providing a banquet for insects. DDT and other organic insecticides greatly alleviated this problem after World War II. But the largest improvements were in the crops themselves, as America began and then exported the “Green Revolution.” Semidwarf hybrid wheats, with thick, short stalks to support heavier heads of grain, replaced marquis wheat, itself a hardy Canadian hybrid, beginning in the 1960s. Corn hybrids, almost unknown in 1930, were nearly universal by 1980.

Fast-maturing, disease-and insect-resistant semidwarf rice hybrids followed in the 1960s. Together, these advances have raised yields from threefold to tenfold over nineteenth-century levels. Selective breeding has similarly doubled average milk production per dairy cow since the 1930s and halved the amount of grain consumed by chickens per pound of meat produced since the 1940s. Another doubling of agricultural productivity would now free only about 1 percent of the work force, producing a comparable gain in overall productivity.

The same limitation increasingly applies to manufacturing: improved productivity saves too little labor to provide much boost to the economy as a whole. Thus, “brilliant productivity performers may actually be condemned by their ... achievements to “burn themselves out.’” Through this process, stagnant sectors assume an enlarged role simply by remaining in stasis; hence the increasing relative importance of retail trade and of services generally in the United States and other advanced economies. This shift dilutes the effect of any continuing advances in the most progressive sectors.

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Progress is not produced by and can scarcely be affected by economic policy. In the past, innovation, market expansion, and capital accumulation could be relied upon to reduce the labor and other inputs needed to produce a given output. Those forces are large spent, and the progress they generated has limited the scope available for further productivity gains.

Agriculture is the paradigm. The rising productivity of American farmers provided the labor needed for manufacturing and other expanding sectors in the nineteenth and early twentieth centuries. But ever-increasing efficiency has since reduced the economic role of farming to virtual insignificance. Another doubling of agricultural productivity would now free only about 1 percent of the work force, producing a comparable gain in overall productivity. The same limitation increasingly applies to manufacturing: improved productivity saves too little labor to provide much boost to the economy as a whole. Thus, “brilliant productivity performers may actually be condemned by their ... achievements to ‘burn themselves out.’” Through this process, stagnant sectors assume an enlarged role simply by remaining in stasis; hence the increasing relative importance of retail trade and of services generally in the United States and other advanced economies. This shift dilutes the effect of any continuing advances in the most progressive sectors.

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An era’s living symbols of wealth speak volumes about its defining values and dynamics. Stanford, Rockefeller, Carnegie, and Ford, for all their flaws, built fortunes out of railroads, oil, steel, and factories, the vehicles of progress for their age. consider some of the comparable symbols of the 1980s:
Michael Milken, Henry Kravis, Donald Trump, Joseph Flom, Joe Jamail, and even Michael Jackson. Their fortunes arise not from building or making, but from manipulating. Carl Icahn was no expert in railcar leasing, textiles, or airlines, as events quickly proved. But he had few peers in redirecting existing wealth and income from others to himself and those aligned with him.

This is “the ‘rent-seeking’ society, in which the tax lawyer and the political lobbyist have replaced the inventor and the engineer and the entrepreneur’s main instruments toward higher profits. Agriculture, manufacturing, and construction have occupied steadily smaller portions of the civilian work force since 1970. Meanwhile, the number of new law-school graduates in the United States roughly doubled during the 1980s. Accountants, investment advisers, stockbrokers, and real estate agents have also multiplied. These are typically people of considerable energy and intellect, “diverted from productive contribution in pursuit of their share of the available pool of rent. The damage they do while rent seeking, although considerable, is less troubling than the loss of their talents from the tasks of production and progress.