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In 1976, the sociologist Harvey Molotch wrote a famous paper called “The City as a Growth Machine.” Molotch used the term “growth machine” to describe the elite political coalition within a city that figuratively—and often literally—bulldozed opposition to construction and growth. For Molotch the term was a pejorative; he believed that the pro-growth orientation of urban elites in his day was bad for taxpayers, workers, and the environment.
When we were trying to find a good name for our newsletter this summer, Matt Yglesias suggested to me that we name it “The Growth Machine.” The idea was to embrace Molotch’s coinage but take the other side of the debate. We loved this idea; our graphic designer even made a snazzy logo for it!
Unfortunately, the name was already being used by a SEO firm and we were afraid they’d sue us. So we decided to name our newsletter Full Stack Economics instead. But we retained a version of this growth-oriented editorial vision.
A lot of successful newsletters have taken a strong partisan or ideological slant, making money by telling like-minded readers what they want to hear. We’ve tried to avoid doing that. Our newsletter is strictly non-partisan and we've tried not to become ideologically predictable.
But this isn’t an entirely agenda-free publication. Alan and I both believe that economic growth is good, and that more of it would be better. We think it’s helpful to view the economy as a growth machine—a machine we want to understand so we can help make it work better.
We’d like to continue pursuing that mission in the coming years—perhaps even decades. To make that possible, we’re asking readers to begin supporting the newsletter financially. We're asking for $9 per month, or $89 for an annual subscription.
In exchange, we’ll continue producing the kind of independent, deeply-reported news and analysis we’ve been doing over the last three months. Together, we’ll explore ideas that could make the economic pie bigger for everyone.
The city as a growth machine
“The political and economic essence of virtually any given locality, in the present American context, is growth,” Molotch wrote in his 1976 paper. “The desire for growth provides the key operative motivation toward consensus for members of politically mobilized local elites.”
Molotch saw the success of the growth machine as a bad thing. He argued it was hurting ordinary taxpayers, workers, and the environment. He hailed the emergence of a grassroots antigrowth movement that was starting to throw sand in the gears of the growth machine.
Those activists succeeded. Major metropolitan areas, including New York, San Francisco, and Los Angeles, enacted numerous laws limiting real estate development. As a result, the supply of housing has failed to keep up with demand, producing a nation of geographic haves and have-nots.
In America’s most productive cities, rents and property values have soared, pricing out workers with less earning power. Fast-growing companies in the most dynamic cities have struggled to hire enough workers, constraining the growth of the national economy.
The triumph of the antigrowth movement was not a victory for the environment. Molotch focused on the way high population densities worsened air pollution. But new pollution-control regulations, along with the movement of heavy industry away from cities, has dramatically improved urban air quality since the 1970s.
By contrast, high urban densities are actually helpful in addressing today’s biggest environmental concern: climate change. Apartment buildings and townhomes require less energy to heat and cool than single-family homes. City dwellers have shorter commutes and can take more energy-efficient modes of transportation.
In short, Molotch got things backwards: the growth machine was good for ordinary workers (because it ensured ordinary workers could afford housing near good jobs) and the environment.
The US economy as a growth machine
Molotch focused on the city as a growth machine, but the metaphor can be usefully applied at larger scales. The US economy is a growth machine too. And as with housing, bad policy ideas with their roots in the 1970s have reduced the performance of America’s growth machine.
The quarter century after World War II was one of the best periods for economic growth in American history. With memories of the Great Depression fresh on everyone’s mind, economic policymakers pursued fiscal and monetary policies designed to maximize employment. Unfortunately, those policies produced high and rising inflation in the 1970s. In the early 1980s, under Paul Volcker, the Federal Reserve slammed on the brakes, bringing inflation under control at the cost of two brutal recessions.
That trauma created a new economic orthodoxy which held that central banks should focus on keeping inflation in check and not worry too much about maintaining adequate demand. Under the influence of this new orthodoxy, Washington policymakers—especially the Federal Reserve—failed to respond effectively during the 2007 housing crash and the 2008 financial crisis. As a result, America suffered another deep recession and an anemic, decade-long recovery.
During the Trump years, Washington policymakers finally started focusing on getting America’s growth machine humming again. A round of tax cuts in 2017 provided fiscal stimulus. In 2019, with the economy still in a fairly healthy state, Jerome Powell’s Fed cut interest rates. The result was strong growth and mild inflation, suggesting that more aggressive policies could have produced a stronger recovery during the Obama years.
Then in 2020, both Congress and the Fed pumped trillions of dollars into the economy to cushion the blow of the COVID pandemic. As a result, we had only a mild recession in 2020 and are currently enjoying a robust recovery.
At this point, it looks like Democrats overshot with the $1.9 trillion of stimulus in the March 2021 American Rescue Plan. That contributed to the high inflation and sporadic shortages we see today. Still, we think today’s overheated economy is easily preferable to the under-heated economy—and years of unnecessarily high unemployment—of the Obama years.
The growth machine can help us stop climate change
With rising concern over climate change, the idea of growth has fallen out of favor in some corners of the American left. In their view, the world’s climate predicament was caused by decades of over-consumption, and the only solution is for humanity to learn to live within its means. A pro-growth agenda seems like the opposite of what’s needed.
While this view is intuitively appealing to some, it doesn’t translate into a practical policy agenda. Most people around the world enjoy a far lower standard of living than Americans do. So even if American voters were willing to voluntarily reduce their own standard of living—and they’re not—that wouldn’t be enough to bring carbon emissions under control. We’d have to also convince billions of people in India, China, and other developing countries to forgo rising living standards for themselves and their children. This is neither desirable nor realistic.
The only practical way to combat climate change is by accelerating the transition from today’s dirty energy technologies to clean alternatives. That means rapidly scaling up the production of solar panels, windmills, electric cars, and other green technologies. In other words, the solution to climate change isn’t to stop the American growth machine, but to redirect it in a more sustainable direction.
And practical experience has shown that pro-growth carrots sometimes work better than anti-growth sticks. Or at a minimum, it’s easier to sell them to the public. Many economists regard a carbon tax as a theoretically elegant way to reduce carbon emissions—we agree. But it’s proven massively unpopular with voters who suspect it will lower their standard of living. In contrast, clean-tech subsidies and mandates have worked well and enjoy broad public support.
The growth machine doesn’t run itself
As these examples illustrate, our perspective on growth runs counter to conventional views on both the left and the right. Many on the left view the growth machine with suspicion, focusing heavily on the way that economic growth leads to worker exploitation and environmental degradation. We think these folks frequently miss the forest for the trees.
Worker rights and environmental protection are valid concerns, but a healthy, fast-growing economy makes these goals easier, not harder, to achieve. Tight labor markets shift power from employers to employees, helping to bring workers higher pay and better working conditions even without explicit legal protections.
In the late 20th century, economic growth made America wealthy enough that we could invent and deploy sophisticated pollution control technologies on our cars and factories. In the 21st Century, we have the financial means to pour trillions of dollars into solar panels, electric cars, and other clean technologies. As we de-carbonize the American economy, economies of scale will start to make these technologies cheap enough that developing countries can adopt them too.
At the same time, our view is different from the laissez-faire position too often championed on the right. Like any machine, the American Growth Machine needs oversight and regular maintenance.
We need governments to maintain basic infrastructure and fund public goods like research and development.
We need fiscal and monetary policies to keep supply and demand in balance.
It’s sometimes necessary for state and federal governments to restrain the parochial impulses of local policymakers—for example by preempting overly restrictive local zoning codes.
Thinking about the American growth machine as a machine also helps to get beyond sterile debates about whether government should be bigger or smaller. It reminds us to focus on the nuts and bolts of how the machine works.
That's what we've been doing for the last three months, and we'd like to continue doing it for years to come. Some newsletters put content behind a paywall as an incentive for people to subscribe. We're not going to do that, at least for now. We want our articles to reach the broadest possible audience, and we believe many of our subscribers will want that too.
So if you’ve been enjoying our work so far and want us to make more of it, please become a paying subscriber. Thanks a lot.
Two quick housekeeping notes:
Alan is expecting to become a father in the next couple of weeks, and will take a few weeks off to care for the new baby. As a result, we’ll be at roughly half our usual output in late November and early December.
We’ll be hosting our first Twitter Space conversation today, Wednesday November 10 at noon Eastern / 9 AM Pacific. It’ll be an “ask us anything” format. Please follow us on Twitter—@binarybits and @AlanMCole—so you can participate.