Technological Innovation and the Great Depression

Duncan McDowall is a professor of history at Carleton University, and
the author of Quick to the Frontier: Canada’s Royal Bank.

In recent decades, the economics profession has pushed economic history
to the margins of its concerns as the esoterics of econometrics,
rational expectations theory, and other more presentist concepts have
held sway. But as University of Alberta economist Rick Szostak stresses,
only economic history helps us to understand the “long-run
determinants of growth.” With this in mind, Szostak has turned his
attention to the most severe economic downturn of the century—the
Great Depression of the 1930s—in an attempt to explain its cause and,
perhaps, to preclude the return of such a catastrophe.

Most attempts to explain the Depression have focused on aggregate
variables in the economy—big numbers like overall consumption and
employment levels. Szostak instead hinges his analysis on individual
sectors of the economy and on the play of technological change on them.
He suggests that economic growth is the product of a combination of
innovation in both technological process (e.g., steam power) and its
product (e.g., the locomotive). The Depression was provoked in the late
1920s by a disastrous lag of products behind processes; the technology
of commercial aviation had, for instance, been mastered, but there were
no products—like the DC–3 airliner of the mid-1930s—to drive this
technology through the greater economy. Szostak pursues this
sector-by-sector approach through the whole American economy in the
Dirty Thirties (with occasional side glances at the Canadian economy)
and concludes that “we can only hope to understand the movement of
aggregate variables by comprehending the dramatic events going on at the
industry level.”

This is obviously a book for specialists, but Szostak is to be praised
for keeping it relatively jargon-free and packing it with fascinating
information on industrial and technological development that is
accessible to the general reader. Specialists will undoubtedly squabble
over his elevation of technology to a primordial role in sparking the
Depression; the general reader

can nonetheless follow and ponder Szostak’s argument with interest and
some profit.