Will the 2020s Really Become the Next Roaring Twenties?

In a dark moment, some predict a new economic and cultural boom. Here’s the reality

In recent years, leading economists, investors, and journalists have painted a decidedly grim vision of our near future: The U.S. economic system and society itself are coming apart, these dystopian voices have said, beset by one of the darkest chapters in the country’s history, including a pandemic, a jobs apocalypse, and now a deadly attack on Congress.

Yet, in one of the most whiplash-inducing spiritual flip-flops in memory, the new zeitgeist for the next decade is shimmering positivism. The Economist is tantalized by hints of “a new period of economic dynamism,” and the Financial Times of “a once-in-a-century boom.” The Wall Street Journal foresees the best era for manufacturing since the 1990s, and even Nobel laureate Paul Krugman, one of the most convinced curmudgeons in economics, is foreshadowing a fresh period of expansion. Observing so much sunniness, economics blogger Noah Smith has compiled highlights into a “techno-optimism roundup.

Perhaps unsurprisingly, these positivists have declared what they are predicting “the new Roaring Twenties.” A century after the iconic decade of prosperous decadence, the thesis is that the United States and perhaps the rest of the world are on the cusp of one of the biggest outbreaks of economic sizzle in memory. With 1.8 million people dead around the world from Covid-19, including some 350,000 in the U.S., along with all the country’s other problems, it’s become almost too seductive to resist harking back to better times. And what better times to recapture than those of Gatsby, flappers, flippant Chicago gangsters, and jazz-infused speakeasies?

But are the positivists right? For the next couple of years, they seem almost certain to be. As increasing numbers of people are vaccinated and the country reopens, Americans are likely to bolt into a bacchanalia of dining, drinking, travel, and other revelry. Travel businesses are already seeing bookings that would carry this pent-up partying all the way through 2022 and into 2023.

The question is what happens after the merry-making dies down. Is there enough underlying zip in the economy to sustain a boom for the remainder of the decade?

History is fixated on the glitz, but the decade’s deeper roar arose from below — from a vast, subterranean engine of commerce that pushed to the surface after World War I and the Spanish Flu pandemic, and ignited an age of consumer convenience.

In the 1920s, there was. History is fixated on the glitz, but the decade’s deeper roar arose from below — from a vast, subterranean engine of commerce that pushed to the surface after World War I and the Spanish Flu pandemic, and ignited an age of consumer convenience: Across the country, companies delivered the first affordable vacuum cleaner, washing machine, temperature-adjustable iron, and food mixer, not to mention the automobile — an economy-driving treasure of inventions. By the end of the decade, Ford Motor, General Electric, Westinghouse and other companies had utterly transformed the American lifestyle into one befitting a new urban prosperity of nearly full employment and real annual GDP growth of 4.8%. If one wished to boil down the decade’s zing to two words, it would be electricity and combustion, a one-two technological punch that streamlined urban housework and took Americans out onto the road, thereby reverberating across the economy.

Today, numerous economists and technologists say that long-gestating technologies may be ready to propel a similar frenzy of commerce. This time, the economic engine might start with artificial intelligence; the pharmaceutical industry, turbo-charged by the historically fast creation of the Covid-19 vaccine; a new era of super-batteries and electric vehicles; and a re-imagination of cities, with much of the workforce permanently dialing in from home. A currently dammed-up tidal wave of cash could finance this economic deluge, these economists say — some $3.7 trillion sitting on the sidelines in personal savings accounts and corporate cash reserves.

But the forecasts hinge on a number of presumptions. Even if you accept that a ton of cool, potentially economy-driving ideas may be out there on the horizon, who is to say their time will come in the 2020s — or whether, like the refrigerator, which only took hold in the 1930s, when their high price dropped, they are likelier to ripen in the next decade? What if we are actually looking at a Thundering Thirties?

It is also reasonable to be suspicious of the crowd — when most of the thinking class has coalesced in a single direction, an undiscriminating herd mentality may have taken hold, especially since, when the world has hit rock bottom, it may be inviting to join in collective wishful thinking. In just one contrary opinion, the World Bank last week released a forecast of a potential “lost decade” in the 2020s, with tepid 1.9% annual growth. “If history is any guide,” the report says, “unless there are substantial and effective reforms, the global economy is heading for a decade of disappointing growth outcomes.”

But in several important ways, the 1920s and the 2020s already do resemble one another. That is in the presence of pronounced inequality, a rural-urban divide, and a financial bubble.

And by the end of 1929, we know how those circumstances ended.

In 1882, Thomas Edison ordered a switch flipped and a hundred lights went on in the Wall Street offices of the Gilded Age financier J.P. Morgan, the nearby headquarters of the New York Times, and numerous other Lower Manhattan buildings. It was the start of the age of electricity. Soon Edison was supplying enough power for about 10,000 electric lights. The number of customers was limited by the high cost — 30 cents per kWh — which only the richest businesses and wealthiest families could afford. But by 1920, the retail price had plunged to around 10 cents, and electric lines were extended to a third of American homes.

Four decades after Edison lit up Lower Manhattan, the American economy was ablaze.

Along the way, a young Connecticut manufacturer named Harvey Hubbell invented the electric plug, and tinkerers began to push out patents for various gadgets — the electric iron in 1882, the washing machine in 1907, the vacuum cleaner in 1908, the waffle iron in 1911, and more. None was an immediate commercial success — most were unwieldy and far too expensive. But then suddenly, coinciding with cheap electricity, gadgets with a plug were sleek and relatively affordable. Hotpoint introduced practical electric stoves, Hamilton Beach offered hand-held electric egg beaters, and Maytag began selling the first washing machines featuring an agitator. Toastmaster gave U.S. homes the first automatic pop-up toaster capable of browning both sides of the bread at once, and Ford dropped the price of his Model T from $965 to $269.

Four decades after Edison lit up Lower Manhattan, the American economy was ablaze.

It amounted to an economic paradigm shift. In a milestone 1989 paper, Paul David, a Stanford economics professor, wrote that electricity had followed a natural arc. Like steam a century before, electricity was a “general purpose technology” that, after decades of gestation, was propelling not only itself to enormous success, but countless other industries and the entire economy.

But the crucial thing to understand about general purpose technologies was that, while ingenious and potent in theory, to succeed they required other industries and segments of society to entirely reorganize around them — they had to align with the new technology. And unless they did, the new technology was fated to be a glorified experiment.

In the case of Edison, he created a frenzy among cities around the world desiring to push back the night. But manufacturers hesitated, Stanford’s David wrote, because they saw it in their interest to keep using the steam engines they had already paid for. To switch to electric motors, they would have to create entirely new equipment and retrain workers. Even when they deployed some electric motors, manufacturers often did so side by side with the old equipment in the same factory, avoiding the cost of full replacement. Even General Electric and Westinghouse themselves — the providers of the electricity — kept their prices high in order to keep milking profits from the legacy equipment they also sold.

All this dilly-dallying and duplicate spending sapped the economy of vitality. From 1890 through 1912, U.S. productivity sunk and wage growth flattened. When World War I ended, a mini-depression took hold. It was only when manufacturers finally surrendered to electricity and the combustion motor, retooling their factories around the two technologies, that the Roaring Twenties as we know them began to unfold.

A similar effect happened again some seven decades later. In the late ’80s, when David wrote his paper on the history of productivity, his economist colleagues were obsessed with what they saw as the failure of the computer age. Intel had walloped everyone with its 1970 invention of the microprocessor. Yet productivity and wage growth had been relatively stagnant in the two decades since. Apart from a single blip of years, annual labor productivity growth had averaged just 1.4% since 1970, about half the rate experienced since World War II. Annual real income had grown by more than 2.5% from 1948 through 1972, but just 0.5% since. That is, the computer — another general purpose technology — simply hadn’t improved the economy.

But David suggested that his colleagues were ignoring history. The economy was exhibiting the same sluggishness as it had while electricity and internal combustion were wending their way through industry in the early 1900s. As happened back then, the rest of the economy had to cooperate with the new general purpose technology before the gains were seen.

No economists appear to expect anything except that Americans as a group will emerge from Covid-19 and gorge in restaurants, drink like fish, and travel with abandon.

Which is what happened just six years later. In 1995, productivity began to surge. For the subsequent decade, it averaged 2.8% a year. Around 2005, though, the productivity spurt again abruptly halted. And in the decade and a half since, the microprocessor and its progeny have again failed to deliver the 4.8% annual gains of the 1920s, less the average 2.7%-a-year growth of the 1950s and 1960s.

Today, like the post-World War I period, we remain in the grip of a pandemic and a deep recession. The question is whether, on the horizon just out of sight, we also have the technological and industrial ingredients of a boom. And, perhaps more important, whether the economy has undergone enough of an adjustment to parlay that technology into a new roaring decade.

By the end of this year, economists are expecting a consumer spending binge, one so powerful that it will drive 3.8% economic growth for 2021 as a whole. UCLA Anderson Forecast, a think tank at the university, predicts the splurging will begin even earlier and propel 6% second-quarter growth. Whichever the case, no economists appear to expect anything except that Americans as a group will emerge from Covid-19 and gorge in restaurants, drink like fish, and travel with abandon. Indeed, the country is already displaying signs of what is coming: Cruise lines say they are getting booked up for later this year through 2023. Luxury tour operators, too, say travel bookings for next year and beyond are surging.

Such spending would be buttressed by a powerful secondary economic punch. To understand why, consider last year’s hospitality industry bloodbath. Some 110,000 restaurants have closed nationwide during the pandemic, according to the National Restaurant Association, an especially gutting number. In order to serve that orgy of hungry and boozy Americans, investors will have to come off the sidelines and fund a reopening of shuttered establishments and launch new ones, igniting a considerable design and construction boom. Restaurants and bars will hire not just servers and barkeeps, but construction workers, plumbers, and specialists in the installation of virus protection technology and equipment.

But the positivists believe that the key commercial products are already in our vision and possibly already for sale. They simply have not gone viral yet.

UCLA Anderson expects this deluge to carry the economy through 2023. But, as in the 1920s, an undertow will be required to propel an elevated, decade-long economic surge. The U.S. will require a mature general purpose technology, in addition to assorted other thriving industries. In terms of the latter, there is no way of knowing with certainty what they will be — after all, in 2006, who forecast the smartphone revolution that arrived the very next year with the first iPhone?

But the positivists believe that the key commercial products are already in our vision and possibly already for sale. They simply have not gone viral yet.

The most obvious candidate for this general purpose technology is artificial intelligence. The fundamental breakthroughs in the most popular current forms of A.I. were made in the 1980s by pioneers like Geoffrey Hinton, at the University of Toronto, and Judea Pearl, a professor at UCLA. Meaning that it’s been almost four decades since their early advances. No one thinks that A.I. is anywhere near the level of human intelligence. But it would not require human-like intelligence to start to underpin an economic surge, the positivists suggest. The question is whether there has been enough time for industries, business processes and skills to adjust to the relatively elementary machine intelligence we now have.

Erik Brynjolfsson, an economics professor at Stanford and co-author of a widely circulated paper last year that in part pivots on Paul David’s work, says early A.I. has gestated long enough. In the paper, Brynjolfsson and his co-authors describe the path of general purpose technologies as a figure “J.” The bottom loop of the letter represents the arrival of a potentially breakthrough technology and the typical subsequent period of stagnation “as people figure out how to use it,” he told me. The vertical line in the J reflects what happens next — “Productivity goes up sharply,” he said. “I think we just turned the corner on machine learning. I anticipate a takeoff in the coming decade.”

Brynjolfsson thinks that A.I.-driven voice recognition and software that writes like humans will become much more commercially significant. Self-driving software will mature, and a biotech boom built on the mRNA method used to defeat Covid-19 will take off. Electric cars propelled by super-batteries will capture an increasing percentage of new car sales. Richard Watson, a futurist at Cambridge University, expects a boom in robots, starting with surgical robots, companion robots, and sex robots. “In Japan you have avatar girlfriends,” Watson told me. “It wouldn’t be surprising to see people forming stronger relationships with robots than with people — with emotionally aware machines, where you trust machines more than people.” Such technologies, he said, would result in “Silicon Valley with the volume turned up to 11.”

How certain is this boom? Chad Syverson, an economist at the University of Chicago and a co-author of the J-Curve paper, is a pioneer of a theory of productivity waves. Internal combustion had multiple productivity surges, Syverson argues, leading to a leap in growth in the 1920s, followed by a years-long slowdown, then a new spurt. Similarly, he thinks that the 1995–2005 jump in productivity may have been only the first stage of a microprocessor-led wave. In an email, Syverson suggested that the new Roaring Twenties would be the second wave. “Will we see the nearly 3% annual labor productivity growth of past waves? I don’t know,” he said. “But I would be disappointed, and start worrying if the next wave is coming, and we don’t see 2%.”

A roaring 2020s would consist of non-intelligent products, too, the positivists say. The pandemic itself, and our reaction to it, are possible clues to what’s coming. James Cham, a venture capitalist in Silicon Valley, notes that the Zoom app was released in 2013. “But it took Covid for it to take off,” he points out. David Staley, a historian at Ohio State, says that the sudden ubiquity of Zoom represents more, which is the rise of delivered services. Zoom brought Staley’s workplace right to his home office. Peloton, he said, brought the gym. DoorDash is bringing restaurants. He expects Zoomification — the transportation of physical businesses to consumers’ homes — to be a 2020s growth industry. “That could be the next big economic driver,” he said. “Making reality mobile.”

The hedonistic 1920s climaxed in a gigantic, end-of-decade collision on Oct. 24, 1929. For the prior 19 consecutive months, the entire nation had seemed to be borrowing money to trade the share of the moment and earn a fortune. The stalwarts of the economy soared in value: AT&T’s share price rose by 87%, U.S. Steel doubled, and GE shares more than tripled in price. The subsequent crash ended the original Roaring Twenties, and opened up a tragically sad new decade of want and revolutionary anger.

As the end of the 1920s neared, the nation’s top 36,000 families were earning as much as the rest of the nation’s 12 million families. Up to 60% of the country lived below the poverty line. Rural America was worse off, largely left out of the revolution on American roads and in American homes. At the end of the decade, just 10% of rural houses had electricity, while in cities the percentage was about 85%. From magazine ads, the rural population could see and feel its deprivation: Resentment seethed below the surface and emerged sharply in the next few years.

That today’s economy features both of these primary shortcomings, too — the failure to spread the wealth and to curb stock market excess — is a flashing red light. The pandemic has deepened the modern U.S. wealth gap: The top 1% holds 15 times as much wealth as the bottom half combined, according to Fed data. The Nasdaq rose 43% last year, and bitcoin quadrupled in price, while gyrating wildly so far this year — signs of froth. Like the working-class anger that seethed below the surface during the 1920s, only to erupt after the Depression, this modern concentration of wealth is a red-flashing warning sign, reflected in part in last week’s attack on the Capitol building.

There is also the possibility that the Roaring Twenties happens, but mostly in China, which is pouring outsized sums of investment into futuristic technologies and infrastructure.

The positivists ignore some raw material lacking in their argument: The Roaring Twenties were fueled in no small part by a youthful population with a median age of 25; two thirds of the country was 35 and younger, filled with verve and entrepreneurialism. The median age today is closing in on 40, and even before Covid-19 the formation rate for new startups was dropping. Among the primary schools of economic thought are that the country’s big technological advances have tailed off since around 1970 after a century of stratospheric achievements. David Hochfelder, a professor of the history of business and technology at the State University of New York at Albany, thinks this inventive dry spell is a reason not to expect a new decade resembling the 1920s, years when Einstein won his Nobel, Edwin Hubble found the expanding universe, and Alexander Fleming invented penicillin. “We are not likely to see a transformation like the automobile, like electrification, like the indoor toilet, or talking films,” Hochfelder says.

There is also the possibility that the Roaring Twenties happens, but mostly in China, which is pouring outsized sums of investment into futuristic technologies and infrastructure. Or that it keeps buoying already-prosperous tech hotspots like Silicon Valley and Boston, but largely leaves out the rest of the U.S.

These cautionary notes are not necessarily evidence that high expectations for the decade are irrational. But some historians hope that, if the positivists are correct, there is time to get a potentially prosperous new decade right this time. As things stand, we may drive headlong into a new gilded age, says Joseph Brusuelas, chief economist at auditing firm RSM. The 1920s “looked like a lot of fun from a distance,” says Beverly Gage, a history professor at Yale, “but what comes next was a lot more complicated.”

Editor at Large, Medium, covering the turbulence all around us, electric vehicles, batteries, social trends. Writing The Mobilist. Ex-Axios, Quartz, WSJ, NYT.

Sign up for Buy/Sell/Hold

By Marker

A newsletter that's 100% business intelligence, and 0% investment advice. Take a look.

By signing up, you will create a Medium account if you don’t already have one. Review our Privacy Policy for more information about our privacy practices.

Check your inbox
Medium sent you an email at to complete your subscription.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store