The 1890s were Peak America? Well, Donald Trump is only off by a century. If we’re going to play the “when was America really great” nostalgia game, my vote would be for the final decade of the 20th century, not the 19th. In my 2023 book, The Conservative Futurist: How To Create the Sci-Fi World We Were Promised, I classify the period from 1995 through 2000, specifically, as the second “Up Wing” period of high productivity growth and techno-optimism in America’s postwar era. 

Among the key elements of my reasoning: First, there’s the wow economy, obviously. Real GDP growth averaged 4.3 percent from 1996–2000, 50 percent faster than the postwar average. Labor productivity growth doubled to over three percent annually through 2004, while total factor productivity growth (a way to look at economic innovativeness) more than tripled. And you have to love that four percent wage growth! Second, the impact of the digital transformation became obvious, with 1995 seeing the launch of Amazon, Netscape’s IPO, and Windows 95. The IT revolution finally started driving significant economic gains. Third, by January 2000, 69 percent of Americans thought the country was headed in the right direction, reflecting widespread national confidence. 

All kinds of good pro-market policymaking back then: deficit reduction, global economic integration (NAFTA, WTO ), and light-touch technology regulation.

Now, the natural response here in this age of populism would be to point out how those good pro-market policies also gave us the “China Shock,” the impact of increased trade with China on US manufacturing employment from 1990 to 2011. But here’s the thing: While initial studies found significant job losses due to import competition, later research suggests these losses were offset by job gains from exports. 

As my AEI colleague Michael Strain writes in a recent paper, the shock is often misunderstood as evidence that trade reduces overall employment. The key lessons, rather, are that labor markets are “less fluid” than previously thought, and workers can struggle to relocate or transition between sectors. These insights can apply to all manner of economic disruptions, not just trade shocks. Strain:

For example, the development of generative artificial intelligence raced forward in 2023 and portends substantial labor market disruption. The energy transition away from fossil fuels could create a situation similar in kind to the China shock, given the geographic concentration of that industry. These lessons from the China shock will apply to AI and the energy transition.

Other lessons from the China shock are important for understanding that episode but may be of limited generalizability. China’s export growth was explosive, with its share of world manufacturing exports rising from 3 percent in 1995 to 18 percent in 2014, to 21 percent in 2020. And the reallocation of workers across sectors was likely severely adversely affected by the 2008 global financial crisis and Great Recession, in which the US unemployment rate peaked at 10 percent and there were as many as six unemployed workers for every one job opening in the labor market. To the extent that adverse effects on import-competing workers created Keynesian aggregate-demand reductions, post-2007 economic slack was a major contributor.

Maybe Trump should take another look at the 1990s and the policies that supported a tremendous economic boom.

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