In this post on manufacturing’s declining share of GDP for both the U.S. and global economies, Scott Grannis writes:
“In this same vein, I would add that agriculture was once about half of total US GDP, whereas now it is only a small fraction, yet we feed ourselves and are a net exporter of food. Here again we see how tremendous productivity gains have enabled us to devote fewer and fewer resources to the production of essential goods. This is as it should be.”
MP: The chart above shows agriculture’s declining share of U.S. GDP using annual BEA data from 1947-2009. From a high of almost 9% of GDP in 1948, the agriculture sector’s share of total output has declined steadily and fell below 1% by 2002. And yet we produce more food today than at any time in history and it’s cheaper as a share of disposable income than ever before. Thanks to productivity gains, farm employment today represents only about 2.5% of total employment compared to more than 12% of America’s workforce in 1950.
Going all the way back to the early 1800s, more than 80 percent of both U.S. employment and output were directly tied to a relatively inefficient (by today’s standards), labor-intensive agriculture sector of the economy. Food products were very expensive and consumed a large part of a typical household’s income. Over time, technology revolutionized farming, resulting in the same trends we observe today in manufacturing: huge increases in farm worker productivity, reduced farm employment, significantly lower and more affordable prices leading to a reduced share of food in both household income and national income (GDP).
And yet, when have you heard anybody claim that “U.S. farming is dead,” or talk about the “decline or demise of America’s agriculture industry?” Probably never. But a lot of people talk about the “decline of U.S. manufacturing” even though it’s going through the same long-term trend as farming – jobs and output are declining as a share of GDP, but manufacturing output and productivity are increasing. And we’re much better off because of it.