For “Schumpeterian pessimists” such as Hansen, Kalecki, and Weintraub, a lack of technical innovation explains the length of the depression of the 1930s. More recent scholarship argues that technical developments provided the only means of “escape from depression.” Lacking in much of this literature, however, is an explicit consideration of how and why technical innovations succeeded or failed. Moreover, little attempt has been made to assess the macroeconomic implications of microeconomic evidence on technical change in the United States during the interwar years. Studies of the depression in other nations provide a somewhat more systematic consideration of the role of technical change.

As Chapter 2 demonstrated, there were wide disparities in investment and output growth in U.S. manufacturing industries during the Great Depression. Certain industries, such as petroleum refining and tobacco manufactures, recovered quickly after the trough of 1932 and even managed to expand in net terms before 1940. Others, such as lumber products, remained virtually stagnant until war orders came from Europe in 1939.

The industries least subject to large decreases in revenues and therefore least prone to terminate net investment expenditures were those making food products and consumer nondurables such as tobacco and petroleum distillates. The relative good fortune of these sectors depended on active innovation in technique, product characteristics, and mechanisms of distribution, innovation that reinforced the latent strength of demand in these industries.