|WORKS DISCUSSED IN THIS ESSAY:
Michael Elliott, The Day Before Yesterday: Reconsidering America's Past, Rediscovering the Present (Simon & Schuster, 1996).
Jeffrey Madrick, The End of Affluence: The Causes and Consequences of America's Economic Dilemma (Random House, 1995).
Robert J. Samuelson, The Good Life and Its Discontents: The American Dream in the Age of Entitlement, 1945-1995 (Times Books, 1995).
Demographically, it had to happen. America's baby boomers were bound to be hit by nostalgia for their childhoods at some time, and the great transition from their 40s into their 50s seems to have been the trigger for an entire generation to feel a collective lump in the throat. Three recent books by Michael Elliott, Jeffrey Madrick, and Robert J. Samuelson are the literary and socioeconomic equivalent of the sudden fashion for Nick at Nite, the Nickelodeon cable feature where boomers can rediscover the television and the comforting texture of their childhoods. For behind Sergeant Bilko and I Love Lucy and Leave It To Beaver lay the long postwar boom, the American miracle of the making of the world's first mass middle class.
"Why did Americans look back on the years after 1945 with such longing?" asks fortysomething Michael Elliott. "Because they were a time of great—unprecedented—national cohesion," he answers on one page. On another, he offers: "No immigrants; less bitter class divisions; a benign federal government; utter domination of the world economy."
"The economy did so well for the first few decades after the Second World War (especially in contrast with the Clutch Plague) that Americans began to assume that Big Government and Big Business could guarantee its performance, and more, that the resulting improvement would effortlessly lead to more social justice, personal fulfillment and greater world order," writes just-turned-50 Robert J. Samuelson. "The United States would be the world's role model; our democracy would be the most admired, our economy the wealthiest."
For fiftysomething Jeffrey Madrick, "spreading prosperity, growing incomes, rising home ownership, expanding leisure time, increasing access to a good education, more secure retirements, the steady climb towards the middle class by more and more Americans, and an economy whose bounty has consistently exceeded expectations defines the golden age . . . characterized our history until 1973."
For each of these three authors, the golden age is over. They also agree that it ended at roughly the same time, in the early 1970s. This was the period that saw the Watergate scandal, the end of the Vietnam War, the coming of the OPEC price rise and its subsequent inflations, and the marked end of a 25-year period of growth in median family incomes.
In the early 1970s, the baby boomer generation, as indulged and pampered as any in history, began flooding into the workforce. This was when Samuelson was a cub reporter on the Washington Post, building to his current eminence as economic columnist for the Post and Newsweek. It was the period when Jeffrey Madrick was earning his Harvard Business School qualifications, and embarking on his admirable career in economic journalism. It was the time when Michael Elliott, a British baby boomer, fell in love with America and its vision of plenty during his first visit in 1974. He came to Chicago to teach law, returned as a journalist for the Economist, and appears set on staying as a distinguished editor at News week. (An interest should be declared here: Elliott and I are friends as well as countrymen, and he kindly lists me in his book's acknowledgments.)
Boomers have one experience in common. They grew to maturity in one kind of America, and built their careers in quite another. The fundamental fact of political-economic life in modern America is that from 1947 to 1973, median family income doubled, from $18,099 to $36,893 (in constant 1993 dollars). Then it stalled. Between 1973 and 1993, it rose by less than 5 percent, to $38,364. (I rely here on the work of Lawrence Mishel and Jared Bernstein, amplifying the Census and Green Book data, and published in the Economic Policy Institute's The State of Working America. Samuelson cites roughly similar figures on page 67 of his book, again based on the Census data.)
The world's most extraordinary prosperity machine suddenly shifted into lower gear, and has, for a dismayingly large number of Americans, stubbornly stayed there. All three of our authors agree that there was no single cause for this, the formative experience of their adult lives, but they all cite the obvious factors that come to mind.
The workforce grew, with the baby boomers and the return of mass immigration and the readiness of ever more women to work. The social programs of the Great Society were imposing their growing demands on the federal budget. Inflation was distorting traditional patterns of thrift. Other countries were catching up with the technological and managerial lead America had enjoyed in the years after 1945. The opportunity advantage of the vast U.S. internal market became available to other countries, and global competition intensified. Corporate profits fell, squeezing the potential for capital investment.
Samuelson argues that business investment as a share of gross domestic product (GDP) grew in each decade from the 1950s (9.7 percent) to the 1980s (12.1 percent). Elliott insists that "America's overall investment certainly declined after 1973. The share of that investment going to research and development also declined, and the rate of growth of investment in industrial equipment slowed quite markedly from a point somewhere in the mid-to-late 1970s." Madrick claims that net investment as a share of GDP was running at a puny 3 percent in 1994, compared to a robust 7 to 8 per cent in the 1950s and 1960. "Overall, capital investment per worker rose by only 1.3 percent a year between 1973 and 1987 in America compared with 6.4 percent a year in Japan and 3.5 percent a year in Germany," Madrick adds.
Business investment, overall investment, R&D investment, capital investment—these are all different things. It is irritating to find these authors tossing around such variant statistics; it's like watching a game where a football is suddenly substituted for a basketball. Samuelson cites the Bureau of Economic Analysis data (published by the Department of Commerce). Madrick cites Data Resources, Inc. Elliott offers no footnotes or citations at all.
For Elliott and Samuelson the period of 1945-73 was exceptional, an atypical burst of speed in U.S. productivity growth. For Madrick the golden age had begun after the Civil War in 1870, with annual GDP growth rates of 3.4 percent that continued for just over a century, until 1973. Then America hit the slow growth era, and GDP growth has averaged 2.3 percent since. Again, we are comparing apples and oranges. Madrick is taking about GDP growth, and Samuelson is talking about productivity.
Though these three books are ostensibly about the same thing, they are in effect talking past one another. Madrick offers the most straightforward economic analysis, and it is also the most fatalistic. His thrust is that the post-1973 period of slow growth is the cause of America's social and political discontents. Madrick reckons than since the great deceleration of 1973 we have lost some $12 trillion in GDP: "More than enough to have bought each of America's homeowners a new house, or paid off all our government, mortgage and credit card debt, or replaced all of our nation's factories, including capital equipment, with new ones."
Unlike Samuelson and Elliott, who concentrate on the postwar period, Madrick tries to cast the era of American exceptionalism back a century more. But all three rather glumly accept that the golden age is over, and that the United States must now learn to live within its straitened means. "Our main rival is not the rest of the world," Madrick concludes. "It is the memory of our exceptional past, when our economic advantages made us the most productive country in every major industry. . . . Throughout our history we believed that we were a chosen people, a belief essentially sustained by our growing affluence. Now we shall see who we are without it."
Elliott offers the most succinct argument, couched in that devilish cleverness that is the inimitable voice of the Economist, a journal that makes up for the private griefs of British decline by being superior about everyone else. He begins by sniffing that "Americans whine." And he concludes, "Much of Americans' contemporary mood of unhappiness stems from their failure to understand how damn lucky they once were." The connective argument is much more entertaining and more subtle than those brisk and brash bookends might suggest.
Elliott believes that the U.S. should be getting back to sociopsychological normal after the wonder years of the golden age. "We shouldn't exaggerate our present discontents, but we will always do so if we think that the Golden Age was normal and the years that followed an aberration. Precisely the opposite is the case. The messy, fragmented babel of a place of today is how America has usually been." America can best address its current whining by remembering the energy and jaunty self-reliance with which its ancestors built the railroads and invested in education and opened their ports and their political systems to all the talents.
For Elliott, the golden age was defined by the unusual power and prestige of the federal government, acting with broad public support. In by far the most readable and most ambitious of the three books, Elliott ranges from Detroit's assembly lines to the impact of the air conditioner on the South to explain the confidence in technology. But he stresses that there was an essential new component to the golden age: Democratic government was the can-do instrument that had taken on the Clutch Plague, World War II, and the Cold War, and prevailed in each encounter. Ungrateful Americans then complained that their taxes were too high and that the Feds were far too intrusive. "Fifty years after FDR's death, there was a broad consensus that the cohesive role which the federal government had lately played in American life had come to an end," Elliott suggests.
Samuelson offers the most moralistic argument. He asserts that the easy affluence of postwar America developed a culture of entitlement, in which too many individuals and groups developed too many expectations and asserted too many "rights." Behind this lurked the beguiling myth of the American Dream, that the future would always be better than the present. The federal government was expected to deliver far too much, and both the economy and American society were becoming overstrained. At times, this can sound like Bill Clinton at his most Reaganesque: "People ought to do more for themselves and expect government to do less. We need to curb our casual use of government— especially, the federal government—as the problem solver of last resort."
This flies in the face of the available evidence that the U.S. government does not really try to solve very much at all. It does rather less for its citizens than other members of the Organization for Economic Cooperation and Development. The United States offers far less strategic guidance for the economy than even, for example, Singapore, South Korea, Taiwan, or Japan, countries that have manifestly not suffered from government interference in the economy. In many ways, Americans ought to expect their government to do much more for them: to reduce the extraordinary homicide rate by tackling the promiscuous availability of firearms; to reduce shamefully Third World-like infant mortality statistics by taking public health seriously; to tackle the national scandal of the public schools, at least to the degree of ensuring that high school graduates are literate and numerate.
Samuelson can sound like a caricature of a schoolmarm: "An ethic of responsibility needs to replace an expectation of entitlement in government policies and private behavior." He can also sound at times worryingly like Senator Phil Gramm, one of those new Republican politicians whose education and career were furthered by public investment, and who now suggest that all this public spending has gone too far, and that all this government meddling in our lives is doing more harm than good. To cite one example: "Affirmative action now generates more ill will than social justice. It is a bad bargain."
Closely read, the surprise of Samuelson's book is how little it sounds like the confident diagnostician of his Newsweek and Washington Post columns. As a columnist, Samuelson comes up with brisk ways to balance the budget, to puncture the pompous, and to wave aside the quibbles of politicians who have to inhabit the no-man's-land between wisdom and expedience. In book form, Samuelson is more hesitant and rather plaintive, as if writing the confessions of the impotence of the modern public thinker. Time and time again, he endearingly admits that we do not know what makes economies function as they do or how to improve them; nor do we understand the relationship between the economy and society at large.
"We can't consciously change what we don't understand, and that is a great deal. . . . No one has convincingly explained the productivity slump. . . . These trends are erratic, no one really understands them." Such intimations of fallibility are the more welcome, because when Samuel son does wax assertive, he can become intemperate. "At the close of the twentieth century, American government and politics seem almost suicidal. They compulsively generate public distrust."
Samuelson tries to argue two cases at once. As a moralist, he wants to persuade us that as citizens we have come to expect too much, and that our politicians have pandered to us, and that we should all become more responsible. As an economist, he wants to tell us that the U.S. economy is not broken, that its deficits can be almost painlessly fixed, and that public living standards are a great deal better than most statistics reveal.
This is true. The median income statistics do not take into account bigger and more comfortable homes, a cleaner environment, and wider access to health care through insurance paid by employers or government. Still less do the raw figures adequately reflect improved quality of life, through more telephones and air conditioners and far greater choice of food and clothing. But then the income statistics do not reflect the decline in the quality of life that comes with increased crime and drug abuse. Nor do they adequately reflect the increasingly uneven way that America is these days sharing the wealth that it generates.
Perhaps the most striking feature of these three books is that they fail to pay much attention to the extraordinary disparity in outcomes for different groups of Americans over the past 20 years. These books also rather duck what some of us may identify as one of the most predominant characteristics of the golden age after 1945: the degree to which America became an egalitarian society. The period was marked by steeply progressive income taxes, which could rise to 91 percent on income above $400,000 a year, and by huge investments in public goods like state-subsidized education.
Despite the rhetoric of free enterprise and the suspicion of anything that smacked of socialism, a strong argument can be made that America in the golden age was the most successful social democracy of them all. The industrial workforce of the U.S. into the 1970s was the best-educated, best-trained, most-productive, and best-paid in the world. Union-negotiated paychecks became the locomotive that hauled the great consumer boom, as American workers moved from the cities to the suburbs, periodically bought new cars, and saved to put their children through college. One of the classic political phrases of the period was John F. Kennedy's airy assumption that everybody would do well together—"A rising tide lifts all boats." Perhaps it did then. It doesn't now.
Two fundamentals of American life have changed. In the golden age, the country barely needed to trade at all. Imports and exports were each about 4 percent of GDP in the 1960s. Last year, exports were over 12 percent of GDP, and imports even higher. From a country for whom trade was a luxury in 1968, the year Bill Clinton first went abroad, it has now become so central to the U.S. economy that this has been since 1992 a more export-dependent economy than Japan, which exports just under 10 percent of GDP. In the course of a generation, the U.S. economy has undergone a revolutionary shift.
The second fundamental shift in American life has been the slow, sad shriveling of that egalitarian principle that sustained the golden age. The steeply progressive tax system has gone. The devotion to public investments in the public good has not gone, but it has become far more problematic. The easy assumption that all members of the next generation could expect to do better than their parents has almost wholly disappeared. And at least to this outsider, Americans seem to be reinventing the class system that their ancestors wisely fled Europe to escape.
The contours of the new American class system are strikingly similar to those of Edwardian Britain. There is a small number of mega-rich, followed by a very large and comfortable upper middle class. At the bottom comes what Karl Marx called the lumpen proletariat and what we call the underclass. In the middle, a large number of the respectable poor is divided between those who fear dropping into the underclass, those who still aspire, and the vast majority who know that they are stuck in their station and suspect that their children may be stuck as well. The traditional mechanism of social mobility, the public school system, is laboring, and the cost of a college education is soaring. At the same time, median incomes are stagnant or dropping.
Despite its gestures on behalf of the working poor and struggling middle class, the impact of the Clinton administration seems likely to intensify both these trends, toward more trade and more social stratification. Although he was building on a free trade agenda sketched out in the years of George Bush, it was Clinton who split his own party to enact the North American Free Trade Agreement, and the new GATT treaty that established the World Trade Organization. The seriousness with which he has pursued his free trading strategy, in the teeth of Democratic Party opposition, almost compels the conclusion that this is the Clinton Doctrine, the core project of his presidency.
And note the Doctrine's subtlety. Britain's Margaret Thatcher had warned at the 1990 G-7 international economic summit in Houston of the dangers of a world dividing into three competing currency blocks of the dollar, the yen, and the German mark. She feared that such economic competition would in time lead to strategic rivalry. The elegance of Clinton's economic diplomacy is to fend off such an outcome, by locking the U.S. into the heart of each of the big trading blocks. The pattern of the Clinton Doctrine is not only clear; if these free trade blocks develop according to expectations, Clinton will go down in history as the real architect of the post-Cold War world, and of America's keystone role within its various groupings.
Free trade boosts imports and exports and leads to a larger economic pie, but it divides that pie in ways that disproportionately benefit the wealthy, the educated, the skilled, and the adaptable. It exacerbates that growing disparity, which has been marked in American income statistics since 1973, between the incomes of those with a high school diploma or less, and those with college degrees. Free trade, without an accompanying series of government measures to protect its less-equipped citizens with the education and training skills to cope with its competitive challenges, carries some ominous political baggage in its commercial wake.
In 1992, Clinton campaigned on the potential of activist government to equip the American workforce for this fray of global competition. He promised to flesh out the sparse American form of the welfare state into a more European shape with a national health insurance system, national job training, and apprenticeship schemes. These were always justified in terms of the Clinton Doctrine, part of an economic rather than a social strategy. Once he was elected, these plans went down to defeat at the hands of a nominally Democratic majority in Congress. In short, Clinton has intensified the pressure of global competition on the American workforce, while doing little to help them to adapt or to resist.
It is, of course, highly unfashionable to think in terms of class, even as the signs of stratification hurtle upon us. Samuelson's high-minded sniffs at the way we all wallow in the entitlement troughs is not conducive to much sympathy for those who genuinely need public assistance. Madrick notices that the national wealth is being distributed in ever more partial ways, without steeling himself to draw the obvious social conclusion. Elliott, as a victim of the English social system, keeps inching toward a class analysis of modern America. "At the start of this century, as at its end, class divisions were all too evident," he says. Later, he adds that "Playing off blacks, foreign competition and immigrants, a de gree of class and racial resentment would eventually develop in the white working class, of a kind and intensity unknown in the Golden Age."
Elliott points to the most dramatic feature of America's racial condition, which is the degree to which it is giving way to a pathology of class. The civil rights movement and affirmative action and innate talent have combined to produced a large black middle class, many of whose members are abandoning the inner city to move to the suburbs, just as the whites did.
Despite the efforts of the Clinton administration, it will not be easy to fit America's glorious and messy sprawl into the neat layers of a European class system. The culture presents too little tradition of social deference, and too much celebration of self-confidence, to cooperate. Americans have traditionally been far more mobile—geographically in search of status improvement, and socially across the income bands. But these jaunty American energies are coming under un usual strains. They particularly bear down on the poor, whose traditional ladders of advance ment—from the public school system to affirmative action—are systematically being whittled away even as their real wages decline. A grisly social ex peri ment appears to be getting under way to see just how much pressure an underclass can take before they do something about it.
These strains are inching up the social food chain to affect the middle class, for whom a college degree has become less affordable, a job less certain, and a lifetime career more subject to dislocation. There is a psychological dimension to the current national mood of socio-economic disquiet revealed in the opinion polls, which belie the relatively sunny official statistics of unemployment and growth in GDP and productivity. We may try to define class with objective criteria, but the essence of class is consciousness; you are what you deem yourself to be. In America of the golden age, an unprecedentedly large proportion of the population looked with hope at the future of their country and their own family's place within it. These days, they don't. A growing number fear what the future may bring, with consistent majorities of more than 60 percent of Americans telling pollsters that the country "is on the wrong track."
There have been exceptions who have done very well during the slow-growth era. It is interesting that all three of our authors come from a profession that has grown in income, in status, and in social prominence since the golden age ended. Whether the American economy is slowing permanently or just easing back to normal after an unsustainable sprint, it has clearly become an agreeable place for the economists and media folk and others who analyze its ailments. In Edwardian days it was also fashionable for the prosperous to worry over the state of society, and to hark back to a golden age when Britain's economic dominance was unquestioned. That Edwardian era was also a time of furious growth in world trade, of a militant feminism, and of alarm at the rise of the Yellow Peril across the Pacific. It was also marked by a surge in the numbers of the elderly, as public hygiene and antiseptics produced an unprecedented demographic bulge that provoked the great political row over Lloyd George's budget to introduce Old Age Pensions. Even without the events at Sarajevo, the parallels are becoming too striking for comfort.
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