Life after the boom

In US you can’t miss the mood of introspection. Right across the country a debate is on. Pundits read-aloud the horoscope of the US economy. To find out what went wrong and how. That it is now bad is everybody’s point. The row is only on how deep is the festering wound. And how long it would take to heal.

As usual, opinion is sharply divided. Luckily only two schools of thought. Let us call them optimists and pessimists. At the moment, the doomsayers are one up. Hogging the limelight. So we will begin with the other side.

Yes the optimists insist that everything is basically fine with the US economy. The crisis seen now is nothing but a halt after a marathon race. A well-deserved rest at the end of those huffing and puffing. Nothing more should be read into the south-going charts and graphs.
Indeed far too many set-backs dotted the past two or three years. The dot.com bust, the high-tech collapse, steep fall in corporate profits, a growing number of bankruptcies and, of course, the 9/11 disaster.

Where does the US economy rest now. Key indices in growth, personal income, employment and productivity do fluctuate, often violently. More crucial is the fact they all are within pattern. In other words no precipicitous fall. The economy is only recouping. No crisis please.
Even if the signs are troubling, it is not time for air raid sirens. Take for instance the unemployment figure. At about 6 percent, they are at an 8-year low. It’s ok. Is it intimidating? No, say the optimists. Why?

They have an explanation. Back in the seventies and eighties the unemployment level was equally bad. But those were boom years. And it was during this period the federal defict, dubbed for long as chronic, was converted into sustainable growth. This is not to deny that there were no hang up. Thanks to better designed monetary and fiscal policies. Real hourly wages began to show, for the first time, a rising trend. As a result, there was only 11.3 percent of the population below the poverty line in US at the turn of the century. A decade ago, the ratio was 15 percent. After all, taste of the pudding in eating.

The starry-eyed among them also take comfort from the bits of news trickling in from both new old industrial landscapes. Reporters, scanning the silicon valley rubbles for traces of life, come back with mildly bullish accounts. The streets of the high-tech kingdom are of course empty. No Ferrari in sight. The scintillating restaurants are gone. Rent and wages are down to earth. On the whole, a cluster of ghost towns.

At the same time, they say the valley is down but not out. Here and there a few old honchos are trying to get their act together. Helped by the low-cost scenario and the valley’s rich heritage. The Phoenix rising from the ashes sees its salvation in new technological frontiers, bio-informatics and Nano-technology. But no gold rush. All are patient including the vultures who over saw venture capital funds. For the record 2001, was not too dry. Over $6 billion came from venture capitalists. Though it is a far cry from the $21 billion they pumped in 2000.
Nonsense, roar those past all hopes. They call it even sunset for the mighty US economy. For them the pendulum has swung and it is a gathering storm. For once the greenback is no longer the pole star it was for the wobbling currency markets. Wall Street has lost its momentum. Dow shed all hopes going up to 36000 in five years. Nasdaq which at one stage looked set to overtake its senior is struggling even to hold the lower levels.

What more do you want? The leading indices foreshadow gloom. What out there in the corporate market? “The funeral pyre of bruised and tattered corporate reputations” is what we see there. Worse, almost all leading companies, once worshiped as models for honesty, efficiency and non-stop growth, are being investigated.

What do all these added up? The lose of weight for the dollar has far-reaching implications for the US economic supremacy and internal monetary paradigm. No one now talks of exporting American entrepreneurial dynamism across the Atlantic or the Pacific. At the same time, various European models, sporting their liberal and egalitarian labels, are gaining in popular esteem. How the US economy grew in eighties and nineties? The myth is being shattered. Looked closely increased productivity played only a small role. Monopolistic tendencies, frowned upon for decades, ensured the fast growth. Mergers and acquisitions struck at the root of the free market economy that underwrote US industrial supremacy. And competition, the driving force for US business all along, is now getting increasingly circumscribed.
Economic historians feel tempted to draw parallels. Yes England came first with industrial revolution. But steam engines were juxtaposed with five-year old (boys) who were sent up the chimneys to clear the soot.

Then Germany. The showcase of superior technological prowess and hard work. It was in the reckoning during Second World War and even thereafter. Japan was hero-worshipped for its cute gadgetry. Even Russia sat on the throne for a while. All admired its huge military machine and tour de force in space technology. 

Now who is there to succeed America? None. So same status for all advanced countries. No immediate danger of being upstaged. The reason is not far to seek. Only innovation can drive economic growth. Nothing else since the industrial revolution.

After every innovation there is a pause. Knowledge doubles in four or even two years. As a rule, pause is used for refining the old products. Take automobiles as an example. There has been no change in the structure of a car or bus. Even with better engines and other related and unrelated comforts. A new device must come to drive the cars, trucks (and even two wheelers) away from the roads. Till then it is all in low gear.

If it has all been so, is there anything basically unsound about the US society on the whole? The question, a healthy one at that, crops up in the intellectual circles. The feeling is widespread that it is time to look beyond CEOs earning $40 million a year and investment bankers taking home $2 million.

Kevin Phillips raised the issue. He is no socialist. Or even a democrat. On the other hand he is a Republican spin master running a consulting firm. He makes himself heard.
His new book, ‘Wealth and Democracy! A Political History of the American Rich’, is not for fanning the flames of the class war. But the book is attracting an enviable number of readers. Kevin Phillips lashes out at the society. Especially the excesses of America’s free market economy. And more important the moneybag democracy. He sees no method in the madness of superrich ways. He means that the egalitarian policies of Lincoln, McKinley and Nixon had given way to Wall Street jargons, Darwinism and poor health care, education and tax-cut worship.

Even before Kevin Phillips came on the scene, questions were being asked about Bill Gates and Micro-Soft. Bill Gates philanthropy is lauded. But how came he and Micro-Soft amass so much wealth in a society which never looked kindly on monopolistic tendencies. The advantage of being first in the field insufficiently explains the pile-up of that scale.
It is being argued that under the cover of the World War, Vietnam War and threat of another World War, Washington spent and spent. Allowing some parts of the economy to corner more dollars than others. Computer technology and telecommunications held their ground following the same pattern. With more money in hand lobbying for favourable economic policies was made easy.

Now income disparities are at their highest. At lower layers people suffer from longer work weeks, same wages, declining health and negligible retiring wealth. The average family cash income has shown no change since the early eighties. Even so, manufacturing companies are going as far away as China in search of cheap labour and low taxes.
Finally a look at the top. There, adjusted for inflation, the average cash income climbed &0.256 million to more than &0.644 million. Who benefited from the new taxed policies, and long term deficits in social security and medicare?

The author’s parting kick is the most devastating. He sees America as the “ aging visage of the leading world economic power-purple veined with years of high living. Lips curled with the insolence of great wealth, eyes blood-shot with the late vigils of increasingly frequent financial crisis”.

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