SUMMARY
The statistics reveal three major trends during the 80s:
First, the Reagan-Bush era greatly polarized the nation's wealth and
income. The administration pursued multiple policies (tax cuts being only
one) which helped redistribute wealth from the middle class to the top
1 percent. In response to their eroding standard of living, Americans formed
two-paycheck households and went deeply into personal debt. Despite these
efforts, this will be the first generation unable to live as well as its
parents. Today, America has the greatest level of inequality in the entire
industrialized world, not to mention its own postwar history. The fact
that we have still not restored the tremendous growth we enjoyed from 1939
to 1973 is a damning indictment of the effectiveness of concentrating capital
in the hands of a few.
Second, America went from being the world's greatest creditor nation
to its greatest debtor nation. The public perceives this as a much greater
problem than economists do, however. Often overlooked is the fact that
we got something for our debt. Also overlooked is that we owe most of the
money to ourselves. However, this should not diminish the true problems
caused by the debt. The debt crowds out private investment; interest rates
make debt an inefficient form of spending money; and the interest is collected
by the banking community, which only adds to our inequality of wealth and
income.
Third, the economy experienced growing turbulence in the 80s, as entire
industries rose and fell. But several trends were visible. The economy
moved from a moderated meritocracy towards a more unrestricted one. Congress
favored the approach that regulation of business should not be improved
or fine-tuned, but eliminated completely. The fierce competition that resulted
produced a record number of business failures -- arguably, a healthy by-product
of competition, since it weeds out the weak. But unrestricted competition
also resulted in a record number of corporate mergers and takeovers. Today,
productive and economic power is concentrating in the hands of a relatively
small group of players. The problems of monopolies (price hikes, non-competitiveness,
inefficiency, abuses of power, etc.) are well-known. One of the advantages
of moderated meritocracies is that they allow sustainable competition.
Other than these three developments, very little changed in the 80s.
Supply-siders were not successful in fulfilling their promise of restoring
the economic growth of postwar America. The economic trends that are currently
affecting America are deep and measured in decades, and the 80s were only
a small part of them. At best, Reagonomics only slightly improved or worsened
these long-term trends. In most cases, they became somewhat worse; perhaps
the most troubling development was the decline of American leadership in
the global economy.
Policy recommendations to undo the damage are difficult to make, because
true political scientists and economists admit that these problems are
deep and poorly understood. (Interestingly, those who know the least are
usually the ones who claim to know the most.) But although specific policies
remain elusive, there are a few clearly desirable outcomes that Americans
should seek, one way or another. Debt of all kinds should be reduced; savings
and investment should be increased. The middle class should be strengthened
by making it larger and wealthier. And we should move to a sustainable
economy, not one judged successful only if it grows. Sooner or later economic
and population growth are going to reach their limits, and we will certainly
be kinder to ourselves than nature would be in determining how those limits
are reached.
Your comments concerning this webpage are welcome. I am committed to
improving or correcting all arguments and statistics brought to my attention.
My e-mail address is kangaroo@resurgent.com.
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