While waiting for phone calls to be returned, I ran across this article on the New York Magazine web site.
The Blip
As a baby boomer and student of history, it's a subject that interests me. The questions it asks is "What if everything we've come to think of as American is predicated on a freak coincidence of economic history? And what if that coincidence has run its course?"
I wrote some comments in response to it, which I'll share below. But I'd recommend you read the article first.
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Our expectations of growth and prosperity are based on what happened during a very brief period of history, 1948 to 1973. During this time, Japan and Germany were rebuilding from the rubble they'd been bombed into during World War II. Our main competition was military and ideological, Communism in the Soviet Union and Red China. We enjoyed a fantastic standard of living. Business and organized labor were essentially partners in the great scheme of things.
Things began to change in the early '70s. Suddenly Germany and Japan had new factories and infrastructure, while ours was aging. To cover the costs of Vietnam and the Great Society, Nixon floated the dollar, undoing the Bretton Woods Accord of 1944. Automation became more prevalent. Americans began feeling the pinch.
No one likes to give up gains they have made. Our reaction was to pitch headlong into borrowing. Who had a credit card in 1970? Businessmen with expense accounts mainly. By the end of the decade they were being pitched to everyone (my first Bank Americard, in 1979, had an astounding limit of $500.)
In addition to the extension of credit came the decline of manufacturing and the embrace of consumerism as the economy's driving engine. Baby boomers entering the workforce embraced easy credit as essential to their standard of living.
That was as unsustainable as the postwar prosperity was, and 2008 was when it finally hit the wall. We were like a single engine plane flying up a mountain canyon. The higher we got, the thinner the air got and the less pulling power the plane had. If the head wall is too tall, you smack into it.
I would say the American Century was essentially 25 years, 1948-1973, the same quarter-century the Baby Boomers were born and raised. We expected to live twice as we'll as our parents and borrowed recklessly to sustain the illusion that we were. Younger generations I believe are going to have more tempered expectations, and that's probably a good thing.
I liked this quote in particular: “I strongly believe if we understand the end of growth, we can make provisions for the economy we actually have.”
