Harlow H. Curtice, President of General Motors, was “Time” magazine’s “Man of the Year” in 1955, the first businessman to receive that honor since Walter Chrysler in 1928, and the last until Ted Turner in 1991. Curtice presided over a U.S. economy that provided rapidly increasing living standards every year to the American people. One is forced to ask: what went wrong?
Time’s listing has been by no means infallible – lovers of freedom and good government will be infuriated that Mikhail Gorbachev received the honor twice (including “Man of the Decade” for the 1980s) while Margaret Thatcher never received it at all. Nevertheless Curtice was a worthy recipient. In the 1930s he had rescued Buick, then GM’s weakest brand, from the depths of the Depression, re-positioning the brand as the epitome of middle class achievement and gaining a sales success with Chinese Emperor Pu Yi that was to lead to vast profits for his distant successors seventy years later. As President of GM from 1952 to 1958 he made it the first corporation ever to report profits of more than a billion dollars, and presided over the world’s most successful company, with a 60 percent market share in an era in which the United States, the automobile and General Motors were all paramount in their fields.
Curtice’s United States was a country in which productivity increased at rates never seen before or since, and in which wealth flowed smoothly through the system to the American working man (although not, it must shamefully be remembered, to African Americans south of the Mason-Dixon Line.) Curtice’s predecessor Charles E. “Engine Charlie” Wilson had famously opined that “What’s good for General Motors is good for America,” a statement much mocked but at that time very largely true. High productivity growth, stable employment and income gains flowing smoothly throughout the income distribution are surely aspects of an ideal economy that all can admire, whether politically of the left or the right.
We are not in such an economy today. Productivity growth is much ballyhooed by the George W. Bush administration and the Federal Reserve Board, but in reality even in the long period of economic growth since 1992 productivity growth has been well below the level of 1947-73. Wage levels at the bottom of the economic pile are continually eroding in real terms, down more than 20 percent since 1973 even as overall Gross Domestic Product per capita has increased by 80 percent. Labor turnover has increased sharply for older workers, and workers without a college degree. In other words, however much GDP may have increased since 1973 it is likely that the economic “satisfaction” of the U.S. workforce as a whole has sharply diminished. Surveys of the percentage of people thinking “things are on the wrong track” and expressing cynicism about U.S. institutions tend to confirm this view.
Shills of the current cheap-money bubble and the New Economy will dispute the superiority of the Harlow Curtice economy, claiming that it was un-innovative, that its high top rates of income tax and dominance by large corporations penalized entrepreneurship and that the structural changes since 1980 represent a resurgence of capitalism from an unhappy social democratic mid-century. Given the feeble performance of the U.S. productivity statistics in the last 32 years and the yawning U.S. trade deficits of the last decade, it is however pretty clear that these claims are without foundation. Innovation, in terms of increasing productivity, increasing life expectancy and improving living standards for the American people, was far greater in the Harlow Curtice economy than it has been in the much vaunted “New Economy” of the last decade, many of the major innovations in which on close inspection turn out to have been new techniques of accounting fraud.
There are many causes for this unhappy change. Some, like increased foreign competition, were inevitable – the United States was in an especially favorable economic position in 1955 because of the devastation of Europe and Japan by World War II, and their slow recovery thereafter.
Some, such as the workforce’s search for self-actualization through work and family life and the declining salience of traditional ethical standards may reflect changes between the “G.I.” generation that formed the workforce in Curtice’s time and its “Baby Boom” successors today.
Some, like increased environmental protection, equal rights and anti-discrimination legislation, and greater safety consciousness may reflect a conscious and willing political tradeoff of economic benefits for other societal goals, perhaps bringing greater overall satisfaction thereby.
Others, like the Information Technology revolution and the consequent increase in the value of academic qualifications may be largely temporary – I cannot believe that a huge percentage of the Americans of 2100 will be engaged in writing software code.
Yet others, notably the huge increase in low skill immigrant labor, with its consequent pressure on working class living standards, reflect decisions by the elite political class that were never properly put before the electorate, are not in its interest, and do not reflect its wishes.
Finally, there is globalization, the ability through improved technology to communicate so effectively in real time with anywhere on the globe that huge segments of industry and the service sector can be outsourced to the world’s supply of cheap labor. This is very little due to explicit political decisions – the world is moderately more free trading than in 1955 but only on balance – and mostly due to the forces of technological change. Unlike the rise in the software industry, which appears close to saturation, this process may be intensifying and impossible to reverse. Contrary to optimistic baloney from both U.S. political parties and the great bulk of economic commentary, it has been thoroughly negative in its effect on U.S. living standards. On the other hand, it is the best possible way to raise the Third World out of poverty.
To a large extent in terms of its greater economic efficiency, and without question in terms of the overall satisfaction and welfare of the American people, a return to the Harlow Curtice economy in the United States would thus be desirable. What is not clear is whether such a return is feasible, or is a mere pipe-dream. Nevertheless, there are some steps that can be taken that would lead in the right direction:
Heavy low skill immigration presses even more sharply on the living standards of the less skilled than does globalization, since many of the jobs the low skilled can undertake, such as personal services, are not subject to distant competition. The United States should return towards the restrictive Immigration Act of 1924, which remained in force until 1965 and allowed the rapid increases in living standards of Curtice’s day.
In a globalized world, protectionism sufficiently draconian to protect U.S. workers from cheap foreign labor is likely to prove unenforceable. In any case it is immoral; the Third World too deserves to raise its living standards and enter a Harlow Curtice economy of its own. Since the world’s improvements in technology rest almost entirely on a tiny elite of highly skilled scientists, engineers and managers whose supply is finite, this can only occur if world population growth is brought below replacement level. Development economists have noted the well established tendency of population growth to decline as wealth increases; it appears likely that this is a two-way effect, so that a reduction in population growth produces a faster increase in wealth, rather than simply being an effect of it. This will particularly be the case for fast populating but economically stagnant regions such as Africa and Latin America, for which population control by any means available should be the world’s No. 1 priority.
The dead weight of government on both industry and the working classes must be lifted. A bonfire of environmental and safety controls would be appropriate, as would a slashing of the marginal government functions that have proliferated since the 1950s. Taxes must be redirected away from moderate earned incomes and dividend income (paid by large, well established companies) and towards speculative gains of one sort or another, sterile profits on overpriced housing and very high incomes in general. The 30 year old billionaire, so emblematic of the 1990s, was not present in the Harlow Curtice era and is not a productive innovation.
We must eliminate altogether government subsidies and corporate welfare, the benefits of which flow almost entirely to the rich. The explosion in the lobbyist culture and Congressional corruption in the last 50 years may not have been the principal cause of the demise of the Harlow Curtice economy, but it can’t have helped.
Removing tax subsidies for healthcare premiums, reducing government subsidies for non-catastrophic healthcare in general and clamping down drastically on medical malpractice suits would force the healthcare sector to slash its costs and bureaucracy and return to its proper modest place in the national economy.
Interest rates must be sharply increased. Not only do low interest rates encourage job outsourcing to the Third World, they also discourage middle class saving and encourage over-investment in unproductive real estate and speculation of all kinds. With low stock market price-earnings ratios, a tiny pool of venture capital and limited availability of leverage, the U.S. cost of capital in the Harlow Curtice era was the highest in the twentieth century. This was unquestionably beneficial; it greatly reduced wastage compared with the current cheap money era, and it maximized the United States’ competitive advantage over countries whose cost of capital was even higher.
Runaway population growth, cutthroat competition with an infinite supply of Third World labor and an endless proliferation of get-rich-quick schemes fueled by cheap money are not a utopia, they are a dystopia. The sooner we realize this, the better.
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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)
This article originally appeared on United Press International.