2003: The Rich Got Richer . . .
. . . and so did everyone else.
11:00 PM, Dec 29, 2003 • By IRWIN M. STELZER
MOST ANALYSTS expected this year to end with a whimper. Instead, it is ending with a bang, and not only because Saddam Hussein was extracted from his rat hole. The economy is roaring ahead at a pace that so amazes observers they are guessing it will slow a bit in the new year. That would still mean an economy growing fast enough to satisfy those in charge of George W. Bush's reelection campaign.
Big-company share prices rose by more than 20 percent, and the high-tech and small-business sectors soared at twice that rate. Productivity is scaling new heights, profits are up, incomes are rising, inflation is nonexistent, and the dollar is in a so-far agreeable decline, shrinking the trade deficit. The unemployment rate has fallen to the level it averaged in the 1990s, which decade included both boom and bust. The Bureau of Labor Statistics' survey of households shows that over 2 million more Americans are working at year end than were employed at the start of 2003.
America's industries and workers produced almost $500 billion more goods and services in 2003 than during the previous year. That means that America added to the size of its economy an amount equal to a Brazil, or an India, or over one-and-a-half Russias.
Of the world's ten largest businesses, measured by market capitalization, eight are in the United States (the others are the U.K.'s BP and HSBC Holdings). Americans bought over 16 million cars and light trucks and some 2 million houses in 2003 (estimates for the most recent months, as yet untabulated by government, come from Morgan Stanley), as consumers rewarded Bush for his tax cuts by spending about $3 out of every $4 he refunded to them, thereby putting the economy on course to become a plus in the election that is less than a year away, and finally getting our two lagging indicators--employment and CEO confidence--to turn up.
BUT ENOUGH about the year we are about to see off. This last column of 2003 (sighs of relief from readers are not appreciated) is the place to take a longer look at the past performance of the American economy. The American system is deservedly famous for the material benefits it produces, but less well known for the system's ability to distribute those benefits very widely. There is some useful evidence of the ubiquity of progress that has seen, according to some observers, the material well-being of today's secretary exceed that of Queen Victoria.
As Gregg Easterbrook, an editor at the New Republic, reports in his new book, "The Progress Paradox," there are at least 200 housing developments built around golf courses, and not all are occupied by the very rich. One such, which includes "a well-reviewed eighteen-hole course reached from the porch door via personal cart . . . [offers] beautiful, well-appointed homes . . . from about $285,000 . . . , within the means of tens of millions of Americans."
The list goes on. Almost 15 percent of all homes purchased are for use as second, vacation homes, at which Americans deploy their 3 million all-terrain recreational vehicles (cost: about $5,000 each), or their recreational watercraft, on which they spent an amount greater than the GDP of North Korea. All of this, says Easterbrook, illustrates "the grand increase in living standards for people who aren't rich." Indeed, so widespread is American affluence that "old money"--from the merger boom of the 1980s--is complaining about the crowding of marinas, golf clubs, and ski slopes created by "new money" arrivistes who made their fortunes in the high-tech boom of the 1990s.
Of course, no sensible person would claim that poverty has been eliminated in America. Or ever will be, since the poverty line is periodically raised. But remember: Data gathered by the Federal Reserve Bank of Dallas show that over 40 percent of America's poor own their own homes, 72 percent have washing machines, 60 percent own microwave ovens, 92 percent have color television sets, half have air conditioners, and 72 percent own one or more cars.
IT IS FASHIONABLE to dismiss these indicators of material prosperity on two grounds. The first is that inequality is rampant and rising; the second is that money can't produce happiness.
There is no question that statistical measures show a rise in inequality. The main reason: America welcomes more immigrants--legal and illegal--than all the other countries of the world combined. These newcomers typically start at the bottom rung of the economic ladder. Exclude them from the statistics, calculates Easterbrook, and the increase in inequality disappears. Indeed, for the 9 out of 10 Americans that are native born, inequality is declining. And here is the reason that will surprise America's critics: The decline in inequality is due in good part to the rising affluence of African Americans.