Stock Market Crashes of 1998 and 1999 (1997), brought to you by the same prescient author who penned The Great Depression of 1990, Ravi Batra. (If there were a mutual fund for bad-news products and services, I'd plow my life savings into it.) Second, to many people good times are scary and bad times are almost reassuring. After all, the higher you go, the more it hurts when you fall.
So now is as good a time as any for Myths of Rich and Poor, by Federal Re-serve Bank of Dallas Chief Economist W. Michael Cox and Dallas Morning News reporter Richard Alm. This book is a fascinating eyeopener that somehow manages to shoot out numbers like a submachine gun and yet keep you thoroughly engrossed. (Early versions of some of Cox and Alm's research have appeared in REASON. See "Buying Time," August/September 1998 and "The Good Old Days Are Now," December 1995.)
Does the book claim this bull market will go on forever? Obviously it cannot. Will inflation always be this low? That's up to us, but probably not. Will the budget remain in the black? Not if the Democrats can help it. Not if the Republicans can help it, either.
Cox and Alm do not focus on such questions. Rather, they take a long view--usually going back to 1970, often to 1900 or earlier--and point out that, despite myriad ups and downs, and despite the doomsayers who come and go, in the ways that really count Americans keep improving their lot. And there's probably not a damned thing President Clinton or Congress can do about it.
Cox and Alm start out with 10 myths that are widely accepted by Americans, especially in the news media. These include:
- Americans' living standards have been falling since the early 1970s.
We're working more, and there's never enough time to enjoy life.
Women and minorities are falling further behind.
The United States is falling behind in the race for economic supremacy.
By the time they are done, Cox and Alm have sent each myth spiraling to earth with a thick stream of smoke trailing out the back end. "In each and every instance," they note, these statements "are not just wrong [but] spectacularly wrong."
The kernel of truth at the heart of the first myth is that the hourly wage, adjusted for inflation, has fallen nearly 15 percent since 1973. The answer: So what? The only measure that truly counts is what we can buy for the amount of time we spend working. In those terms, prices on the whole have been and continue to be steeply declining. "The statistics on consumption--the most direct measure of Americans' well-being--point to a nation that's better off now than at any other time in its history," contend Cox and Alm.
A half-gallon of milk cost the average worker 10 minutes of labor in 1970, 8.7 minutes in 1980, and only seven minutes in 1997 the latest year for which data are available. A gallon of gasoline cost 11 minutes in 1950 and now goes for less than half that. But these declines are nothing compared to some price drops. A scratchy-sounding three-minute coast-to-coast phone call cost an incredible 90 hours of work back in 1910; today it costs less than two minutes of work time. A hundred kilowatt-hours of electricity, which cost a shocking 107 hours of worker time in 1900, cost a bit over an hour by 1960; today the cost is less than 45 minutes.
"A typical American at the turn of the century spent $76 out of every $100 on food, clothing, and shelter," Cox and Alm write. "By the 1990s, this portion had fallen to $37 of every $100." Just since the 1970s, food and beverage costs have fallen from over 19 percent to about 15 percent, notwithstanding that we're eating out and bringing home preprepared food more.
There are seeming exceptions, but the usual explanation is that what you're paying more for is better than it used to be. Thus, the average house at first seems to cost considerably more work hours today than in 1970. But factor in the increased size of homes, and they cost just 10 percent more. Now factor in lower mortgage rates, and depending on the size of the down payment, houses built today are cheaper. And we still haven't accounted for improvements such as central heating, air conditioning, kitchen appliances, extra bathrooms, garages, better insulation, and the elimination of lead in pipes and paint.
Likewise, cars at first seem to cost about the same number of work hours as they did in the 1970s. But they now are far safer, pollute much less, and are loaded with standard goodies like high-quality stereos that weren't even available as options in 1970. To make the point, I offer but three words: "eight-track tape players." (Shudder!)
Anything with a high labor component is likely to have declined less in price. On the other hand, the prices of products with a small labor component, such as computers, have sunk faster. This tendency helps explain the most glaring exception to the general rule: college tuition. It's difficult to argue college students are getting more for their money than formerly. But in great part, tuition reflects wage increases for instructors and administrators, probably along with the perverse effect of rising government aid, which allows schools to get away with raising tuition costs, which in turn leads to even higher levels of government aid.
Conspicuous by its absence in this book is any analysis of health care costs. There seems little doubt that, like tuition, health care is taking up a greater number of wage hours, but how much we are not informed. Surely comparing health care now to that in the 1970s is not as easy as discussing improvements in TVs or VCRs, yet one wishes the authors had tried. They do provide data that suggest we are getting more and more out of health care, noting huge improvements in areas such as life expectancy, infant mortality, organ transplants performed, and survival time after such transplants. And while complaining about our health will always be a favorite national pastime, it's interesting to learn that the number of us rating our health as "fair or poor" has fallen from 12.2 percent in 1975 to 9.6 percent in 1994, even as the population has aged.
With few exceptions, the data are truly encouraging. Every year, we're able to buy more with our work or, conversely, work less for the same products. True, this may lead to more crass materialism on the one hand and more couch potatoes on the other. But Furby obsessions and daytime talk shows seem a small price to pay for a society in which those classified as "poor" can buy many things that even well-off Americans couldn't afford a few decades ago.