Slow Economic Growth in US Poisons Race Relations

By , H. Erich Heinemann is chief economist of Ladenburg, Thalmann & Co., investment bankers in New York.

FOR two decades, the United States economy has been marching in slow motion. Since 1973, real labor income per worker (wages, salaries, and benefits adjusted for inflation) has advanced a scant three-tenths of 1 percent annually.By contrast, during the first 25 years after World War II, real income grew at a steady rate of more than 2.6 percent a year. The average US worker today earns about half what he or she would have earned had the trend of the early postwar period continued. Shock waves from the slow-motion economy have torn at the nation's social fabric. Slow growth has produced a zero-sum society, where one group's gain is inevitably another's loss. In a basic sense, this is what lies behind the perennial gridlock over the federal budget. Politicians, who must face the voters regularly, cannot prosper taking from Peter to pay Paul. Equally important, slow growth has helped poison and polarize US race relations. This is true not only between blacks and whites, but among all racial and ethnic groups. Linda Chavez, executive director of the Civil Rights Commission under President Reagan and a Republican candidate for the US Senate in 1986, has published a brilliant analysis of the successes and failures of the nation's Hispanic minority in achieving the American dream. Ms. Chavez argues that Hispanic leaders "have a vested interest in showing that Hispanics were ... the poorest of the poor." Even so, she says "most native-born Hispanics have leaped over blacks in achievement" and today enjoy solid, middle-class living standards. The central thesis of this important volume, "Out of the Barrio" (Basic Books, 1991), is that too often public policy works to isolate and impoverish those it was supposed to help. Rather than bring Hispanics into the mainstream, government has kept them out. She shows that the first criterion of a good social welfare program is taking good care of its social workers. Chavez is silent on the transcendent issue of growth. This is what will really determine how Americans - of all colors, shapes and sizes - will live in the 21st century. Of course, people of good will must work for better race relations. In the end, however, the size of the pie is more important than how it is sliced. Reaganauts sailed into Washington in 1981 with much fanfare about new incentives for the nation to work, save, and invest. Since then, Americans have certainly done a lot of working, but unfortunately far less saving or investing. For all their fancy supply-side rhetoric, Republicans did nothing over the last 11 years to cure the slow-motion syndrome. Many people argue they have made the problem worse. That said, Chavez does a superb job exposing absurdities and anomalies in US social policy. Her particular targets are bilingual education programs for Spanish-speaking children. US officials intended such programs to help students study basic subjects in their native language while simultaneously learning English. Over time, the focus shifted. Now, "the purpose is not to assimilate Hispanic children, but to maintain and strengthen their ethnic identity.... In the process, these children have become the most segregated students in American public schools." Chavez, now a senior fellow at the Manhattan Institute, a New York City think tank, examined a range of topics in great depth: the Voting Rights Act of 1965, US immigration policy, and the chronic underperformance (within the Hispanic community) of Puerto Ricans in New York City. Each of these discussions is a metaphor for more basic questions. Does US social policy help to weave the many ethnic and cultural threads in American society into a coherent fabric? Or, alternatively, does it divide and separate people to serve parochial needs of narrowly defined interest groups? Chavez clearly answers "no" to the first question and "yes" to the second. She is angry, and she wants to do something about it. Sadly, however, social engineering - no matter how well focused or administered - will come to naught in a slow-motion economy. More than ever, growth is the name of the game.

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