Measuring economic progress in a more complex world
Picturing the world at work these past 75 years is like trying to pick the best ten pictures out of the family photo album. Does one pick the crises? The stock market crash of 1929 or the global depression of the 1930s? Or does he pick events that developed over decades such as the rise of union power or married women in the work force, or the effects of new inventions such as the mass production of the automobile in the 1920s or the explosion of the semiconductor industry in the 1970s? Yes, the peak event and the evolving one are both part of the scene, and The Christian Science Monitor's pages have seen them all in black-on-white word pictures.
Looking back at the famous stock market crash, for instance, the Monitor on its front page, more than a year before the event, played up in a lead story the visit to New York of a Swedish economist, Gustaf Cassel, who said that stock prices were far too high and it was the duty of the press to tell people they stood more chance of losing money on the stock exchange than making it. Then, just a month before the crash in 1929, it reported, again on Page 1, Roger Babson's famous warning in a story titled, ''Babson Warns Investors of Stock Decline.''
But do the individual photos tell the story of the whole family? How your grandmother looked as a baby - or at 75 - doesn't tell you how she lived her life. Even all the photos in the album do not do that, but together they re-create the atmosphere of her time. Thus, the real story of how we work and what has happened to our economies is seldom if ever fully portrayed by following a single subject or a single year's events. Even the Great Depression, which formed the basis of political and economic theories and continued to influence business decisions for 30 years, has begun to fade into the larger canvas of the 20th century.
If we look at where the world stands today vs. the first decade of this century, there are, however, at least three streams of events that tell much of the economic story of these 75 years:
* The debate, which still continues, over the proper role of government in fostering economic growth and being responsible for the welfare of its citizens. We shall return to this at some length later in this piece.
* The increasingly global nature of the economic system, expressed in 1908 by a last-ditch scramble to gain colonies for the European empires and now by the attempt to integrate the prosperous, industrialized West, including Japan, with the emerging industrial nations of the third world and the oil-rich countries.
* The explosion of economic well-being, which has led in the West to attitudes toward work and nonwork (i.e., leisure) that would sound revolutionary to a reader of 1908.
From its inception, the Monitor has had a keen interest in global economic progress. It has seen that progress as evidence that the human spirit was freeing itself from the limiting belief that mankind must live ''by the sweat of its brow.'' Thus, economic growth has been deemed important for its evidence of greater human freedom more than the accumulation of material goods as such. The Monitor has also been concerned that one man's, or one nation's, progress not be at the expense of another's. As early as 1911 it ran a full page statement of policy in headline-size type; it began, ''Twentieth century industrialism . . .'' and said:
The rapid and unheard-of development of national resources, the multiplication of labor-saving machinery, the constructive achievements of master builders, have been the means of taking this subject out of the field of academics and making it the very keystone of the social structure.
Then, turning to the negative side of early 20th-century business, it continued:
But the growing unrest of the people and the covert and open efforts of leaders in the industrial world to make unwarranted and destructive use of their power, calls for the united front of the press to fulfill its natural mission as a public institution, and to awaken the people to and protect them from any encroachment upon the general welfare.
It ended with a statement that the Monitor would ''support those policies which mean the greatest good for all.'' What such policies are, of course, has not always been crystal clear and is alone sufficient reason to warrant a free press where major issues can be thrashed out. But the Monitor with some record of consistency has looked for a balance between those elements that allow the individual to achieve all he can and a concern that the social fabric not be warped to the benefit of any one group or class. Events move governments to more active role
The fact that the Monitor felt a need to talk about the public good in 1911 indicates something of the time span of these 75 years. For the first decade of this century more or less marked the end of unregulated capitalism in the United States. The power of the steel and oil trusts was broken up. Teddy Roosevelt's progressivism did not find a permanent lodging place in the political structure until the 1930s, but the idea was born early in the century that the business structure must be brought to serve the common good, and that, when necessary, the courts or Congress would not hesitate to move events in that direction.
The year of the Monitor's founding, coincidentally, was the year in which General Motors Corporation was put together. The early decades of the century saw the achievement of mass production and mass distribution; in the 1920s installment buying also became a mass phenomenon for the first time, supporting the manufacturing capacity of America's new industrial technologies.
The 1920s are remembered as the halcyon days of jazz and prosperity, but the prosperity was an uneven one, both in America and Europe. The latter's individual nations faced difficult adjustments following World War I. The decade came to a ''smashing'' end with the American stock market crash of 1929 and England's going off the gold standard in 1931. What followed in America was the first major experiment with the federal government's becoming directly involved in the economy.
During the eight New Deal years that preceded US entry into World War II, a permanent regulatory structure was put in place as well as a host of more or less temporary agencies and programs to deal with the economic problems of the decade. Nothing better epitomized the New Deal or disturbed its opponents more than the Works Progress Administration (WPA), whose administrator was Franklin Roosevelt's close friend, Harry Hopkins. In an article in the Monitor's weekly magazine section in August 1936 one can find Hopkins defending the concept behind the WPA. Answering the charge that the WPA was a ''boondoggle,'' Hopkins wrote:
We have never been concerned with precedent so much as principle in this work , for we have been engaged in solving a problem of new times and new conditions. Whatever the boondoggling of the past, it is the boondoggling of today - its economic and human values - that interests us chiefly.
John C. Gebhart, director of the National Economy League, answered in an opposing article:
What effect can such a policy have but to ''freeze in'' those now on work relief, to discourage initiative in seeking full-time, private employment and to create friction and resentment among those not so fortunate as to receive WPA jobs?
These statements may bring to older readers a flavor of the discussions they remember hearing back in the '30s. This debate was never fully answered, since preparations for World War II and the war itself lifted the economy out of its deepest morass in the 20th century. Even opponents of the New Deal can today appreciate it as a time of bold innovation, while many would still conclude that some of its specific parts did not fit the warp of the American people. Its impact on American institutions was lasting but pale when compared with Leon Blum's Popular Front in France at the same time or with the people's widespread acquiescence in national socialism in Germany and Italy. What remained of the New Deal after 1945 was largely embodied in the Full Employment Act of 1946, in which Congress gave government responsibility for maintaining economic progress, full employment, stable prices, and balance-of-payments equilibrium.The next major attempt to extend the role of government came during the Johnson years. The Great Society was in one sense forgotten in the clash that sprang up over the Vietnam war. In any case, Americans had long ago come to accept the role of government as one of offsetting the bigness of many of its economic units, but they remained divided over the degree to which the government should provide, other than in emergency situations, for the individual welfare.
The Keynesian revolution, which dominated mainline economics for a generation , now appears to have had only a limited validity. Keynes was mainly concerned with the distribution of income in a static society (such as Britain in the '30 s). Thus, the countercyclical role he saw for fiscal policy to allocate the national income in such a way that it would get spent and maintain aggregate demand. That such policies gave governments too much power of manipulation over their citizens bothered more orthodox economists from the start. The Monitor commented in 1974:
Conservatives have criticized Keynesian policies for 40 years on the grounds that political management of the economy couldn't be evenhanded. They have feared that demand and consumption would get more attention than investment, that the importance of the jobless rate would always make the inflation rate secondary. Political management of the economy is not going to disappear. But it faces some hard choices. . . . The easy choices are about used up.
Today the challenge is seen more as one of supplying the needs of mankind globally and the main task of economics as that of assuring a constant growth in the means of production. The so-called ''supply side'' economics of some of President Reagan's advisers may be as one-sided as was Keynes, but it seems more in line with the needs of this generation. In any case, Americans' interest in the role of government or in economic theories has always been highly pragmatic rather than ideological.
From the beginning, the Monitor has considered the world its beat. It has proclaimed itself daily to be ''An International Daily Newspaper.'' It isn't surprising, then, that its editors have chosen to see evidences of the globalization of business before they were generally acknowledged. But perhaps the early editors also reflected a then prevalent consciousness of colonialism, when the major European powers were still trying to stake out pieces of geography around the world.
Early editorials showed an awareness of the linkages between economics and politics. In 1909 the paper commented in one of its daily seven editorials on the circumspect way in which France had been building a link to China through its policies in a corner of Asia that would preoccupy all Americans 60 years later: Indochina. Commenting on the construction by the French of a rail link north from Hanoi to Yunan, capital of China's most southern province, it said, ''This policy of concealing her actual strength has enabled her to extend her influence and to consolidate her interests in the same unobtrusive way in which Holland has for decades labored to solidify her rule in the neighboring Malay archipelago.'' Then, in a prescient sentence, it concluded, ''. . . at the present time France has the greatest difficulty in keeping down native rebellion throughout Indo-China, but she is pursuing a well-defined policy for which she has made great sacrifices but which promise to make her the dominant power in the development of south China.'' Economic cooperation outpaces political
Such business ventures may have been easier to cover than wholly private ones , since they were part of the activities of sovereign states. But even the American corporation of 1908 had many links abroad; approximately half of the 50 largest US companies had what one author calls ''significant overseas operating interests.'' It was in the post-l945 era, however, that business went abroad in a big way. In the 1960s US investments overseas almost tripled, from $54 billion to $167 billion. With a weaker dollar in the 1970s, investment flowed into this country. By the end of that decade, American companies had $227 billion invested abroad, but there also was almost $100 billion invested here by foreign companies.
The Monitor commented, ''The internationalization of the world community has been at least as much the work of the multinational corporations as of governments.'' Yet, the postwar era of global investment was undergirded by a US determination not to become isolationist again. This was expressed by the Marshall Plan, launched in 1947, date okbut even earlier by the founding of international economic organizations (although the Soviet Union and its satellites chose not to join).
One might say, in fact, that one positive outcome of World War II and the depression preceding it was a determination to begin building a true world community. In the almost 40 years since 1945, this community has found tangible expression more in economic institutions than political. The igniting event for the explosion of international economic cooperation was the Bretton Woods conference, convened at a resort in New Hampshire in the summer of 1944 while the war was still in progress. Convinced that the world must never enter a beggar-thy-neighbor era such as it had gone through during the depression 1930s, the leaders of the Western democracies created institutions to deal with short-term economic adjustment as well as to finance long-term growth aroun Today's challenges greatest since '30s Out of Bretton Woods came the World Bank, the International Monetary Fund, and the General Agreement on Tariffs and Trade - names all so familiar to this generation that it may sound surprising that such international institutions are less than 40 years old. Bretton Woods also produced agreement on the kingpin role of the US dollar in world trade, with the dollar to be interchangeable with gold among the world's central bankers. This arrangement lasted well until the late 1960s, a whole generation later, when the overriding economic position of the United States that existed in 1945 at war's end had been superseded by the full recovery of the other leading industrial nations.
At the time of Bretton Woods, the Monitor asked editorially, ''Can we, lacking any form of close political organization for peace, set up any machinery which will promote economic peace?''
Bretton Woods preceded the formal establishment of the United Nations by almost one year, but the question has somewhat answered itself through the experience of 40 years. The victors of World War II, their numbers gradually augmented by the addition of new members as well as by Japan and Germany, began a process at Bretton Woods that still continues. The world has become one economically far more than politically, knit together increasingly by jet planes , telecommunications, cross-country investments, and banking networks, which all force the wielders of major economic power to make decisions in terms of reference beyond their own nation.
Today's problems with third world debt owed to the multinational banks both here and in Europe loom large. They are certainly serious, and even the next six months should tell whether the crisis will worsen or begin to untangle itself (through sustained growth both in the US and in Europe). But just as the depression has now receded in memory and the century is seen instead as one of expanding technology and wealth, today's problems are but one piece of the process by which at least in an economic sense the global community is becoming a reality.
These 75 years have witnessed an attempt by modern governments to come to grips with their proper role in modern industrial societies, and expanding commerce has led us close to the global village in practice.
How each of us sees himself in this world is the third major change. At no time in history has there been such an explosion of material well-being. Reading a joke in an early Monitor about Mr. Rockefeller paying $35 for an overcoat and an advertisement of Oriental rugs on sale in Boston for $35, one doesn't know whether Mr. Rockefeller paid too much for his coat or the rugs were really a bargain. The conditions of life in 1908 were still harsh for many Americans, whether on farms or in burgeoning new cities. One may ask whether it is higher incomes that have made the terms of everyday living more pleasant, or the technology that is available to almost everyone. Even telephones were not common 75 years ago. The automobile produced more social change than any single invention. But it was joined by the radio in the '20s and '30s, by television after 1945, and by the jet plane that put the whole world within the reach of the large middle class of many developed nations. The invention of the small horsepower electric motor transformed household tasks - the vacuum cleaner, the automatic washer, and so on - just as microelectronics is now in the process of producing another revolution in gadgetry.
While the US of 1983 still has unresolved economic problems, by almost any statistical measure the living standard of its people, as in all developed countries, has gone beyond what most could have dreamed of 75 years ago. So far, in fact, that a strange countermood set in about 1970. Whether it was Jay Forrester at Massachusetts Institute of Technology saying the world was running out of resources, Aurelio Peccei of the Club of Rome saying mankind had only so many years to face its common global problems, Charles Reich writing ''The Greening of America'' and rather uncritically basking in the counterculture of his day, or E. F. Schumacher saying ''Small Is Beautiful'' - whatever it was, for the first time in history a sizable minority in the rich countries began to question even the desirability of economic growth.
A common thread running through the new questioning was that the very richness of living standards had done something to downgrade the quality of life itself. The thoughts of Ecclesiastes suddenly surfaced in minds unfamilar with the Bible. Sometimes it was an inchoate desire for a simpler, more contemplative life. Sometimes it was the realization that for every advance there was some price to pay. The ecology movement, none too soon, forced industrial nations to deal with the pollution of air and water. Then there were the results of electronic communication, the revolution of rising expectations which made those who had not shared in every step of economic progress even more aware of what they were missing. And, on a global scale, the same rising expectations raised the economic demands of former colonial areas, which discovered that political independence alone was not enough.
This questioning of the aims of economic progress was somewhat dampened by the oil-price crises of the 1970s and the attempts of the rich nations to deal with economic adjustments along with high inflation. Economic growth today is not accepted as being quite as automatic as it was ten years ago. The experience of the past decade has heightened the sense that the future will not be a linear extrapolation of the past. But our experience in dealing with almost constant economic adjustment since the mid-'70s, which makes this the longest period of economic unease since the 1930s, is also beginning to build some confidence that human intelligence and resolve are bigger than the problem.
Certainly economic growth is seen in the context of a more complex world. Economics and politics are linked; business and the environment are linked; the rich and the poor are linked; the North and South of the world are linked. These linkages have always been there; they are only more generally recognized today. That is why thinkers such as Dr. Peccei can say that mankind must in a manner come to grips with all its problems at once. No area of human endeavor can be worked out in complete isolation from any other.
However, even if governments and large units of economic power have a necessary role to play, the individual still is the key. As a Monitor writer put it in the early '70s, ''. . . confidence starts, not in an institution, but in human consciousness. A combination of concern about and confidence in the future may even lead Americans to take some radical new steps in how they manage their affairs.''