Cultural myths are no more “truth” than an architect’s sketches are buildings. Their function is to explain events and guide decisions. Thus while it is pointless to challenge myths as unrealistic, it is entirely valid to say that a culture’s mythology serves it well only to the extent it retains its connection to the reality the culture faces. Myths must evolve as the context evolves. Stories that stay rigid as realities change become ever less useful cultural tools.
The new conservative story conveys an important set of insights. Permissiveness—that is, liberalism’s overwhelming preference for smoothing over rather than facing conflict—contributed to an environment in which unaccountability flourished, both at home and abroad. In abdicating public authority, America issued an invitation to irresponsibility. But the skeins of cause and effect behind the breakdown of Great Society liberalism are far more tangled than the conservative story suggests. The mythology that inspired liberalism in its salad days of the 1960s can indeed be faulted for failing to address the harsh realities of the 1970s and 1980s. The world has changed. But the change has not been along a single dimension, from benign to hostile, mandating an equally simple shift from conciliation to toughness. A subtler, more sweeping transformation has been taking place that touches on most areas of public concern—the Soviet threat and the Third World, the national economy, the poor within America, the role of government. The stresses Americans began experiencing in the 1970s are intimately connected with an evolution of the global economy and society.
Some of the symptoms are painfully familiar—the two oil shocks of the 1970s, the flood of Japanese automobiles and consumer electronics into America, the loss of American jobs in basic manufacturing, the unrest that periodically erupts into violence in obscure places around the globe. Other aspects of the transformation are less well understood. Two central trends stand out.
The first is that America’s economic position in the world is becoming less distinctive. The rest of the world is catching up, and America’s preeminence by default is over. Beginning in the late 1960s, and continuing to the present day, the cost of sending things or information around the globe has fallen dramatically. This is due, principally, to rapid advances in technologies of transporting and communicating, to such innovations as container ships, satellites, and computers. Until recent times most goods were produced close to where they were to be consumed; the main exceptions were certain minerals, agricultural goods, and economically unimportant exotica. This pattern has been breaking down at an increasing pace. Consumers of cars, refrigerators, television programs, insurance policies, and even money, often live in different nations or on different continents from the producers. The producers, in turn, often depend on far-distant sources for components, designs, or information. It is now often cheaper to ship raw steel across an ocean than across the United States. Slight differences in interest rates may induce a New York corporation to raise money in Tokyo or in Bonn instead of on Wall Street. Across an unprecedented range of goods and services, quality and cost matter more than location: Whoever can do it best and cheapest, anywhere in the world, sells to whoever is willing to pay the best price, anywhere in the world. The elegant curves of supply and demand that so charm economists are meeting up in the oddest of places.
Similarly, the tastes and preferences of people around the globe are gradually converging. If modern communications technology has failed to endow humanity with a shared moral sense, it has at least managed to induce shared appetites. On the streets of Lima or Fez, for example, it is not unusual to hear British rock music emanating from compact recorders designed in Japan and assembled in South Korea, while the listeners wear Levi’s.
By the late 1960s, the industrial nations that had been devastated by World War II were once again full participants in the world economy. But this commercial transformation has not been solely, or even most importantly, a matter of trade among the United States, Japan, and Western Europe. Our economic fate is increasingly shaped by developments in the Third World, especially in Latin America and Southeast Asia.
The second central trend is demographic. The planet’s population balance has been tipping ever more precipitously in the direction of the poorer nations. In 1950 two thirds of mankind lived in the Third World; by 2020, the proportion is expected to be five sixths. To put the matter in some perspective, consider that for all eternity up to 1932, when modern American liberalism came of age, the world’s population had expanded to approximately 2 billion people. This is less than the increase in the Third World’s population between 1932 and 1985.
These nations are wildly heterogeneous and share no other feature but relative poverty. For centuries or millennia, many African, Asian, and Latin American cultures have been characterized by fatalism. Most people harbored little hope of improving their material situation, and this has been a rational accommodation to hard reality. But as money, technology, goods, and services flow with ever greater ease around the globe, more of the world’s poor billions have come to know that a more comfortable life exists. Nothing undermines centuries of resignation as readily as a television commercial.
Nor are their ambitions fanciful. An ever larger number of these people have not just the will but the full capacity to participate in the world economy; many have already joined in. Large-scale production of basic goods continues to migrate to the Third World. As recently as the mid-1960s the inhabitants of Taiwan, Hong Kong, South Korea, Mexico, and Brazil primarily made basic products—like clothing, shoes, toys, simple electronic assemblies—that called for cheap labor but little in the way of sophisticated capital equipment; indeed, Japanese industry had been largely limited to such basic goods a few years previously. By the mid-1970s several of these countries had followed Japan’s lead into steel and other basic capital-intensive processing industries. Japan, meanwhile, had become an exporter of steel-making equipment as well as basic steels, and had moved its industrial base into products like automobiles, color televisions, small appliances, consumer electronics, and ships—all products requiring technical sophistication as well as considerable investment in plant and equipment. By 1985 Taiwan, South Korea, and several other nations had themselves become major producers of these complex products. At the same time, poorer countries like the Philippines, Sri Lanka, and India were taking over the production of clothing, footwear, toys, and simple electronic assemblies. This second wave of industrializing nations was inexorably pushing into more advanced technologies as well. By the mid-1980s China was the world’s sixth-ranking industrial nation; Brazil and India almost tied with Canada for ninth place.1
As these newcomers to modern global capitalism jostle for room, established industries in advanced nations have been squeezed. Factories have closed. Workers have faced the loss of traditional jobs, and have had difficulty shifting into new ones. The growth trend of these economies has flattened markedly, amid calls for tariffs and quotas against foreign goods. The United States has not been immune to such demands.2 To be sure, a basic goal of American foreign policy during the postwar era was precisely to modernize the economies of poorer nations, lest they succumb to communism. It may seem inconsistent and certainly ungracious for us now to blame these nations for our economic problems. But few could foresee that the pace of change would be so quick and that America’s economic preeminence would be so suddenly at risk. When John F. Kennedy entered the White House, America accounted for 35 percent of the world’s economic output; by 1980, its share had fallen to 22 percent. In 1960, almost 22 percent of the world’s exports were shipped from the United States; in 1980, the figure was 11 percent.3
The anxieties this evolution has provoked in America are naturally most familiar to us, but the effects in other nations of this accelerating integration have been far from tranquil. Rapid change has sparked upheaval in much of the Third World. Violent shifts in oil prices have played havoc with many developing economies. Some have sunk deeply into debt; others are confounded by inflation. Sudden industrialization also has contributed to urban poverty and corruption. The material benefits of enhanced world trade have been accompanied by a humiliating sense of relative deprivation. The enticements of commercial capitalism have aroused appetites faster than incomes, while undermining traditional cultures. The consequent social unrest has encouraged extremist left- and right-wing regimes and, on occasion, fundamentalist uprisings. The dilemma parallels that of the United States as manufacturing plants shut down: How can this immensely promising process of integration be encouraged without undercutting the cultural foundations on which continued progress depends, without spurring into devastating action the forces of reaction and retreat? This is the new context confronting America, and the rest of the world as well.
The rest of this book will explore in detail how our reigning cultural mythology is disturbingly at odds with this context, assess the costs of this disjuncture, and speculate on how our parables might evolve to incorporate a new set of cultural challenges. First, it will reexamine the parable of the Mob at the Gates. The liberal ideal of magnanimous accommodation is an out-of-date and dangerously unbalanced guide to our dealings with the other peoples of the earth. The conservative story rightly perceives the Soviets’ readiness to exploit Third World instability. But as will be evident, the conservative parable is also perilously incomplete. Third World tensions are manifestations of the economic and social transformation of the globe. Their connection to the East-West rivalry is in most cases derivative and wholly secondary. Our national interests are undeniably affected by the ability and willingness of Latin American nations to pay off their debts; by the speed with which American and European workers shift out of basic mass production; by how global corporations allocate functions to different sets of workers around the world; by the oil cartel’s manipulation of petroleum prices; by the flow of deadly drugs into the United States, and of deadly weapons to all manner of semi-sovereign groups; by South Korea’s and Taiwan’s advances into high technology, by China’s convulsive drive toward modernization, and by violent contests between dictators and revolutionaries in the world’s tropics. But it requires lengthy training and a concerted effort of imagination to divine Soviet machinations behind all these events. Even where the Soviets attempt to intervene, there are many other, more powerful forces at work in most of these areas. To treat such occurrences as occasions for secondhand warfare between the United States and the Soviet Union leads to tragically myopic prescriptions. Yet the conservative mythology holds no other role for the impoverished majority of mankind than as a pawn in the East-West struggle.
Subsequent chapters probe the parable of the Triumphant Individual. Surely conservative economists are correct in arguing that our economy must avoid the systemic fraud of inflation and ensure adequate incentives to save and to incur financial risk. Our inventors and managers undeniably merit encouragement as well as respect. Post-New Deal liberal tax rates and spending policies doubtless did undermine economic discipline, and unrestrained wage demands helped fuel inflation. But our economy has suffered less from either capital shortages or inflationary wage pressure than from a decay in our capacity to collaborate.
For nearly two decades before 1970 the average working American had produced around 3 percent more goods and services by the end of each year than at the start. Then in the 1970s the annual increase in the rate of productivity fell dramatically. Not even the economic recovery that began in 1983 returned productivity to its former level of growth.4 It is difficult, although certainly not unknown, for an individual to become wealthier without producing more. It is impossible for a society to do so. Almost no growth of productivity in America has meant almost no increase in the real incomes of Americans. From the end of World War II until 1973, American families enjoyed steadily rising incomes. This trend stopped. In 1986, even after years of rousing growth in the gross national product, average family incomes were a bit lower than they had been a dozen years before.5
The drop in productivity growth has been rooted in our difficulties adapting our economy as opportunities and constraints have changed. By the 1980s, 70 percent of the goods that Americans made were potentially exposed to foreign competition; our economic policies and habits of thought, formed in an era of autonomy, were unprepared for this transformation. Some of our companies simply moved along with the current, setting up their low-skilled operations in poorer areas of the globe, while relying on the Japanese for their high technologies. Others preferred to dress up their balance sheets by resorting to creative accounting, and through cosmetic mergers and acquisitions. Others made common cause with workers in demanding government protection from foreign competition. Still others sought refuge in defense contracting. Meanwhile, what we considered to be a “normal” rate of involuntary unemployment crept upward, from 4 percent in the 1960s to around 7 percent. This higher figure hinted at a pervasive mismatch between what many Americans can do and what they need to do to be part of the newly competitive world economy. It signaled a failure of adaptation.
As a nation’s economic structure becomes more a matter of choice and strategy, economic growth has come to depend less on the gross level of investment, more on how investment is channeled into adaptation. Mass production of physical things—increasingly the province of low-wage competitors—has become far less important to America than the manipulation of ideas, embedded within bundles of goods and services that are continuously evolving. In advanced nations, wealth flows from the collective abilities of groups of people to piece things together in new ways, to conceive of new possibilities, and to make continual improvements in what has come before. A culture is economically successful to the extent it encourages such broad-based innovativeness. The lure of substantial wealth and the threat of severe poverty doubtless serve to inspire great feats of personal daring and ambition, as the conservative tale of the Triumphant Individual suggests. But the conservative parable casts entrepreneurialism as exceptional; a few Triumphant Individuals create safe, simple jobs for their less innovative neighbors. Yet in an era where such simple jobs are ever harder to retain, the capacity to innovate, adapt, and envisage the novel must be widely spread throughout the work force. The conservative story may be suited to a less sophisticated economy in which rare feats of individual audacity matter more than the continuous, collective habit of innovation. But it is out of sync with our own age.
The third fable we will examine concerns the Benevolent Community. Here again, the new conservative interpretation is in important senses a plausible response to reality: Poverty has persisted in America in defiance of liberal good intentions and large welfare budgets. Many of our impoverished communities suffer from social breakdown and the decay of civic and family responsibility.
But as I will seek to show, the conservative story fails utterly to take account of the larger setting in which American poverty has persisted. Poverty at the lowest rungs of the society is in large part a function of economic stagnation above. A rising tide lifts all boats, the saying goes; similarly, an ebb tide lowers all boats, and strands some. The entrenchment of poverty coincided with the collapse of growth in productivity and earnings, and the erosion of the manufacturing industries that had in the past offered access to the middle class. Women and baby boomers streamed into the workplace—some 19 million of them during the 1970s, and millions more since then. But many of these new entrants were driven by the need to prop up declining family incomes. Young workers, in particular, fell behind. Many could no longer afford to buy their own houses nor aspire to the standard of living enjoyed by their parents.
As upward mobility faltered, some Americans remained stuck at the bottom. America’s poverty rate—the fraction of the population officially listed as controlling too little cash to tend to their minimal needs—stopped declining in 1973 and then slowly began edging up again. Conservatives are quite right when they charge that liberalism has failed to solve the poverty problem; they are quite wrong to say that liberalism caused the problem. As to the burgeoning social-welfare burden on the federal budget, it has surprisingly little to do with liberal efforts to aid the poor.6 Most “welfare” has gone to the middle class, not to the poor, through programs like Medicare and Social Security. By 1980, the aggregate of these benefits was more than three times that for programs based on need. As a result, America’s elderly were becoming more secure while large numbers of its children were sinking deeper into poverty.
The final chapters will consider the parable of the Rot at the Top. The conservative version sees corruption and unaccountability principally in the public sector. It deserves a degree of respectful attention. Few would argue that public programs are immune from incompetence or irresponsibility. Spending for defense, Social Security, and Medicare together comprise almost 60 percent of the federal budget, and are the fastest-growing categories of expenditure. Each could stand careful pruning, even more extreme reductions—though it is worth noting that none of these programs has been typically the object of conservative concern. Government regulators have also shown a disrespect, willful ignorance, or even hostility toward the private sector they are charged with overseeing.
But once again the reigning version of this American story is grossly incomplete. Posing the issue as a struggle between free enterprise and stifling government control, the conservative parable has obscured the central issue of how we organize and maintain that set of rules and constraints which we call the market. The conservative’s idyllic “free market,” unencumbered by government meddling, is a logical impossibility. The important question—left unaddressed by the conservative story and irrelevant to government’s size—is whether these “rules of the game” ease and encourage economic change, or forestall it.
The conservative mythology is understandably comforting to an America confronted by a suddenly intractable world—mostly poor, mostly nonwhite—in which the United States is no longer preeminent. It summons us to defy the wholly natural erosion of an unnatural postwar economic and political supremacy, and to reject our new interdependence. It lets us blame our troubles on indulgence and naïve generosity, and promises renewal if only we forswear the flabby principles of altruism and conciliation. It charges us to bolster our power and exercise it boldly to reclaim our rightful hegemony.
But the conservative parable holds no place for the fundamental transformation of the world economy and society. It overlooks the key relationships between these changes and political instability around the globe, Soviet opportunism, the stagnation of the American economy, domestic poverty, and the relationship between American business and government. Its message of discipline and pugnacity, in other words, does not so much seek preeminence as presume it. This is an invigorating but reckless vision.
Modern liberalism, as we have seen, offers no real alternative. Rather than assert ourselves, the liberal story teaches that we should be charitable and conciliatory. But the objects of our conciliation remain the same as in the conservative story. “They” are the Soviets, the Japanese, Third Worlders, organized workers, and the poor.
The ongoing debate between liberals and conservatives in America assumes that the only pertinent issue is how much we should concede to “them.” Yet in the new reality in which America finds itself, the real choice is not along the single dimension of conciliation versus assertion. The shrinking and rapidly evolving world we now inhabit offers unprecedented opportunity for mutual gain, but also ample incentive for the opportunism, exploitation, and betrayal that poison collaboration and derail progress. As coming chapters will seek to establish, our fundamental challenge is to define jointly promising endeavors and to forge durable ties of mutual obligation and responsibility. To a greater extent and for subtler reasons than either modern conservatism or modern liberalism appreciate, life on this planet has become less a set of contests in which one party can be victorious, and more an intricate set of relationships which either succeed or fail—we win or we lose together.