Triumph of the American way of life

THE SUNDAY TIMES (LONDON)

December 26, 1999

It is difficult for an American to look back on this year - and, indeed, on this century - without breaking into a triumphalist paean. It is not only that the American economy continues to defy the laws of gravity. Or that the nation's military power is unmatched. It is that the American model has routed all rival contenders.

It is not so long ago that a well-regarded and highly articulate group of declinists were predicting a grim future for America. Harvard professor Benjamin Friedman warned in 1988 that underinvestment in infrastructure would produce a "Day of Reckoning", in which American society would "lose its vibrancy". And Yale University's Paul Kennedy declared that America was about to collapse as a world power, the victim of "imperial overstretch". And it seems like only yesterday that critics of America's free market system were trumpeting the superiority of Japan's government-managed economy. And that Germany was claiming that its social democratic system of economic management by its holy trinity of government, trade unions, and corporate managers, operating under the umbrella of a few large banks, was the wave of the future. And that France was dismissing America's prosperity as a bubble, due to burst because free market capitalism contains inherent contradictions not present in France's exquisitely planned economy.

In the event, Japan's economy is struggling to emerge from a long recession, Germany is afflicted with double-digit unemployment, and France continues to grope for ways to protect its inefficient economy from world competition, at huge cost to its consumers. Only America - followed closely by Britain, which for all the talk of some "Third Way" is moving closer and closer to the American entrepreneurial model - provides everyone who would work with well-paid jobs, creates millionaires by the score, reduces its welfare roles to levels once thought unattainable, and attracts to its shores the best, the brightest and the hardest working of the world's population.

Indeed, looking back over what magazine magnate Henry Luce correctly predicted would be "the American century", it is difficult to find an indicator that does not fuel the triumphalist fires. Americans are richer: median incomes have doubled in real terms since the end of World War II, and a survey by the Spectrum Group, market researchers, shows that the number of millionaires has doubled in this decade, to eight million. Americans are healthier: life expectancy at birth stood at under 50 years for both men and women at the beginning of this century, and now is almost 80 years for women and almost 75 years for men. Americans are better educated: the portion of high school graduates going on to college increased from only on-third in 1970 to 45% today.

And this prosperity, which has seen household wealth increase by trillions of dollars in the past decade, has more than trickled down from the high-tech millionaires to the less affluent. It has gushed. A study by W. Michael Cox and Richard Alm of the consumption patterns of those classified as "poor" reveals that over 40% of the poor own their own homes, 72% have washing machines, 60% own microwave ovens, 92% have color television sets, half have air conditioners, and 72% own one or more cars.

Money, they say can't buy happiness. Perhaps not. But a good job and a good income are more likely to produce happiness than they are to create misery. A recent Business Week/Harris poll shows that although Americans are working harder than ever, 91% are very or somewhat satisfied with their jobs. Few fear unemployment. Karolyn Bowman, the doyen of America's poll analysts, summed it up best at an informal meeting in my office: "Americans are happy. They are very happy."

Whether these happy Americans are benefiting from a new economic paradigm, a development that has converted the economy into an inflation-free, perpetual growth machine, remains the subject of debate. But new paradigm or not, Americans are benefiting from an increase in productivity brought about by heavy investment in new technologies, and from the good economic management of the now-legendary chairman of the Federal Reserve Board, Alan Greenspan, the man whom one presidential candidate has vowed to reappoint even if he is dead. No longer must Americans choose between full employment and nil inflation: they can and do have both.

Man, of course, does not live by bread alone. It became fashionable in the America of the 1980s to dismiss its material progress by pointing to rising crime rates, the disintegration of the family, environmental degradation. Well, a funny thing happened on the way to a de-moralized America. Americans got fed up with welfare cheats who were placing a huge burden on the public purse and with street-wise predators who made a walk of a summer's evening a risky venture. So they reformed their welfare system, and told those who had settled into a life of no-work and welfare dependency to get a job or lose benefits. And they decided that the best place for those who threatened the safety of others is in prison.

The results have been dramatic. The crime rate is at its lowest in 25 years. You don't have to be a statistician to notice the difference in cities like New York, where its mayor, Rudy Giuliani, has led a crackdown on muggers and crooks that has returned the streets to the city's law-abiding citizens. This was not accomplished by reforming the bad guys, but by putting them where they cannot menace others - in jail.

As, Charles Murray, one of America's leading social scientists, has pointed out, " Zero-tolerance policing reestablished public order. Most of all, we figured out what to do with criminals...:lock 'em up." Almost two million people are in jail, five times the number that made their homes in correctional institutions in 1960. Since each criminal left at liberty commits between 12 and 21 crimes, it isn't difficult to imagine the crime wave that would be engulfing America had its citizens not decided to elect leaders who understood that crooks belong in prison. European critics may scoff, but law-abiding Americans have learned that thick walls and iron bars keep the bad guys away from them.

Then there is welfare. It was only a few years ago that America seemed faced with an intractable problem: more and more people were becoming permanently dependent on the state for their incomes. Now, as we enter the next century, the problem - if not solved - has been reduced to manageable proportions. welfare rolls have been cut in half. The threat of no benefits for the able-bodied has both augmented the work force at a time of labor shortage, and reacquainted millions with the dignity of work.

To the surprise and, if truth be known, the chagrin of the greens, this boom and the consequent increase in the number of people producing goods and services has been accompanied by an improvement in the environment. Despite vice president Al Gore's hysterical warnings that we are about to drown in floods, or suffer draughts, and choke in the exhausts of the big cars and private jets that he deems suitable only for use by government officials, Americans are breathing cleaner air than they were twenty years ago, and drinking purer water. And, as Paul Portney, president of the non-partisan and highly respected Washington think tank, Resources for the Future, points out, there is now more forested land in America than there was at the beginning of this century.

To say that the 20th has indeed been the American century is not to say that that sensible Americans have no worries. Most are now aware that the nation's military, although at the moment the world's most formidable fighting machine, has been so starved of resources by the Clinton administration that it cannot meet its stated objective of being able to fight two wars simultaneously. With China and Russia reestablishing cordial relations to create a counterweight to American power, rogue governments such as Saddam Hussein's in possession of weapons of mass destruction, and North Korea developing and marketing the means of delivering those weapons, the world remains a dangerous place.

That is not the only cloud on the horizon. Some Americans worry that the current consumer buying spree is unsustainable, and that the low recorded savings rate threatens the nation's ability to make the investments it needs to remain competitive. Still others fear that the burgeoning trade deficit will give foreign creditors too much power over the American economy: if these overseas investors become unhappy, they might start unloading dollars, driving interest rates here up, and trigger a recession.

But these are the worries of a relative handful of Americans. Most are looking back at 1999, and the many years preceding it, with satisfaction. Ronald Reagan once said that he wants to go down in history as the President who made Americans believe in themselves again. By reforming the tax structure so as to unleash the creative energies of Americans from California's Silicon Valley to New York City's Silicon Alley, and by winning the cold war, he succeeded in doing just that. It is perhaps the saddest note of this decade that he is unable to realize the extent of his success.