American Standards of Living:1918-1988
Evaluation of American standards of living in the
1990s depends on whether one has a worldwide perspective or a national
perspective. From a global per-spective, the United States enjoys
the highest private standard of living in terms of housing, automo-bile
use, recreational activities, food, clothing, and energy use. Americans
continue to use a disproportionate amount of the worlds resources.
Our private medical care is excellent, but costly for employers
and a large drain on the economy. Social Security provides an unparalleled
system of income and medical care for seniors, but it relies on
a transfer of income from employed people to retired people that
will be difficult to sustain when the baby boomers retire. Our higher
education system is world class, but our K-12 system lags behind
those of other developed countries in terms of graduation rates
and test scores. Social services for the poor also lag behind those
in many Western European countries. Partly this gap reflects the
emphasis on individual choice and liberty in the United States,
which results in more lenient immigration policies, for both legal
and illegal immigrants, and in more social acceptance of individual
decisions that have an adverse social impact, such as the substantial
increase in single-mother families.
From a national perspective, Americans seem unaware of their disproportionate
use of the worlds resources. Instead, we are more con-cerned
about our ability to maintain a high and growing standard of living.
We are especially troubled by the slow economic growth of the 1980s
and the debt we have amassed at the Federal level and in world trade.
Although concerned about public education, Americans are uncertain
how to improve it. Although troubled about the dissolution of the
family, we are uncertain how to halt it. We Americans take great
pride in our military superiority and our role in the downfall of
the USSR. We also take pride in being a world leader in advancing
equal rights for women.
Two major forces that affect living standards in substantial but
opposite ways are still evolving ¾ globalization and computerization.
The U.S. economy and society have had to adjust to intense competitive
pres-sures as the world economy has become more open and interconnected.
As the Cold War has collapsed into many localized wars, the United
States is reexamining its military role. As American wage-earner
jobs are disappearing with the movement of capital abroad or the
importing of foreign-made manufacturing goods, the United States
is reevaluating its need to protect its semi-skilled and skilled
labor market. As the number of immigrants swells, the United States
is reevalu-ating its role as a haven for refuges and those seeking
a better life.
From a national perspective, the inclination to protect labor markets
and living standards seems reasonable; from a global perspective,
a protectionist approach seems selfish and harmful. Many economists
predict that revitalizing productivity and income growth will expand
domestic jobs sufficiently and will make America competitive internationally.
Economic theory does not point to this conclusion, however. The
formation of a worldwide market economy should lead to a convergence
of wages and living stan-dards, as capital moves to take advantage
of lower wages and as workers move to take advantage of higher wages.
The importance of domes-tic markets and domestic resources fades
as the world provides an expanding marketplace. Americans benefit
in the short run as consumers of less expensive goods, but we are
penalized in the long run when real wages decline. Without institutions
that regulate these flows and protect the structure of domestic
labor markets, living standards in the developed world will decline,
or stagnate at best, until living standards in the developing world
have caught up. How the United States evaluates this situation depends
upon whether the welfare of the world's population or the welfare
of U.S. citizens is foremost.
Regulating immigration is an important variable in this evaluation.
Although immigrants from developing countries usually raise their
con-sumption standards instantaneously by coming to the United States,
from a national perspective, large-scale immigra-tion of less-educated
people simul-taneously results in an increase in the poverty population
with a lower standard of living.
The other major force still evolving is computerization, which simultaneously
changes the skills used at work and opens new consumption worlds
in communication and recreation. Some econo-mists predict that computerization
will restore U.S. produc-tivity growth and provide high-skill and
high-wage domestic jobs. To do this, technological innovation must
provide the United States with a comparative advantage in innovative
products that will stop the decline in living standards generated
by the globalization process. As consumers, Americans can look forward
to living standards that expand to incorporate a wide array of modern
communication devices and multimedia home entertainment systems.
As employees, however, Americans do not seem better situated than
foreigners to provide the various levels of skilled labor in designing,
developing, manufacturing, and servicing these new goods and services.
Even so, the development of these new goods and services should
provide a boost to economic growth both in the United States and
world-wide. If this is the case, then we would expect American standards
of living to gradually increase to incorporate the innovative goods
and services. At the same time, further improvements in income and
living standards will be constrained by the pressures of global
competition. Constrained expenditure growth in the United States
should continue the modifications in consumption norms that occurred
between 1973 and 1988, when slow growth resulted in innovation with
almost no emulation and in the expansion of variety, and especially
Worldwide economic development, coupled with the number one problem
of population growth, will force serious attention to environmental
degradation. Congestion and environmental problems may force the
American people to broaden their focus from fixation on private
standards of living, which reflect relative standing in the community,
to broader concern with the public standard of living, which is
shared by all. If so, the concepts developed here ¾economic
distance and the division of the stan-dard of living into basics,
variety, and status, along with the dynamics of emulation and innova-tion
¾-will have to be expanded to include envi-ronmental conditions
and the global economic situation. The path of the United States
and the rest of the world in using the worlds resources, includ-ing
its peoples energy and talents, is at a crucial crossroads.
Our ability to protect our private living standards and enhance
the public living standard, while we participate in the development
and preservation of the world economy, remains to be tested.
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