American Standards of Living:1918-1988
Brown

Looking Ahead

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 world’s 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 world’s 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 status, purchases.

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 world’s resources, includ-ing its people’s 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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