W. Michael Cox: These are the Good Ole’ Days
Michael Cox spoke to students of the Engalitcheff Institute on Comparative Political and Economic Systems this past summer as well as to supporters of The Fund for American Studies at its Leadership Network retreat held in Charleston, S.C. this past fall. In his talk, he argues that despite all of the doom and gloom we hear on the news, Americans are now living in the best of times... and he predicts it will only get better. To those who lament the loss of “The Good Ole’ Days,” Cox responds that the “Good Ole’ Days” are, in fact, here with us now.
Despite all of the successes of the American economy, we find our free-market system today to be consistently under attack. These attacks come, not just from outside the nation, but from inside as well – a constant drumbeat of negativism led by the media and sometimes even politicians about how the economy is failing.
You’ve probably heard the prediction that today’s children will be the first generation in history not to live as well as their parents.
Simply turn on the television or read the newspaper, and you will hear about job-losses, business failures, consumer burdens, that our debt is exceedingly large and more. You hear that inflation is something we should fret over — or, if not inflation, then deflation.
You hear that the stock market is going to crash, that gas prices are too high, that there’s an increasing gap between the rich and the poor. You hear that Wal-Mart is gobbling up all the “mom-and-pop” grocery stores. We’ve passed the apex of our prosperity, they say—both adults have to work these days in order to make a living for the family.
In a word, this is all bunk. You’ll find it’s bunk too, if you just dig beneath the surface, look at the data, and think about it. Faced with all the fear mongering, doomsaying, biases in the data, myths and out-and-out lies, you can’t trust how you feel. Instead, you must be scientific, be rational, look at the facts, and make an informed opinion, not a knee-jerk one. That’s what I challenge you to do. Look at the data; and you will be pleasantly surprised.
Negativism may work well for the talking head trying to hold your attention until commercial time, seek your vote on an issue or warn you of a competitor’s product. But it’s not healthy for people to go around thinking that everything is broken, that all is wrong, that we’re failing. It’s detrimental on many layers.
First of all, the sky is not falling! Good things happen far more often than bad, and thus, you’re likely to get much further positioning yourself as an optimist than as a pessimist. There’s more money to be lost by not understanding and believing in good times than by not hunkering down for tough times. Not to mention the effect it could have on your mood.
Second, if we believe that the system is broken and in need of repair, then we’re likely to tinker with it and break something that was working fine. Our failure to look objectively could lead to a self-fulfilling prophecy — a blunder, which would be bad not just for this country, but globally since America is the leader of the free world.
Despite all of our troubles, and despite what the media, various politicians and self promoters say, we are far better off than we are led to believe.
In my capacity as the senior vice president and chief economist at the Federal Reserve Bank of Dallas, I have spent a great deal of time researching America’s living standards. This goes far beyond what we normally look at in terms of the consumption of goods. America has a fixation with gross domestic product, but people care about much more than that.
They care about their leisure time, their recreation and their working conditions. They care about how healthy they are, their safety and their security. They care about variety, choice and new goods, among many other things.
So I’m going to do a quick review of five components of living standards and show you all the good news that the news media and others are not revealing — the full picture of America today.
1. Let’s start by looking at consumption and wealth. When you compare the year 1900 to today, you see two obvious patterns. First, the great masses in America today have a tremendous number of goods that even the wealthiest Americans could not afford in 1900. Almost no one in 1900 had electricity, an automobile, a telephone—even the basics of life. No one had refrigerators, televisions, air-conditioning, washing machines, clothes dryers or dishwashers. These are things that the vast majority of Americans today routinely take for granted.
Second, look deeper, and you’ll see that the process of product diffusion is happening much faster today than in the past. It took 45 years from the time the automobile was invented for one-third of Americans to get one. It took just a decade or so for a very sophisticated product like the cell phone (which cost $4,200 when it first came out) to spread throughout society. Similarly, the personal computer reached a third of households within just 12 years.
Computers, VCRs, microwave ovens, cell phones, Internet access, digital cameras, etc. – these products have spread very rapidly throughout almost all levels of society. There’s great democracy of consumption in our times.
Food, clothing and shelter make up only about a third of the budget today — compared to three-fourths in 1900. The remainder of the budget leaves room for more purchases and recreational activities.
Now, let’s break this down by hours worked. Suppose you make $5.15 an hour — minimum wage. Here’s what you’re going to earn in 10 40-hour weeks of work. You earn a personal computer with a color printer, fax, monitor and all of that. You earn a color TV, VCR, DVD player, cordless phone, microwave, small refrigerator, digital camera, palm pilot, financial calculator, MP3 player and a variety of other things — and you’ll still have $84 left for a cell phone and a pizza. That’s how far your work time goes today.
When I was in college in the 1970s, with 10 weeks of work, I could get just a black-and-white TV, a clock radio, a used typewriter, an electronic adding machine and a stereo. The same amount of time spent working bought far fewer goods because the real cost of living (the number of hours of work required to buy a good) was so high. That’s right, the real cost of living has been falling! That’s not what you hear every day is it? Yet it’s true.
And our work time doesn’t just buy more in what we might call the “technology” category. Food has also become less expensive. A basket of groceries that used to cost 9.5 hours of work in 1919 now costs only 1.4 hours of work.
We talk about how homes are getting so expensive. Yet, 50 or so years ago, if you took a house that was very inexpensive — say $14,500 — and you divided that price by the average hourly wages of the day, then divided that by the number of square feet in the home, you’d find that each square foot of the house cost 6.5 hours of work.
Today, the average new home costs just 5.9 hours of work per square foot, and it’s much nicer, with a two-car garage, storm windows, insulation in the walls, central heating and air-conditioning, a dishwasher, a refrigerator and many other products we don’t even have the statistics for, but that we know are there — such as rugs, ceiling fans, etc. And all of this is included in the 5.9 hours per-square-foot price, which I showed is cheaper than yesterday’s.
So homes are not getting more expensive; they are getting cheaper in very real terms. We simply have to calculate the “real cost” of products by the common trouble of acquiring them — that is, the number of work hours.
Electricity is cheaper. Screwing in ten light bulbs and running them for ten hours back in 1902 would’ve cost two-and-a-half weeks of work; today, 35 minutes of work will pay for it.
We are all aware that a gallon of gasoline has gone up in price recently — to about 9.5 to 10 minutes of work. However, that’s still less than throughout most of history, and it will probably come back down again — if not through decreases in the price, then through increases in our wages over time, which lowers the real price.
An average car in 1955 would have required 1,638 hours of work; an average car today requires only 1,290 hours of work. And it’s loaded with all kind of features like anti-lock brakes, air bags and CD players. It’s very comfortable, lasts longer and gets far better mileage than the 1955 model.
All of our appliances, without exception, are cheaper. A refrigerator in 2002 cost half the number of work hours it did in 1970 — 66 hours of work for a middle-income worker, versus 112.
Almost all of our electronic products have enjoyed huge price declines. A color television has declined by 90 percent in work time, and it lasts longer, uses less electricity, has remote control and is better in every way.
The home ownership rate is higher, our houses are bigger; we have more of just about everything. Our median net worth has tripled, and our average net worth has quadrupled, in constant inflation-adjusted dollars since 1970.
So, if you look at consumption and wealth, you see gain, gain, gain.
2. What about if we look at leisure time and recreation? People don’t want to work forever; they need some time off. There are many statistics on this: how many adult softball teams we have, how many professional sports games we attend, pleasure boats we own, physical fitness facilities we visit, how many cruises we take (14 times as many as in the past). We run more marathons; there are three times as many amusement parks today as in 1970.
Consider how many sports we play. One day, I decided to sit down and try to count them all. I came up with 107, and my students keep pointing out ones that I haven’t named yet.
These are signs of an economy that is succeeding, giving us more leisure time and less time spent working. In 1870, the average work week was 61 hours per week. Most people entered the labor force at age 13. Their life expectancy was 43.5 years. They retired at death. Today, the retirement age is 62.6, and life expectancy is easily over 75. Retirement is a part of leisure time we should count when it comes to figuring how much our jobs really demand of our lives.
People today start work later in life and work a shorter workweek. The Department of Labor says the number of hours per week we work is down to about 34. We have more vacations and more holidays. Indeed, the recreation and leisure industry in America is booming, a fact that belies the notion of the overworked American.
3. Working conditions are better too. Not only has the average number of work hours per week declined dramatically, but the way we spend our time while at work has changed as well.
During business hours, workers now attend birthday parties, bridal showers, holiday parties and going-away parties, exercise in on-site gyms, sell Girl Scout cookies for their kids, browse the Internet, email their friends (at work and otherwise) and shop online. Sometimes people even call talk radio programs from work.
A study was done to find out how much time people really spend not working while at work. Companies suspected that people were spending an average of about 1.6 hours a day shirking work, but the results found that it was really more than two hours a day, on average. So you can subtract 10 more hours that people aren’t working per week, and you’re down to a workweek of about 24 hours.
Technology has made it possible for us to lapse in and out of working mode while at work. You can receive two business emails and a third from a friend and answer them all so quickly that it makes the task of separating “personal stuff ” from business at work all but impossible for government data collectors.
Of course it all adds up, and if you are spending your day at work emailing friends, you won’t accomplish as much as perhaps you could have, but I think you see my point. The computer — as well as the Internet, email, instant messaging — have made us so much more productive that we can get our work done in less time and still earn a good living — and that’s progress.
Today, more of us have flexible work schedules. We don’t just come in at 9:00 a.m. and work until 5:00 p.m. We come and go throughout the day. Time varies. If it works for you to come in early and go home early, you do it. About 17.5 percent of the population leaves work between 3:30 p.m. and 4:30 p.m. each day. Owing to ever-better technology and the rise of the service sector, an increasing number of Americans can work from home, at least on those occasional days. Telecommute. Just get the job done.
You couldn’t do this if you were on an assembly line during the manufacturing age. Everyone showed up at the same time and got 15-minute breaks for some coffee out of a thermos—and that was about it.
However, we’ve seen the demise of repetitive-motion jobs —people who are operating, stamping, grinding, pressing or installing machines all day long on assembly lines. And those who still work in industry are safer at work than they used to be.
At one time, much of America worked in a sweatshop-kind of environment, prone to accidents. In the 1930s, about 425 people (per million workers) died every year in job-related accidents at work. That has declined from 425 to about 45, a 90-percent reduction.
4. How about health, safety and security outside of work? First, life expectancy is up. The life expectancy of a woman born today is nearly 80, and for a man it’s about 77. We’re averaging a lifespan of over 78 years, compared to 47.5 in 1900. Death rates due to disease, accidents and natural causes are down.
Even transportation deaths are way down. Deaths per million miles driven have declined by 80 percent since the late 40s and early 50s. The death rate for a billion miles flown has dropped by over 99 percent.
News reports of crime may have increased, but crime is still down. While there was an 83 percent increase in the number of crimes reported in the media from 1992 to 1998, there was a 20 percent reduction in the amount of violent crimes.
I can turn on the TV any given day and find someone who is trying to evade the police in a car chase over in Los Angeles. Or, if a limb falls off a tree at the Augusta Golf Course, news channels will put it on as an alert. Or they will tell us that big fish are eating the little fish in the ocean. But this is simply a matter of looking for the negative wherever we can find it — a misrepresentation of the truth.
Our economy is more stable than it used to be. There are fewer economic downturns. Over the period from 1853 to 1953, the economy was in recession 40 percent of the time —three steps forward, two steps back.
In contrast, we’ve only had 16 months of recession since November of 1982, and in the last recession, gross domestic product didn’t even decline. It was only considered a recession because it was a job-losing recovery, but we were still advancing as we adjusted to the globalized world and the outsourcing of jobs. We still grew. You are living in the most economically stable period ever, historically.
5. Variety, choice and new goods is the final component of living standards we should review because there’s been a lot of progress in this dimension as well.
Variety is the spice of life. We have more choices than ever in the number of different kinds of cars we have, the movies we attend and the places we can fly. There are 340 different breakfast cereals. We have 790 different magazines for your reading pleasure.
What about foods and restaurants? People don’t want to consume the same thing every day; they want food from all around the world. Today in America, you could eat the food of a different country every day of the month and still not return to the same country twice.
What about groceries in general? We have more choices than ever in every category. Take dental floss, for example. We can choose between pink, green, white, red, tape, floss, ribbon, mint, waxed and unwaxed. Milk — 18 varieties, not counting the new flavored milks. To sweeten our coffee we are no longer limited to honey or sugar. We have at least three kinds of artificial sweeteners, including the new Splenda. Our grocery carts are loaded with more and more things.
We have new goods coming into the population — things that nobody had in the past, like microwaves, DVDs and digital cameras, all owned by the majority of Americans.
We don’t have to watch the same channels on television either. Just think of the news channels we have now: CNN, MSNBC, CNBC, FOX, Bloomberg and many others! We now have television channels just for women, such as Lifetime or Oxygen, television channels just for men and the many channels for children, which show cartoons and educational programming around the clock.
Also, America has the world’s richest poor people. We wait for the price of products to fall until most of us can afford it, and we typically can afford it within one generation today.
In sum, the whole notion that America is regressing is ridiculous. Our ancestors were hunters and gatherers; we’ve evolved into browsers and purchasers.
The reality of today is that these are the good ole’ days. This is the best time to be alive, until another generation comes along, which will have it even better, and then the next one, and so on.
This, of course, is provided that we don’t destroy the economic freedom that’s responsible for creating so much wealth, so many good jobs, better working conditions and so on.