Since April
2003, the economy has created a net 5.1 million new jobs. Core
inflation is only 2.1 percent, and gas prices, which surged above
$3 a gallon after Katrina, are now down around $2. Productivity
growth for the five-year period of 2000-2005 is 3.4 percent, the
highest of any five-year period in 50 years.
This is
a remarkable performance and owes something surely to the Bush
tax cuts and to Alan Greenspan's stewardship at the Federal Reserve.
But it also tells us something broader about the American economy.
Mainstream media coverage about the economy tends to be full of
bad news, especially during Republican administrations, and to
focus on economic problems. But over the longer term, the story
of the American economy is one of success. A quarter century ago,
many economic commentators said that the era of low-inflation,
high-job-creation economic growth was over. In the ensuing 25
years, it has come to be the norm.
The negative
bias of economic coverage can be seen in stories about the current
No. 1 private sector employer in America, Wal-Mart, and the No.
1 private sector employer back in the 1970s, General Motors. The
GM story is genuinely grim: The company is laying off thousands
of workers and closing plants, and is threatened with bankruptcy.
Stories about Wal-Mart tend to focus on allegedly low wages and
healthcare benefits, and say less about the company's continual
profitability and the low prices that benefit consumers. These
companies are not entirely comparable -- they're in different
businesses. But some of the differences between them illustrate
why the American economy, which seemed to have run out of gas
25 years ago, is now doing so well.
One big
difference is this: General Motors' business model was designed
for a static economy; Wal-Mart's is for a dynamic economy. From
the 1930s, GM -- as one of only three major automakers -- was
able to pass along to consumers the high costs imposed by wages,
pensions and health benefits negotiated with the United Auto Workers.
When emerging foreign competition started to make life tougher
for Detroit executives in the 1970s, they tried to insulate themselves
with government tariffs and domestic-content requirements. More
recently, they've tried to offload their high healthcare costs
onto the government. Wal-Mart, in contrast, started off with many
retail competitors and has sought more, by taking on supermarkets.
It competes by holding down costs and prices for consumers.
Wal-Mart
has been much more skilled at adapting to market conditions. Its
computers keep it instantly apprised of sales, and its distribution
system keeps stores stocked with items consumers want. Someone
making a 3-ton car cannot adapt so quickly, but even so it still
takes GM years to get new models on the market -- and often they're
not what consumers turn out to want.
Then there
are employment costs. Yes, Wal-Mart does not pay high wages or
provide healthcare benefits to all employees. But not all workers
today want full-time jobs (they may want to be home when kids
return from school) or health insurance (many are covered by a
spouse's policy or Medicare). And Wal-Mart promotes from within:
You can work your way up from the store floor to management ranks.
GM and the UAW, in contrast, insist on a sharp line between labor
and management, with all employees working full-time and getting
full benefits. That made sense when almost all workers were men
supporting families. But it is a poor fit with a labor market
in which many workers are women, teenagers or retirees seeking
extra income.
