Why The Party Won't Be Over SoonKathleen Madigan
The Coming 20-Year Boom and What It Means to You
By Bob Davis and David Wessel
Time Business 324pp $27.50
In recent years, warnings of the U.S. middle class's imminent death have come thick and fast. Such books as The End of Affluence, by Jeffrey Madrick, and The Judas Economy, by BUSINESS WEEK chief economist William Wolman and Anne Colamosca, have described a host of economic predators moving in for the kill. But now comes an account offering a new ending: Not only does the middle class escape but it gets a fat raise, too.
Wall Street Journal reporters Bob Davis and David Wessel assert in Prosperity: The Coming 20-Year Boom and What It Means to You that three forces--technology, globalization, and education--will, instead of hurting Americans, help them stay on top of the world and curb the widening domestic income gap. As a result of developments in these areas, say the authors, America's middle class will, within the next 20 years, gain better jobs and improve its standard of living. Much of Prosperity's analysis of technological developments and globalization is not new, although here the spin is positive. But the authors' take on education is fresh and heartening. And all in all, though the book suffers from overreporting, it offers a persuasive case that we're not going to economic hell in a handbasket.
The pair compares the current technological boom to the ascent of electricity at the turn of the century. They point out that, even though electricity was first exhibited in 1876 at the Philadelphia Centennial Exposition, industry did not achieve the productivity gains of the technology until the 1920s. So, too, Davis and Wessel say, it will take more than another generation for business to utilize today's new technologies fully.
One problem, they point out, is that computers are poorly designed and hard to use. Moreover, they say, companies did not anticipate how computers would change their businesses. For instance, banks saw automated teller machines as clear productivity winners because they were cheaper than tellers and could be used 24 hours a day. But the banks failed to foresee that ATMs would change the nature of banking. Instead of taking out $150 once a week, customers now pop over to an ATM to withdraw $30 several times a week. "Scowling tellers, it turns out, kept bank expenses down," the book concludes.
Freer foreign trade will also mean more wealth, say the authors. Imports improve our standard of living because they bring a wider selection and, usually, lower prices. The shift of lower-paying jobs to developing countries--jobs once held by New England shoemakers and southern textile workers--has raised those nations' buying power, letting the U.S. ship more value-added goods.
We have heard a lot of this before. The rise of high tech in Bangalore, India, to which the authors devote a chapter, has already been profiled, as has General Motors Corp.'s disastrous first foray into computerized manufacturing. But when the authors turn to the subject of education, their analysis is new and insightful. They do not insist that only the Ivy-League educated will do well in the next 20 years. Instead, they say, community colleges will play a greater role in providing the retraining and work skills that will enable the middle class to enjoy what they call "broadly shared prosperity."
Indeed, this is already happening. Among the success stories offered by the authors is that of Randy Kohrs. For years, the high school graduate moved through a series of minimum-wage jobs. Then, at age 37, Kohrs decided to go back to school. Entering a federal program that helps displaced workers get a college education, he earned a degree in respiratory therapy at Kirkwood Community College in Cedar Rapids, Iowa. Kohrs now earns $28,475, along with such benefits as health insurance.
The book also examines the strategy of Cuyahoga Community College.
Tri-C, as it is called in its hometown of Cleveland, has evolved into a vital part of the business community by teaching students the skills required by local companies. When Cleveland's demand for specialized factory workers and technicians increased, Tri-C beefed up its manufacturing offering, including programs within factories, some subsidized by the companies. At a Ford Motor Co. metal-stamping plant, Tri-C operates an educational center 44 hours a week. Workers can take classes before or after their shifts, or work on the computers during their 24-minute breaks. It is not the typical college experience, but then, as the book points out, "most of the students aren't looking for a degree; they want skills they can use."
So is prosperity for all right around the corner? Any economic forecast that goes out beyond the next year is almost always derailed by surprise developments, but Davis and Wessel play down the potential for shocks. And the book glosses over both the environmental impact of development in emerging nations and the devastation to those put out of work by the death of a domestic industry, such as textiles. Moreover, a chapter that's a virtual love letter to Federal Reserve Chairman Alan Greenspan does little to further their arguments.
But these are minor quibbles for a book that seeks to assure America's middle class that we can stop worrying. We are not an endangered species--not as long as we use our computers for work, not to play solitaire. And it wouldn't hurt to learn a new skill at night school every once in a while.