The Alchemy Of Affluence


How a Generation of Americans Created the World's Most Prosperous Society

By Robert Sobel

St. Martin's Press -- 450pp -- $29.95

America's current economic expansion, unbroken for nearly a decade, is startling in both its pace and duration. What's also astounding is that the nation has experienced nearly a half-century of overall growth and prosperity, with serious instability and unemployment appearing during only about a 10-year period starting in 1973. In contrast, deep depressions were a regular part of economic life from 1865 through 1950. One might think economists and historians would devote much attention to understanding the sources of this prosperity. But most don't.

The late Robert Sobel, a retired Hofstra University professor and author of more than 30 books on industry and finance, was an exception. The Great Boom--completed only weeks before his death last year--examines the highly successful economic experience of World War II veterans, from the late 1940s to the start of the new millennium. (In this, it echoes other recent books, including Tom Brokaw's The Greatest Generation.) Sobel provides a lively and thorough discussion of how individual Americans' determination to own their own homes, build retail franchises, and acquire stock helped to drive the country's prosperity. Strangely enough, this is simultaneously the volume's greatest strength and its key weakness: The individual achievements are impressive, but the author--almost in spite of himself--presents evidence that smart government programs were equally important.

The postwar road to success began with education and the purchase of a home and car. Sobel considers the vets "the best-educated generation in American history"--a result of solid public schools, rigorous college programs, and personal diligence (a trait they'd later carry into their jobs). Apartment dwellers purchased suburban single-family homes that became tremendous assets over time. Cars helped expand suburbia and signaled the emergence of a consumer culture that meant jobs for millions.

As autos reshaped America's physical landscape, they also altered the economic scene by helping to spawn a franchise boom. A high point of Sobel's book is his tale of how this began with restaurants, auto dealerships, gas stations, and motels, and continues to the present in areas ranging from computer training to videocassette rental. He stresses that the phenomenon generated wealth for many who weren't franchisers or franchisees by providing reliable services that encouraged business travel and by enriching "a small army of suppliers."

Other booms also appeared in the early postwar period: in births, equity prices, and industries driven by new technologies. Sobel provides interesting discussions of each, especially when focusing on innovators such as broker Charles Merrill, who brought stock ownership to the middle class.

But by the midpoint of The Great Boom, it becomes clear that the author has a big blind spot. In the book's analytical passages, he emphasizes the importance of individual action and such personal values as playing by the rules. At the same time he presents ample evidence that the government and labor unions were crucial to the prosperity. Yet, mysteriously, these get little credit for the felicitous economic outcomes.

We read, for example, how government provided generous college assistance to more than a million veterans, mortgage guarantees to banks, and interest deductibility to home buyers. Washington also took aggressive fiscal and monetary action against signs of macroeconomic trouble and supplied key resources to keep America at the forefront in high-technology industries. But these details seem to have no impact on the author's focus on solitary achievement.

While Sobel touches on the role of the unions, he never gives them their full due. The fact is, collective bargaining between unions and management was a big contributor to early postwar prosperity. By 1954, 35% of workers were unionized, up dramatically from only 12% in 1930. This affected the entire workforce by setting a standard for benefits that even many nonunion employers felt they had to meet. And union pensions helped spur the rise of institutional investors.

As for the last few decades, Sobel glosses over some of the darker aspects. The 1970s brought economic turbulence due to renewed international competition and rising oil prices. Then, through the '80s, a wave of corporate takeovers and restructurings helped drag the economy out of the doldrums and into the Internet age. Sobel concedes that large numbers of workers and managers--including many vets--lost their jobs in these decades. But he doesn't allow their struggles to complicate his argument. Indeed, he thinks too much attention has already been given to what went wrong during the past 50 years: "This book represents an attempt to present the other side of the ledger."

Trouble is, it's impossible to truly understand what accounts for the prosperity of so many vets without considering what distinguishes them from Americans who were less successful. To his credit, Sobel fingers racism for excluding most nonwhites from the vehicles of wealth creation. Nevertheless, his book is marred by his decision to study the ingredients of economic success by examining only those who've "made it."

It's clear The Great Boom doesn't have all the answers. Still, as food for thought, this book's a feast.

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