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Reagan and the Real America

Mr. Reagan has an imposing vision of the country that he is to lead. He sees an inherent America—an America which is white, and male, and industrial—and a project, of economic growth, by which this reality can be born again. He sees a “spirit” which is “still there, ready to blaze into life” if we “stimulate our economy, increase productivity, and put America back to work.”1 But his America no longer exists. The pursuit of his vision may lead to an economic crisis and a level of unemployment in comparison with which the events of 1975 and 1980 will appear as the merest disturbances of the compassionate state.

During the election, Mr. Reagan spoke frequently about the American economy, and his words served him well. They had resonance—such is the political charm of the president-to-be—on two quite different levels. First, in policies, projections, and legislative proposals. Second, and far more importantly, in the imagination and in a tableau of American resurgence, packed and repacked in the cardboard of the traveling theater, which journeyed with Mr. Reagan through his seemingly interminable electoral wanderings.

The first level of economic discourse can be dismissed fairly expeditiously. Mr. Reagan said that he would cut income tax by 30 percent by 1983, that he would reduce business taxes in order to stimulate investment, that he would increase military spending, that while he would eliminate waste in government he would not assault the “integrity” of Social Security, that he would in the meantime balance the federal budget, and that his policies would reduce inflation.

The unlikeliness of this enterprise is not hidden by the appointment of a Cabinet balanced between wild tax cutters and men who appear as pillars of fiscal responsibility. We need not doubt the new government’s resolution to kick the poor by eliminating social programs. The Republican policy equation depends, nonetheless, on the assumption of rapid economic growth. Only then would tax revenues be equal to Mr. Reagan’s extravagant schemes.

But such accelerated growth seems unlikely. The United States exports more than 10 percent of its gross national product, and the countries with which it trades are sickly. Industrial production turned down in the second quarter of 1980 in each of the five largest capitalist economies.2 The number of people looking for jobs in the European Community has increased by 20 percent in one year.3 The world economy may be moving, as Mr. Reagan takes office, toward the synchronous recession of 1981-1982.

The expectation of economic growth thus depends in turn on a further assumption: that some unknown Republican inspiration, some elixir of indigenous capitalist expansion, will intervene to make possible the American regeneration. It is here that Mr. Reagan’s imaginative tableau is of importance.

The scene is of an innate economy, an economy of industrial workers, male, white, neither young nor old, which is to “get working again.” It is the country of the man in the Republican television commercial, standing lonely but determined in a deserted factory that he hopes to bring to life. And it is the country of basic manufacturing values. In his main economic speech, Mr. Reagan mentioned only two industries. “Outdated depreciation schedules,” he said, “now prevent many industries, especially steel and auto, from modernizing their plants.”4 The image is related, in turn, to the idea of remilitarization. The resurgent America will be equipped with missiles and tanks and military transport planes. Mr. Reagan repeatedly joined his objectives, of reconstructing “a disintegrating economy, a weakened defense.”

It is on this vision that the Republican mission of restoring economic confidence relies. The new policies, Mr. Reagan’s adviser George Shultz says, will have “an electric effect on expectations.”5 Like other observers of capitalist behavior, including Keynes, the Reaganites believe in an investment “spirit.” The “strategy,” Reagan himself says, “is based on solid economic principles and basic experience in both the government and the marketplace. It has worked before and will work again.”6 And indeed his imagery corresponds to the reality of the postwar period. The two great surges in recent American economic growth, from 1950 to 1953, and from 1962 to 1966, were each accompanied by an even more rapid increase in manufacturing output; each was also a period of rapid expansion in the military economy.

The vision is not implausible. But it is false. For the structural changes that have taken place in the US economy in the 1970s are such that the old truths no longer hold. These changes—in the structure of employment and also in the structure of military expenditure—make Mr. Reagan’s regeneration, his Pittsburgh Redivivus, unlikely. They also hold out the possibility of a far more cruel economic crisis to come.

The 1970s were a time of startlingly rapid expansion in employment in the American economy. In the period of the economic crisis alone, from 1973 to 1979, almost 13 million new nonagricultural jobs were created of which almost 11 million were in the private economy.7 This is as though the entire labor force of Canada had moved south and found employment in the United States. The US had by far the most rapid growth in total employment of any major industrial country: from 1973 to 1979, it was more than three times as fast as in Japan, while employment actually fell in West Germany, and was virtually unchanged in France and the United Kingdom.8

The new American jobs were concentrated, however, in two sectors of the private economy—services and retail trade—and, at least in the early 1970s, in one public sector, state and local government. By 1979, 43 percent of all Americans employed in the private nonagricultural economy worked in services and retail trade. The two sectors together provided more than 70 percent of all new private jobs created from 1973 to the summer of 1980.9

Even within these two vast sectors, the growth in employment was further concentrated. Three industries each provided more than a million new jobs during the 1973-1979 period: “eating and drinking places,” including fast food restaurants; “health services,” including private hospitals, nursing homes, and doctors’ and dentists’ offices; and “business services,” including personnel supply services, data processing services, reproduction and mailing, and the quaintly named “services to buildings.” These three industries together accounted for more than 40 percent of the new private jobs created between 1973 and the summer of 1980. In that period their employment increased almost three times as fast as total private employment, and sixteen times as fast as employment in the goods-producing or industrial sector of the economy.

The three “new” industries loom very large in total employment. Mr. Reagan’s fundamental manufacturing industries are insignificant by comparison. Thus the increase in employment in eating and drinking places since 1973 is greater than total employment in the automobile and steel industries combined.10 Total employment in the three industries is greater than total employment in an entire range of basic productive industries: construction, all machinery, all electric and electronic equipment, motor vehicles, aircraft, ship building, all chemicals and products, and all scientific and other instruments.

This transformation has profound consequences for the organization of society, and for the American economy. The new jobs are different in several respects from jobs in productive industry. In the first place, they provide employment for women. Women accounted for 41 percent of all employment in 1979, and 31 percent of all manufacturing employment; they accounted for 56 percent of all people employed in eating and drinking places, 43 percent of employment in business services (a sharp increase since the early 1970s), and 81 percent of employment in health services. Waiting on tables, defrosting frozen hamburgers, rendering “services to buildings,” looking after the old and the ill: “women’s work.”

Second, jobs in the big three industries of the 1970s offer short hours. People working in eating and drinking places work the shortest weekly hours of any industry: 26.4 hours in 1979, compared to an average of 35.7 for the entire private economy, and 40.2 in manufacturing. (“Services to buildings” and health services are also parsimonious in hours worked.) Third, hourly pay is very low. Eating and drinking places offer the lowest average hourly earnings (excluding tips) of any industry. Business services and health services are also among the low-paid industries. Employees in “nursing and personal care facilities,” for example—of whom 89 percent are women—earned an average of $3.87 per hour in 1979, compared to an average of $6.16 in the entire private economy, and $6.69 in manufacturing. And these pitiful earnings increase very slowly. Hourly earnings in services, measured in 1972 dollars, fell from $3.16 in 1973 to $3.08 in 1979; earnings in retail trade fell from $2.70 to $2.61. Over the same period real hourly earnings in manufacturing increased from $3.83 to $3.85, while earnings in the motor vehicle industry increased from $5.13 to $5.22.11

Fourth, the new positions are “dead-end jobs.” One measure of the prospects for change and promotion in an industry is the proportion of all jobs which are for production or nonsupervisory workers. The average for the private economy in 1979 was 82 percent; for manufacturing it was 72 percent, with such adventurous industries as chemicals requiring only 57 percent nonsupervisory workers, aircraft 54 percent, and guided missiles 32 percent. Business services, by comparison, employ 87 percent nonsupervisory workers, health services 89 percent, and eating and drinking places 92 percent. Fifth, the “new” industries, with their short hours, temporary and part-time employment, and their women workers, are less protected by union agreements and benefits than are older manufacturing industries: the motor vehicle industry, for example, with its unemployment compensation, health benefits, and increasing earnings.

The booming labor-intensive industries are, finally, distinct economically from older productive industries. Their “structure” in input/output terms, for example, is different from that of manufacturing industries. They buy inputs from a very few other industries, and most of these suppliers are similarly crowded into the service and trade sectors. Thus the business services industry does not buy as much as a penny’s worth of inputs, per dollar of its output, from any manufacturing industry; its major purchases consist of services from real estate and from itself. (Purchases of capital equipment are not covered in these statistics.) Medical services spend about three cents per dollar on food and drugs, and just over one cent on such suitably office-bound inputs as paper and printing; the important purchases are of business and other services. Eating and drinking places spend thirty-two cents per dollar of output on “food and kindred products,” one cent on paper and paper containers, and the rest of their substantial purchases in the transport, trade, and service sectors.

This more or less hermetic behavior is in evident contrast with the more familiar input/output profile of, for example, the motor vehicles industry: for each dollar of output, it buys two cents worth of textiles, three cents worth of rubber, one cent of glass, eight cents of screws, seven cents of iron, one cent of engines, one cent of miscellaneous machinery, twenty-two cents from motor vehicles and equipment, and so forth….12 The new service industries are isolated from the coming and going of intermediate inputs, from the propensity, in Adam Smith’s phrase, to “truck, barter and exchange one thing for another.”

  1. 1

    Acceptance speech, Republican convention, The New York Times, July 16, 1980.

  2. 2

    US Department of Commerce, Business Conditions Digest, September 1980, Table II F1.

  3. 3

    Interview with Raymond Barre, Le Monde, November 29, 1980.

  4. 4

    Washington Post, September 10, 1980.

  5. 5

    Business Week, December 1, 1980.

  6. 6

    Washington Post, September 10, 1980.

  7. 7

    US Department of Labor, Employment and Earnings, March 1980, Table B-1.

  8. 8

    Organization for Economic Cooperation and Development, Labour Force Statistics, 1967-1968 (Paris, 1980) and Quarterly Supplement, August 1980.

  9. 9

    Employment figures for the US, here and in what follows, are taken from Employment and Earnings, March 1980, March 1974, and various issues, Tables B-1 and B-2 (except where other sources are given). These figures are derived from data for establishments in the nonagricultural economy. Figures for the summer of 1980 are the average of May, June, and July 1980, from Employment and Earnings, August 1980.

  10. 10

    Figures for motor vehicles and equipment (Standard Industrial Classification code 371), steel (SIC 331), and iron and steel foundries (SIC 332) are from 1979, before the current recession. Employees in the auto and steel industries work far longer hours than do employees in eating and drinking places. But even in terms of hours worked, the increase in eating and drinking places exceeds total hours for motor vehicles and equipment.

  11. 11

    Figures for the employment of women are from Employment and Earnings, March 1980, Table B-3. For gross hours and earnings of production workers, Employment and Earnings, March 1980 and March 1974, Table C-2. Earnings in 1972 dollars are deflated by the consumer price index for urban wage earners, US Department of Labor, Monthly Labor Review, August 1980, Table 22.

  12. 12

    The Input-Output Structure of the US Economy, 1972,” US Department of Commerce, Survey of Current Business, February 1979, Table 3, “Commodity-by-Industry Direct Requirements.” Medical services are grouped with educational and social services.

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