The End of Affluence:: The Causes and Consequences of America's Economic Dilemma

This is a classic, not long, not hard to read, and is a concise analysis of a theme that I've been thinking about for a long time: the maturing of the US and the transition from a fast-growth economy to a slow one. It is as valid and true today as when it was published in 1995, but I wish Mr. Madrick would publish an update. Those that believe that the US will return to fast growth will be dissappointed, please set aside your fervor and delusional thinking and consider the facts that are presented here. What is not very much discussed, but is a result of these changes and facts, is the capture by the socioeconomic elite of much value in our corporations in the last 15 yrs or so... they realize what is happening and have moved to liquidate value and put it in their pockets, leaving the workers to hold the empty bag. Even if you don't believe these things, you should read the book, it is an important work, and again, it is a fast read and not difficult to digest. Our current state of affairs is put into historical perspective, which is so important, since it is difficult to see where we are now without examining how we got here. I urge you to read it, then begin to manage carefully for a more sparse future, if you are not one of those who got over the top financially (like myself... though I have had the pain and priveledge of seeing others get this done via leveraged companies, financial flips and the like). A survivor.

While the conventional wisdom is that the 1990's have been a decade of prosperity, every so often undercurrents of discontent surface (in places like Seattle), and suggest that for many people in the United States, this is not the case. Jeffrey Madrick's "The End of Affluence" offers an explanation of why this is so.Madrick begins by noting that since the early 1970's the US has been in the doldrums economically; starting in 1973, the long-term economic growth rate fell by over 1% annually (contrary to the previous reviewer, this is still the case). Madrick notes many of the consequences of this slowdown. He contrasts the present period with the rapid growth of the past in a concise but informative review of US economic history--this segment by itself makes the book worth reading.Madrick then turns to what he sees as the main cause of the slowdown. As European and Japanese firms adopted American methods of mass production and distribution, this increased international competition eroded much of the US's long-standing advantages. The slowness of US firms, such as the automakers, to adopt new methods of flexible production, and the lagging rate of US capital investment, further aggravated this trend. A major consequence of this trend has been a sharp decline in the availability of well-paying jobs for those without college degrees.Madrick criticizes the "misplaced optimism" of those who see our problems as minor or readily solved. He critiques some alternative explanations for the growth slowdown, such as our allegedly insufficient savings rate and supposed "skills shortage." While he offers little in the way of specific solutions, he does give a solid refutation of the Republican Party's ever-resurrected "solution" of yet one more round of supply-side, trickle-down tax cuts.Madrick's analysis is often solid, but he falls short in two respects. First, he is too focused on a single explanation for our "end of affluence," international competition, and neglects other factors that also are important--the collapse of the labor movement comes to mind as one. Second, his vision is centered too narrowly on GDP and related economic measures, and so neglects issues like environmental degradation, which are of considerable importance, but are not captured in convential economic statistics.While Madrick's story is an incomplete one, his superb reporting makes his book, even though it is somewhat dated, worthwhile reading.

Madrick describes the subtle economic decline in America that has taken place over the last thirty years. Many people find themselves working more hours, or even a second job without getting ahead. The rise in social problems, lack of faith in the government, and America's poor economic performance are approached from a historical perspective, where Madrick cites the underlying problem as "a sharp slowdown in economic growth from our historical average of 3.4% a year, and often higher since the Civil War to a little more than 2% a year since 1973." He makes the case that politicians and economists often look at economic indicators to determine economic expansion or recession, but fail to acknowledge that the slow average economic growth over time has had a somewhat irreversible effect on lost production, which he has estimated to be about $12 trillion over the twenty year period of 1973 to 1993. As a nation we tend to blame these economic problems on inflation, government budget deficits, low levels of investment, faltering education, or the irresponsible politicians and their special interest spending -- which are really symptoms of the root cause, slow growth. Conversely, Madrick presents a positive correlation with the increase of growth in productivity as the solution to all of society's problems. Furthermore, he makes the case that the decline cannot be rooted to any political party, change in moral values, or the rise in special interests -- but has to do with the corporate America's reluctance to identify and adapt to the changing global marketplace. Madrick tells of America's second frontier of mass production which had once given the U.S. a great competitive advantage: having the operating experience to produce large qualities at a small enough unit price and distribute it over the nation's large consumer base -- which is unparalleled in the world. While American businesses were caught up in a paradigm of mass production of standardized products with broad marketing, the rest of the world began systems of flexible production of specialized products, produced for narrower markets. This coupled with the reduction of trade barriers and the ease of entrance into U.S. markets created competition that American companies had never before experienced, and were unprepared for. As their corporate paradigm shifted, and companies began to realize that what had once been was no longer, they reacted by trying to compete through reducing costs-- such as reducing labor or wages-- rather than focusing on increasing their productivity. Corporate America's failure to adapt to the changing market conditions, essentially caused an economic retreat in industries where American companies felt they couldn't compete -- most noticeably in manufacturing. Madrick presents a model which represents the cyclical decline created by the internationalization and fragmentation of markets which create cost cutting and lower wages,

Jeffrey Madrick uses facts to explain what went wrong with the American dream. The cold hard facts explain how it is unlikely that economic growth will return to historic levels. The truly amazing points to me were that education reform, welfare reform, balanced budgets, health care reform...even if all of these come to pass...will still not return America back to where we have been for the past 150 years. Most Americans believe that the Great Drepression was a period of negative growth, and the period following WWII was unprecedented rapid growth. The reality is that the period following WWII was a return to our historic growth patterns. I continue to send my children to private schools due to the abysmal public schools in California, but the ecomonic payoff is not likely to be achieved. I still retain a healthy optimism about Americas future, but this book was definitely food for thought