The Man From Mars Investigates the 1980's (Long)

Longtime WSJ Editorial Page Editor Robert Bartley penned a book, The Seven Fat Years, that was an economic defense of the 1980's. Great book. He published the first half of the first chapter as a column in the WSJ and frankly, it's one of his better ones. I'm re-reading the book right now and thought I'd put up his column here as it can not be found online. The column's title was "The Man from Mars."

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In July 1990, the Seven Fat Years ended. An economic expansion of record peacetime duration ground to a close.

That summer, too, the Man from Mars landed in Kankakee and began to watch television programs, browse in bookstores and listen in on daily chatter. The shopping malls were air-conditioned; the parking lots were filled with cars shipped from far-off Japan; the movie house offered a choice of five attractions; what used to be record shops sold "music videos" by Madonna and Milli Vanilli; and kids in the mall wore $100 sneakers.

Yet everywhere he heard and read of economic decline. Everyone talked of "excesses." Best-selling books mocked recent history, depicting the follies of tycoons, elaborating on the poor sinking into deeper misery and bemoaning the decline of the nation. The impending recession was the start, everyone seemed to assume, of the collapse the Cassandras had predicted throughout the 92 months of economic expansion.

No one could see any economic statistic except the "deficit," a kind of black hole into which vanished the savings of all America and maybe the world. The corner savings and loan has somehow mutated into the eggplant that ate Kankakee, Tampa and Los Angeles. America had become a "debtor nation" and was declining as previous empires had. Whole companies had been financed on "junk." The financial genius of the preceding decade was headed for jail, and the huge financial firm built around him was bankrupt.

Most curiously of all, in all this the Man from Mars sensed a peculiar satisfaction. The country was leaving behind a "decade of greed." The time had come to atone our sins, his most fashionable interlocutors seemed to feel. Seven lean years would be good for us. It was as if part of the American soul wanted a recession. This was our nervous breakdown; we had earned it, and we were going to enjoy it.

Disoriented by the disjunction between the affluence he saw and the poor-mouthing he heard, the Man from Mars pulled out his hand-held Databoy, and started to query for some statistics.

ECONOMIC GROWTH?, he punched. In 1990, the Databoy screen said, the gross national product of America was 31 percent above 1982 in real, inflation-adjusted terms. During the Seven Fat Years, America had grown by nearly a third.At the beginning of the period, the German economy was about a third of America's; in its years of "excess" the American economic machine had in effect built a whole new West Germany.

LIVING STANDARDS?, the Man from Mars punched. Inevitably the economic expansion had affected individual Americans. The Databoy exhibited the best measure of standard of living, something economists called real disposable income per capita. As expansion ended in 1990, this was 18 percent above 1982. Over the Seven Fat Years, that is, the standard of living of the American people grew by nearly a fifth. At least, the Man from Mars thought, this explains the $100 sneakers.

How?, he punched, pressing for elaboration. The growth happened because the expansion was a long one, he learned, and powers of compound interest do wonders in a long run of uninterrupted growth. The Databoy said the expansion started at an economic trough in the final quarter of 1982 and reached its peak in the third quarter of 1990. Over this time, real gross national product grew by 32 percent.

DEINDUSTRIALIZATION?, the Man from Mars punched, picking something he'd heard. He found that manufacturing production grew even faster than GNP, rising by 48 percent over the expansion. And despite the deficit black hole, gross private investment grew by 32 percent, in line with GNP. And just as a demographic surge reached working age, enough jobs were created to boost civilian employment by 19.5 percent. Between 1982 and 1990, the U.S. economy added 18.4 million jobs.

PRODUCTIVITY?, he continued. During all that "excess," nonfarm productivity, the output of an hour of American labor, grew by 10.6 percent, though it had previously been stagnant for a decade. And while the interlocutors bemoaned "noncompetitive" industries, exports to the rest of the world grew by 92.6 percent.¹

GREED, he typed, DECADE OF? No statistics on greed, the Databoy replied, reference CHARITY? Here he found that the 1980s were a remarkably generous decade, with charitable giving growing at 5.1 percent a year, compared with a rate of 3.5 percent over the previous 25 years. Giving increased faster than jewelry purchases, beauty parlor and health club spending and consumer debt. ²

TAX REVENUES? This time the Man from Mars was sure he'd find a catch, having heard again and again of "irresponsible" tax cuts. The Databoy replied that between fiscal years 1980 and 1990, federal government receipts grew by 99 percent, against GNP growth of 102 percent. From the low point in 1983 to the high point in 1989, the figures showed, tax receipts actually grew faster than GNP.

CHART, U.S. ECONOMY, the Man from Mars punched into the Databoy, CRUDE. It told him that as the expansion began, the crudest measure of economic progress was something called a "misery index," offered by the late Arthur Okun, the Brookings Institution economist. It was simply the sum of the inflation rate and unemployment rate. The data base offered up a chart. It showed that the misery index had been at a peak when the Seven Fat Years started, and declined until they came to an end.

Taking one glance at the misery index, the Man from Mars punched, CHART, U.S. ECONOMY, INFLECTION POINTS. Yes, it told him, there had been a discontinuity in the growth path of the U.S. economy, but it had come before the years of "excess." From World War II until 1973, real economic growth averaged 3.6 percent a year. After 1973 the economy staggered, growing only 1.6 percent a year over the next nine years. But after 1982, growth returned, hitting a 3.5 percent path through 1990. From the beginning of 1983 through the end of 1989, growth hit 3.8 percent—The Seven Fat Years.

SEE FOOTNOTE, the Databoy screen flashed, INFLECTION POINTS. There is a convention among economists to measure different economic periods peak-to-peak or trough-to-trough. By their nature, inflection points measure peak-to-trough or trough-to-peak. The usual convention is "fair," but doesn't help much with the issue of what causes peaks and what causes troughs. Sometimes inflection points will help show when things changed.

Yes, the Man from Mars thought, to glance at these charts, something changed in 1973 and in 1983. While I know little about the partisan and ideological battles of Earthlings, something caused a flattening and something caused a revival.It probably takes a while to work out policies, and anyway economists talk of lags, so maybe the crucial times were a year or two before the chart's inflection points.

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