TCS Daily

Pop the Corks!

By James K. Glassman - December 30, 2005 12:00 AM

"The prettiest sight in this fine pretty world is the privileged class enjoying its privileges," says Jimmy Stewart, playing Macaulay Connor, the young magazine writer in The Philadelphia Story, the 1940 movie about an upper-crust wedding in the Depression years.

Connor is trying his best to be cynical, but, truth is, like me, he finds a lot to admire about the American wealthy, including the way they made their money and what they spend it on. Still, there are exceptions. This afternoon, I picked up a copy of a magazine called Palm Beach Pet Society, loaded with lush full-page color photographs of rich people's dogs decked out in diamond jewelry. Here are "Cha Cha [a chihuahua] in Tiffany" and Daisy Desmond [miniature schnauzer] in Van Cleef and Arpels."

Being a country with a lot of very rich people, however, is nothing to be ashamed of -- as long as nearly everyone has a shot at being well-off. Stephen Moore of the Wall Street Journal and Lincoln Anderson of LPL Financial Services recently pointed out that the latest Census data show that, far from shrinking or losing ground, the middle class in America has become a good deal richer.

"Back in 1967," they write, "the income range for the middle class [that is, the third of five quintiles] was between $28,800 and $39,000 (in today's dollars). Now that income range is between $38,000 and $59,000." In 1967, one family in ten had an income of more than $75,000 (in 2004 dollars); today, it's one in four.

Americans believe our economic system gives them a shot at dramatic upward mobility if they work hard and get some breaks. But mobility and other socially desirable goals demand growth. In his new book, The Moral Consequences of Economic Growth, Benjamin Friedman, a Harvard economist, argues that when countries grow robustly, they become more tolerant, democratic and generous. It is economic stagnation that breeds bias and callousness.

If economic growth is good for reasons beyond giving people the ability to live comfortably (and maybe even to buy a few diamonds for the pooch), then the U.S. last year was a very good country indeed.

When the final figures are in, it is almost certain that our Gross Domestic Product -- the single best indicator of economic progress -- grew by more than 3.5 percent once again in 2005, compared with about 1.5 percent for the Euro Zone (the part of Europe, mainly Germany, France and Italy, that uses the euro as currency). U.S unemployment is 5 percent, compared with rates twice that high in Europe.

We are creating net new jobs (that is jobs gained minus jobs lost) at a rate of 2 million a year. Inflation is low, and the stock market -- unless something dire happens this week -- will rise for the third year in a row.

Further good news is that, Europe excepted, the rest of the world has enjoyed superb growth this year, and the U.S. has provided much of steam for the global engine. Yes, this means that we have a large trade deficit, but we can afford it. Our economic strength has boosted the value of dollar, and we're attracting gouts of investment cash from around the world.

Globally, 2004 and 2005 were the two best years in a row since the 1970s. Latin America will grow more than 4 percent; China, about 9 percent; India, nearly 8 percent. Even Japan, which has been in the doldrums for more than a decade, is back on track.

"This sustained and broad-based economic growth is a pleasure," writes Martin Wolf in the Financial Times. "It is also something of a surprise."

After all, hurricanes in 2005 caused $100 billion in damage in the United States. There was a terrible terrorist attack on the London subway. Iraq has been rough going--though not as bad as we are led to think. A recent pre-election survey in Time magazine found 71 percent of Iraqis saying that "things are going very well" or "quite well" in their lives and that, by a margin of 6-1, next year will be better for their country.

There are threats in America: imminent investment tax hikes, a looming crisis with Social Security and Medicare, terrorism and protectionism. But overall, 2005 was a damn good year. Celebrate!



what about the poor?
I notice the Author didn't mention the poor in the USA. Most different gov system are simply different ways to distribute wealth. There maybe a lot of wealth to distribute in America at the moment but is it being distributed fairly? The USA is as far away from solving the rich get richer and the poor get poorer problem then any other in the OECD. AS the Author knows the principle here is not how poor a yank is compared to say a Indian but how poor they are compared to the rich in his own country when the gap becomes to big trouble ensues. The world whatched how the US handled the gulf state's diaster and saw something was rotten in the state of denmark.

whose principle?
Why does a "poor yank" deserve a better living than a poor Indian? Whose principle is this? Why should we care more about the gap than about the absolute standard of living? According to this "relativistic" logic, multi-millionaires should be crying "no fair" to the government about and demanding handouts from multi-billionaires.

It is right to define poverty in absolute terms rather than relative terms, otherwise your measure of "poor" is actually just the measure of covetousness.

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