Who did president reagan christen as the “heroes for the eighties”?

A s 1999 came to a close, a techno-logical disaster threatened mil-lions of computers around the world. For decades, programmers had used a two-digit field to describe dates, recording 1950 as simply “50.” What would happen when the clock flashed to 2000? Would millions of computers record it as 1900, magically shifting the world a century back in time? Would the computers crash and wipe out the

data of millions of users? As it turned out, the great “Y2K” (shorthand for “year 2000”) fear proved unfounded, as thousands of software programmers patched the world’s computer systems and avoided a disaster.

The moment was nonetheless symbolic. As Y2K showed, the fates of the world’s many peoples were directly tied to one another electronically and in many other ways. In centuries past, epidemical diseases — the Black Death, cholera, and infl uenza — had periodically swept across the world, bringing death to its peoples. Now millions of the world’s citizens were linked together on a daily basis: working in export-oriented fac- tories, watching movies and television programs made in other countries, fl ying quickly between continents, and — most amazing of all — having pictures of their towns snapped by satellite cameras and beamed instantly around the world. The globe was growing smaller.

But it was not necessarily becoming more harmonious. “Globalization,” the movement of goods, money, ideas, and organizations across political bound- aries, created many conflicts. Likewise, modern means of communication made Americans more conscious of their differences — racial, ethnic, religious, ideological — and sharpened cultural conflict. In particular, New Right Christian conservatives squared off against social welfare liberals in an intense series of “culture wars.”

What Christians have got

to do is take back this

country. I honestly believe

that in my lifetime we will

see a country once again

governed by Christians

and Christian values. — Ralph Reed, 1990

916

A Dynamic Economy, A Divided People 1 9 8 0 – 2 0 0 031

C H A P T E R

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America in the Global Economy and Society In the last decades of the twentieth century, bread-and-butter issues loomed large in the minds of many Americans. The abrupt rise in global oil prices in the 1970s ended the era of American affl uence (1945–1973) and triggered a corrosive “stagfl ation” that heaped hardship on the poor, shrank middle-class expectations, and shook the confi - dence of policymakers and business executives. It would take ingenuity and a bit of luck to restore America’s well-being and self-confi dence.

The Economic Challenge Until the 1970s, the United States had been the world’s leading exporter of agricul- tural products, manufactured goods, and investment capital. Then American manu- facturers lost market share, undercut by cheaper and better-designed products from Germany and Japan (see Chapter 29). By 1985, for the fi rst time since 1915, the United States registered a negative balance of international payments. It now imported more goods than it exported, a trade defi cit fueled by soaring imports of oil, which increased from two million to twelve million barrels per day between 1960 and 2000. Moreover, America’s earnings from foreign investments did not offset the imbalance in trade. The United States became a debtor (rather than a creditor) nation; each year, it had to borrow money to maintain the standard of living many Americans had come to expect.

The rapid ascent of the Japanese economy to the world’s second largest was a key factor in this historic reversal. More than one-third of the American annual trade defi cit of $138 billion in the 1980s was from trade with Japan, whose corporations exported huge quantities of electronic goods (TVs, VCRs, microwave ovens) and made nearly one-quarter of all cars bought in the United States. Refl ecting these trading profi ts, Japan’s Nikkei stock index tripled in value between 1965 and 1975 and then tripled again by 1985. Japanese businesses bought up prime pieces of real estate, such as New York City’s Rockefeller Center, and took over well-known American corpora- tions. The purchase by Sony Corporation of two American icons, Columbia Pictures and CBS Records, was a telling signal of Japan’s economic power.

Meanwhile, American businesses grappled with a worrisome decline in produc- tivity. Between 1973 and 1992, American productivity (the amount of goods or ser- vices per hour of work) grew at the meager rate of 1 percent a year, a far cry from the post–World War II rate of 3 percent annually. Consequently, the wages of most employees stagnated, and because of foreign competition, the number of high-paying, union-protected manufacturing jobs shrank. Unemployed industrial workers took whatever jobs they could fi nd, usually minimum-wage positions as “sales associates” (a glorifi ed title for menial workers) in fast-food franchises or in massive retail stores, such as Wal-Mart or Home Depot. By 1985, more people in the United States worked for McDonald’s slinging Big Macs than rolled out rails, girders, and sheet steel in the nation’s steel industry. Middle-class Americans — baby boomers included — also found themselves with less economic security as corporations reduced the number, pay, and pensions of middle-level managers and back-offi ce accountants.

C H A P T E R 31 A Dynamic Economy, A Divided People, 1980–2000 � 917

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918 � PA R T S E V E N A Divided Nation in a Disordered World, 1980–2008

The Turn to Prosperity Between 1985 and 1990, American corporate executives and workers learned how to compete against their German and Japanese rivals. One key was the use of information processing, which had been pioneered by Microsoft, Cisco, Sun, and other American companies. As corporations outfi tted their plants and offi ces with computers, robots, and other “smart” machines, the productivity of the workforce rose. Nucor, a steel- maker in North Carolina, used electric arc furnaces, which are cheaper and more effi cient than conventional blast furnaces, to compete successfully against foreign fi rms. Other American manufacturers cut costs by adopting the Japanese system of rapid inventory resupply.

Refl ecting these initiatives, Dow Jones stock price index of leading American cor- porations doubled from 1,000 to 2,000 during the 1980s and then soared to 8,000 by the end of the 1990s. Increased productivity and profi ts fueled only a part of this rise. The Securities and Exchange Commission encouraged the entrance of small-scale investors into the stock market by encouraging the creation of discount brokerage fi rms. The growing wealth of pension funds was even more important and refl ected a more problematic development. Increasingly, American corporations switched from providing pensions to their workers to contributing to their 401(k) stock accounts, causing the percentage of American families who owned some stock to rise from 13 to 51 percent between 1980 and 2000. This gain came at a high price: Workers could no longer count on a defi ned-benefi t pension for life; instead, they had to hope that their stock investments provided suffi cient funds for their old age.

The rise in stock values unleashed a wave of corporate mergers as companies used stock to buy up competitors. As these deals multiplied, so did the number of traders who profi ted illegally from insider knowledge. The most notorious white-collar crim- inal was Ivan Boesky. “I think greed is healthy,” Boesky told a business school graduating class. “You can be greedy and still feel good about yourself.” At least until you are caught! Convicted of illegal trading, Boesky was sentenced to three and a half years in prison (he served two) and had to disgorge $50 million from his illicit profi ts and another $50 million in fi nes.

While sleazy fi nanciers such as Boesky gave corporate millionaires a bad name, successful business executives basked in the Reagan administration’s reverence for wealth. When the president christened self-made entrepreneurs “the heroes for the eighties,” he probably had Lee Iacocca in mind. Born to Italian immigrants and trained as an engineer, Iacocca rose through the ranks to become president of the Ford Motor Corporation. In 1978, he took over the ailing Chrysler auto company and turned it into a profi table company, securing a crucial $1.5 billion loan from the U.S. government, pushing the development of new cars, and selling them on TV. His patriotic-tinged commercials echoed Reagan’s rhetoric: “Let’s make American mean something again.”

Real estate entrepreneur Donald Trump had his own vision of what America meant. In 1983, the fl amboyant Trump built the equally fl amboyant Trump Towers in New York City. At the entrance of the $200 million apartment building stood two enormous bronze “T’s,” a display of self-promotion reinforced by the media. Calling him “The Donald,” a nickname used by Trump’s fi rst wife, TV reporters and maga- zines commented relentlessly on his marriages, divorces, and glitzy lifestyle.

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Trump personifi ed the materialistic values of the Reagan era. Accustomed to the extravagance of Hollywood, Ronald and Nancy Reagan created an aura of affl uence in the White House that contrasted sharply with the austerity of Jimmy and Rosalynn Carter. At President Carter’s inauguration in 1977, his family dressed simply, walked to the ceremony, and led an evening of restrained merrymaking; four years later, Reagan and his wealthy Republican supporters racked up inauguration expenses of $16 million. Critics lambasted the extravagance of Trump and the Reagans, but many Americans joined with them in celebrating the return of American prosperity and promise.

The economic resurgence of the late 1980s did not restore America’s once domi- nant position in the international economy, however. The nation’s heavy industries — steel, autos, chemicals — continued to lose market share, owing to weak corporate leader- ship and the relatively high wages received by American workers. Still, during the 1990s, the economy of the United States grew at the impressive average rate of 3 percent per year. Moreover, its main international competitors were now struggling. In Germany and France, high taxes and high wages stifl ed economic growth, while in 1989 in Japan, there were spectacular busts in the real estate and stock markets, which had been driven to dizzying heights by speculators. Its banking system burdened by billions of yen in bad debts, Japan limped through the 1990s with a meager annual growth rate of 1.1 percent.

Meanwhile, boom times came to the United States. During Bill Clinton’s two terms in the White House (1993–2001), the stock market value of American compa- nies nearly tripled. This boom, which was fueled by the fl ow of funds into high-tech and e-commerce fi rms, enriched American citizens and their governments. Middle- income families who held 401(k) pension plans saw their retirement savings suddenly double, and the tax revenue from stock sales and profi ts provided a windfall for the state and federal governments. By 2000, the Clinton administration had paid off half of the enormous national debt created during the Reagan and Bush presidencies. Looking for- ward, the Congressional Budget Offi ce projected an astonishing surplus of $4.6 trillion in federal revenue over the coming decade — a prospect that proved too good to be true.

The New Social Pyramid The new prosperity was not equally shared. The top tenth of American taxpayers, the primary benefi ciaries of President Reagan’s tax cuts and economic policies, raised their share of the national income to the extreme levels of the 1920s. By 1998, the income of the 13,000 American families at the very top of the increasingly steep social pyramid was greater than that of the poorest twenty million families.

As the rich got richer, many middle-class Americans enjoyed a modest affl uence. The well-educated baby boomers who entered the labor force in the early 1980s took high-paying jobs in the rapidly growing professional and technology sectors of the economy. These young urban professionals — the Yuppies, as they were called — were exemplars of materialistic values. Yuppies (and Buppies, their black counterparts) dined at gourmet restaurants, enjoyed vacations at elaborate resorts, and lived in large suburban houses fi lled with expensive consumer goods. The majority of Americans could not afford the new luxuries; but some experienced them vicariously by watching

C H A P T E R 31 A Dynamic Economy, A Divided People, 1980–2000 � 919

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920 � PA R T S E V E N A Divided Nation in a Disordered World, 1980–2008

Lifestyles of the Rich and Famous, a popular TV series that debuted in 1984. Every week, host Robin Leach took audiences into the mansions of people who enjoyed “cham- pagne wishes and caviar dreams.”

Wishes and dreams were all that most working-class Americans could enjoy, because the real wages of manufacturing and retail workers continued to stagnate. To bolster their families’ income and exercise their talents, married women increasingly took paid employment. By 1994, 58 percent of adult women were in the labor force, up from 38 percent in 1962. Women’s pay remained low, averaging about 70 percent of that of men, and many women did double duty. As one working mother with young children remarked, “You’re on duty at work. You come home, and you’re on duty” again.

Some women entered male-dominated fi elds, such as medicine, law, skilled trades, law enforcement, and the military, but the majority still labored in traditional fi elds, such as teaching, nursing, and sales work. In fact, one in fi ve working women held a clerical or secretarial job, the same proportion as in 1950. Still, as women flooded the labor force, cultural expectations changed. Men learned to accept women as coworkers — and even as bosses — and took responsibility for more household tasks. In the 1950s, over 60 percent of American children grew up in the type of household

Barbie Goes to Work Since 1959, the shapely Barbie doll has symbolized the “feminine mystique,” the female as sexual object, and has helped to diff use this view of American womanhood around the nation and the globe. More than 500 million Barbies have been sold in 140 countries. Barbie moves with the times. In 1985, she got her fi rst computer, and in 1999, this doll and CD set transformed Barbie into a working woman, earning her own bread in the corporate workplace and, perhaps, with something intelligent to say! BARBIE is a registered trademark used

with permission by Mattel, Inc. ©

2008 Mattel, Inc. All Rights Reserved.

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C H A P T E R 31 A Dynamic Economy, A Divided People, 1980–2000 � 921

depicted in the Hollywood movies and TV shows of that decade: employed father, homemaker wife, and young children. By the 1990s, only about 30 percent of children lived in such families.

During these boom decades, poor Americans — some thirty-one million people — just managed to hang on. Citizens entitled to Medicare, food stamps, and Aid to Families with Dependent Children received about the same level of government benefi ts in the 1990s as they had in 1980, but the number of homeless citizens doubled. A Community Services Society report explained why: “Something happens — a job is lost, unemployment benefi ts run out, creditors and banks move in to foreclose, eviction proceedings begin — and quite suddenly the respectable poor fi nd them- selves among the disreputable homeless.”

The collapse of the boom hit the rich as well as the poor. A spectacular “bust” of the overinfl ated stock market in late 2000 resulted in a 40 percent fall in stock values. Their savings suddenly worth less, older Americans delayed their retirements; laid-off workers looked for new jobs. Faced with falling tax revenues, state governments cut services to balance their budgets, and the federal government once again spent billions more than it collected.

Globalization As Americans sought economic security during the 1990s, they faced a new challenge: the globalization of economic life. Over the centuries, Americans had sold their tobacco, cotton, wheat, and industrial goods in foreign markets, and they had long received loans, manufactures, and millions of immigrants from other countries. But the inten- sity of international exchange varied over time, and it was again on the upswing. The end of the Cold War shattered the political barriers that had restrained international trade and impeded capitalist development of vast areas of the world. Moreover, new communication and transportation systems — container ships, communication satel- lites, fi ber-optic cables, jet cargo planes — were shrinking the world at a rapid pace.

When the Cold War ended, the leading capitalist industrial nations had already formed the Group of Seven (or G-7) to discuss and manage global economic policy. The G-7 nations — the United States, Britain, Germany, Italy, Japan, Canada, and France — directed the activities of the major international fi nancial organizations: the World Bank, the International Monetary Fund, and the General Agreement on Tariffs and Trade (GATT). During the 1990s, these organizations became more inclusive. Russia joined the G-7, which became the Group of Eight; and in 1995, GATT evolved into the World Trade Organization (WTO), with nearly 150 member nations.

Working through the WTO, the promoters of freer global trade achieved some of their goals. They won reductions in tariff rates and removal of some restrictions to the free international movement of capital investments and profi ts. The WTO also negotiated agreements that facilitated international telecommunications, the settlement of contrac- tual disputes, and (with less success) the protection of intellectual property rights. Many agreements benefi ted the wealthier industrial nations; in return, they agreed to increase their imports of agricultural products, textiles, and raw materials from developing coun- tries. Thanks to such measures, the value of American imports and exports rose from 17 percent of GNP in 1978 to 25 percent in 2000. By then, the worldwide volume of international exchange in goods and money had risen to about $1 trillion per day.

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922 � PA R T S E V E N A Divided Nation in a Disordered World, 1980–2008

As globalization — the worldwide fl ow of capital and goods — accelerated, so did the integration of regional economies. In 1991, the nations of western Europe created the European Union (EU) and moved toward the creation of a single federal state, somewhat like the United States. Beginning as a free-trade zone, the EU subsequently allowed the free movement of its peoples among member countries without passports. In 2002, the EU introduced a single currency, the euro, which soon rivaled the dollar and the Japanese yen as a major international currency (Map 31.1). To offset the economic clout of the European bloc, in 1993 the United States, Canada, and Mexico signed the North American Free Trade Agreement (NAFTA). This treaty, as ratifi ed by the U.S. Congress, envisioned the eventual creation of a free-trade zone covering all of North America; in 2005, some of its provisions were extended to the Caribbean and South America. In East Asia, the capitalist nations of Japan, South Korea, Taiwan, and

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Became members 1973–1995

Became members in 2004

Applying for membership

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AT L A N T I C O C E A N

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B a l t i

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NETH.

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IRELAND

N. Ireland

MOROCCO ALGERIA TUNISIA

UNITED KINGDOM

SPAIN

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DENMARK

GERMANY POLAND

AUSTRIA HUNGARY

NORWAY

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RUSSIA LITHUANIA

BELARUS

UKRAINE

MOLDOVA

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ESTONIA

ROMANIA

BOSNIA- HERZEGOVINA

BULGARIA SERBIA MONTENEGRO

ALBANIA

GREECE

CYPRUS MALTA

TURKEY

CZECH REP.

SLOVAKIA

MAP 31.1 Growth of the European Community, 1951–2005 The European Community (EU) began in the 1950s as a loose organization of western European nations. Over the course of the following decades, it created stronger central institutions, such as a European Parliament in Strasbourg, the EU Commission and its powerful bureaucracy in Brussels, and a Court of Justice in Luxembourg. With the collapse of Communism, the EU has expanded to include the nations of eastern and central Europe. It now includes twenty-fi ve nations and 450 million people. For more help analyzing this map, see the Online Study Guide at bedfordstmartins.com/henrettaconcise.

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C H A P T E R 31 A Dynamic Economy, A Divided People, 1980–2000 � 923

Singapore consulted on economic policy; as China developed a quasi-capitalist economy and became a major exporter of manufactures, its Communist-led government joined their deliberations.

The proliferation of multinational business corporations revealed the extent of glo- balization. In 1970, there were 7,000 corporations with offi ces and factories in multiple countries; by 2000, the number had exploded to 63,000. Many of the most powerful multinationals are American based. Wal-Mart, the biggest retailer in the United States, is also the world’s largest corporation, with 1,200 stores in other nations and $32 billion in foreign sales. The McDonald’s restaurant chain had 1,000 outlets outside the United States in 1980; twenty years later, there were nearly 13,000, and “McWorld” had become a popular shorthand term for globalization. While retaining its emphasis on American- style fast food, the company adapted its menu to local markets. In Finland, customers could purchase a McRye; in Chile, a McNifi ca; and in India, Veg McCurry Pan.

The intensifi cation of globalization dealt another blow to the already fragile position of organized labor in the United States. In the 1950s, 33 percent of non- farm workers belonged to unions; by 1980, the number had fallen to 20 percent,

“McWorld” and Globalization in Saudi Arabia Many of the leading multinational corporations transforming the world’s economy are purveyors of American-style consumer goods, such as Nike and Disney products. McDonald’s was so successful in developing international markets, with more than 13,000 foreign outlets, that “McWorld” has become the shorthand term used by many observers to refer to the globalization of culture. AP/Wide World Photos. For more help analyzing this image, see the Online Study Guide at bedfordstmartins.com/henrettaconcise.

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924 � PA R T S E V E N A Divided Nation in a Disordered World, 1980–2008

and President Reagan pushed it still lower. When federal workers represented by the Professional Air Traffi c Controllers’ Organization went on strike in 1981 for higher pay and benefi ts, the president declared the strike illegal, fi red 11,000 con- trollers who did not return to work, and broke the union. Heartened by Reagan’s militant antiunion stance, corporate managers resisted workers’ demands at Eastern Airlines and Caterpillar Tractors. A few unions, such as the West Coast Longshore- men’s Union and the Teamsters’ Union, won important strikes, but their successes did not reverse the long decline of organized labor. Union members represented only 13.9 percent of the labor force by 1998 and only 12.5 percent by 2004.

Globalization played an important role in this decline. Seeking cheap labor, many American multinational corporations closed their factories in the United States and “outsourced” manufacturing jobs to plants in Mexico, eastern Europe, and especially Asia. The athletic sportswear fi rm Nike was a prime example. Ignor- ing ideological boundaries, the company established manufacturing plants for its shoes and apparel in Communist Vietnam and China as well as in capitalist Indonesia. By the mid-1990s, Nike had 150 factories in Asia that employed more than 450,000 workers, most of whom received low wages, endured harsh working conditions, and had no health or pension benefi ts. Highly skilled jobs were outsourced as well. American corporations — Chase Manhattan Bank, Dell Computer, General Electric,