Feb
01
1996

Newsweek Puts On a Happy Face

Newsweek's January 8 cover featured a piece headlined "Cheer Up America: It's Not as Bad as You Think." In the article, economics reporter Robert J. Samuelson argued that the source of Americans' current dissatisfaction is our utopian notion of a society in which problems like poverty and job insecurity can be solved. These ideals should be discarded, Samuelson says, since they're simply "too perfect to happen."

Instead, we should embrace the wonders of the society we've got: While it's true, for example, that living standards aren't increasing as they used to, "stagnation hardly describes the explosion of new products that has benefitted millions of Americans since 1970," like VCRs and microwave ovens.

Some of this is just silly, like the chart that trumpets U.S. "progress" since the end of World War II: In 1945, 0 percent of U.S. households had cable TV, whereas in 1995, 59 percent did.

But Samuelson's happy-face portrait is more seriously flawed in other areas--as when he says "for all our angst, the economy is doing fairly well," and bases this in part on the fact that "accelerating improvements in productivity growth (output per hour) imply higher future incomes."

That would be hopeful indeed, if it were true, which it isn't. In fact, as a glance at the business press would tell you, one of the major economic stories of the past few years is the fact that wages are not increasing--while productivity continues to climb.

This phenomenon was acknowledged by none other than the chief economist at the Wall Street investment firm Morgan

Stanley. In a report sent to clients and reprinted in the January issue of Harper's magazine, Morgan Stanley's Stephen Roach wrote: "The once tight linkage between trends in productivity and real wages in the U.S. economy appears to have broken down.... While worker compensation, as a share of national income, has fallen in the past three years, corporate profitability has risen dramatically."

If Wall Street can see that reality, why can't Newsweek's Samuelson? Maybe it's all that cable TV.