Comments on: After the New Economy

By: Doug Henwood

Doug Henwood — Mon, 02 Feb 2004 22:20:38 +0000

I’m not sure if it’s vulgar, embarrassing, or otherwise unpleasant to defend oneself against criticism of one’s own book, but I have no self-control anyway. I’d like to respond to two of the points: 1) “Cavalier” use of stats. Them’s fighting words, man. I’m obsessive about getting the numbers right and looking at them a minimum of thirteen different ways. I present graphs that make it easy for readers to periodize the data any way they’d like, and I also make the point that real wages did rise in the late 1990s across the distribution. As I say on p. 90, “There’s no doubt that the tight labor markets of the late 1990s did a lot to bring up the incomes of poor and working-class Americans – a welcome reversal after more than twenty years of decline.” Elsewhere I describe this as the fortunate byproduct of what turned out to be an unsustainable boom. I’d add now that it’s not enough to rely on tight labor markets to push wages up and poverty down – you need unions and friendly policies to make the gains sustainable. Inequality most certainly did not decline in the 1990s, early, middle, late, or entire. Here’s the Census Bureau’s ginis: 19890.431 19900.428 19910.428 19920.434 19930.454 19940.456 19950.450 19960.455 19970.459 19980.456 19990.457 20000.462 20010.466 20020.462 And yes, hourly wages rose. But so did the work effort – more people worked. As I say often enough to risk boring myself, if we’re in a productivity revolution, we’re certainly not taking its dividends in the form of increased leisure. 2) In my review of the productivity stats, I say that everyone comes up with different numbers, often wildly different numbers. Thus Gordon and the BLS stats show durable goods as the star of the show; McKinsey nominates wholesale and retail trade. Triplett, Jorgenson, and Stiroh all concede that many heavy computer-using industries showed no acceleration in productivity. And though my focus is on the late 1990s, I was trying to situate them in a much longer history – most immediately, the whole post-1979 “neoliberal” era, but less immediately, the ancient tendencies of American-style capitalism, on which the new economy moment was a manic variation.

By: Steve Carr

Steve Carr — Wed, 28 Jan 2004 14:17:44 +0000

I think Doug’s explanation for “why 1995?” is a good one. And there is a concrete event that happened in 1995 that undoubtedly had something to do with the productivity boom, at least insofar as it was connected to business’ use of IT: that was the year semiconductors went from a three- to a two-year product cycle, which meant processing power got faster quicker and also that processors got cheaper, encouraging businesses to invest more in IT. I think IT is only part of this story, and that although it was important it wasn’t sufficient. Regardless, it’s pretty clear something changed in 1995, just as something changed in 1973.

By: Doug Muir

Doug Muir — Wed, 28 Jan 2004 13:12:14 +0000

1995 makes sense as a starting point for much the same reason 1973 does: enough inflection points in enough different time-series curves to really make you sit up and take notice. Now, 1973 was the beginning of a huge long-term change; it represented a drop in sustained growth rates, in both the US and Europe, that dragged on for the next 20 years. 1995 seems to have been a hill rather than a mountain, as most of the numbers seemed to return to normal in 2001. On the other hand, 1973 had a couple of obvious causes—the oil shock, poor monetary policies. 1995 remains somewhat mysterious. (Not that there’s any lack of explanations—just convincing ones.) So it’s a reasonable starting point. Doug M.

By: Doug Muir

Doug Muir — Wed, 28 Jan 2004 13:03:56 +0000

Dsquared: Henwood does discuss this and presents the raw figures. But you’ve got to remember that these increases came about entirely as a result of changes in hours worked rather than an increase in the wage rate. So it doesn’t really fit into a productivity story. Er… WTF? Productivity rose sharply from 1995 to 2000. So did wages. Total hours worked barely budged, though. By “these increases” I assume you mean increases in wages? Well, then, no offense, but you’re wrong. Real wages per hour rose by about 20% over that period—by far the biggest and longest sustained rise of the last 30 years. And, as noted, that tide lifted all the boats; everybody gained, and the lower deciles actually gained a wee bit more. So, again no offense, but your post seems to make no sense. Are we missing something> Doug M.

By: Tom

Tom — Wed, 28 Jan 2004 08:46:12 +0000

“FYI, Contrary to a commenter, Henwood and Cockburn are not on good terms these days, judging by the former’s public remarks about the latter.” Sorry, in the one issue of the LB Observer I read (about 4 years back), Henwood seemed full of praise for Counterpunch & Cockburn, which was enough to make me not want to read Henwood any longer. Glad to hear they’re not on speaking terms these days. Maybe I’ll give Henwood a second try.

By: Luke Weiger

Luke Weiger — Wed, 28 Jan 2004 02:18:54 +0000

???

By: Brad DeLong

Brad DeLong — Wed, 28 Jan 2004 01:39:23 +0000

No follow-up posts, I see. I guess moral incentives aren’t sufficient, are they… :-)

By: asg

asg — Tue, 27 Jan 2004 20:27:24 +0000

Looks like I have another “woops” moment. The source of the “fact” that were it not for immigrants, American income inequality trends would be reversed, is Gregg Easterbrook’s recent book “The Progress Paradox”. Easterbrook has now recanted that specific claim. I guess I will have to reserve my reliance on Easterbrook’s writings solely to football.

By: Leo Casey

Leo Casey — Tue, 27 Jan 2004 18:35:49 +0000

As a non-economist trained in political science, I don’t see the case for 1995 being a magic year at which all our considerations must begin as all that obvious. Hell, Henwood has been writing the book since well before 1995. The arguments about a ‘new economy’ clearly pre-date 1995 as well. Most importantly, the trends that are connected with the term also clearly pre-date 1995. I might be convinced that 1995-2000 constituted a particularly important period for consideration when one looks at the question of the ‘new economy,’ but to say that discussions of data and trends before 1995 are discussions of matters that pre-date the ‘new economy’ seem to me to be the economists’ version of a semantic argument that simply defines the desired answer into the question being asked.

By: Steve Carr

Steve Carr — Tue, 27 Jan 2004 18:10:39 +0000

The Morris/Western article that Kieran cites suffers from the same problem of ending the story just as it begins, since their data set ends in 1996. You can’t deflate grandiose claims of economic transformation by talking about what was happening before the transformation—if it happened—began.

By: Steve Carr

Steve Carr — Tue, 27 Jan 2004 18:03:36 +0000

I don’t understand the point about the “increases” (in people’s wages, I assume?) being due to changes in hours worked rather than changes in the wage rate. The avg. hourly “wage” (actually wages and salaries together) rose from $12.58 in 1996 to $15.18 in 2001. The ECI (which is an hourly measure) went from 102.3 in Q1 of 1995 to 107.4 in Q1 of 2001. Don’t these numbers mean that real wages per hour, as well as real wages in general, rose in the late 1990s?

By: Max B. Sawicky

Max B. Sawicky — Tue, 27 Jan 2004 16:00:06 +0000

FYI, Contrary to a commenter, Henwood and Cockburn are not on good terms these days, judging by the former’s public remarks about the latter.

By: Leo Casey

Leo Casey — Tue, 27 Jan 2004 15:31:20 +0000

It certainly is hard to figure out Henwood’s savaging of Manuel Castels, given that he is so taken by Hardt and Negri—talk about theories of weightlessness. One has to ask whether, in the final analysis, there is nothing ‘new’ about the ‘new economy,’ whether all the analysis which indicates a new centrality to knowledge/information in the economy is simply hype. Castels suffers from attempts to explain everything that is new under the sun, but it does not follow that there are not major structural changes in the forms of production at work, and that there are not some insights to those changes in his work.

By: asg

asg — Tue, 27 Jan 2004 14:09:55 +0000

Woops; of course I meant Henwood, not Henson.

By: asg

asg — Tue, 27 Jan 2004 14:09:04 +0000

I am glad to see someone has decided to try to rebut Cox & Alm; not that I find C&A’s book unpersuasive, but that it’s good to see someone of the left addressing their argument rather than just pretending it doesn’t exist. That said, anyone who says that “the U.S. has the smallest middle class and largest proportion of poor people of any of the advanced capitalist democracies” without mentioning that the U.S. legally admits more poor immigrants each year than all the other advanced capitalist democracies combined is being disingenuous. If the U.S. wanted to completely reverse trends towards income inequality tomorrow, it could do so by closing its borders. Somehow I doubt Henson would take that as a progressive measure, though.