Here’s a letter to the Wall Street Journal:
Editor:
Daniel Akst’s splendid and positive review of Richard Langlois’s The Corporation and the Twentieth Century is marred only by Mr. Akst faulting Prof. Langlois for taking “little note of the consequent social dislocation” allegedly caused by “low-cost overseas manufacturing” and the corporate raiders of the 1980s (“‘The Corporation and the Twentieth Century’ Review: The Rise and Fall of Managers,” July 1st).
Although mentioned repeatedly in polite conversation as if its reality were indisputable, this “social dislocation” is both nebulous and, when defined with any precision, difficult to discover in carefully considered evidence.
Does “social dislocation” mean greater income inequality? If so, as Phil Gramm, Robert Ekelund, and John Early document, when proper account is taken of income after transfers and taxes, income inequality (measured by the Gini coefficient) did rise a bit in the 1980s, but ever since has trended downward. Today it’s three percent below its 1947 level and about eight percent below its post-war peak in 1987.* Or does it mean stagnant or falling real wages for ordinary workers? Still no ‘dislocation.’ Gramm, Ekelund, and Early report that
Over the last fifty years, real average hourly earnings of those with only a high school diploma rose by a healthy 50 percent….
The growth in American productivity was sufficient to produce real hourly earnings for high school dropouts in 2017 that were higher than those earned by high school graduates with some college or technical training in 1967. High school graduates in 2017 had higher real hourly earnings than college graduates in 1967, and high school graduates with some college in 2017 earned about as much as people with advanced degrees earned in 1967.**
This impressive productivity growth is due in no small measure to American producers’ increased access to the world’s lowest-cost inputs (thank you globalization!) and to refinements in finance that ever-more speedily channel resources to the most promising and productive firms, as well as discipline corporate managers to use those resources as effectively as possible (thank you corporate ‘raiders’!).
That the fruits of economic growth over the past 40 years weren’t spread evenly over all workers or households is true but trivial. Growth’s fruits have never been and never will be so spread. Also true but trivial is the fact that growth necessarily involves creative destruction. But that growth in recent decades has impressively increased the economic opportunities and living standards of almost all Americans – and done so in ways no more disruptive than was growth in most other periods of American history – cannot be denied.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030* The Myth of American Inequality (Lanham, MD: Rowman & Littlefield, 2022), especially page 4 and Figure 4.2, page 48.
** Gramm, Ekelund, and Early, page 72.
