If This Is a Hangover, Then the Exuberance Was Rational
Is it Morning in America, Again? President Bush seems to think so. But the type of morning he has in mind is, well, not exactly bright and cheery. We've been on a "binge," the president declared last week in Birmingham, and we've got a "hangover."</br></br>What a difference two years make. As late as mid-2000, no less an authority than Federal Reserve Chairman Alan Greenspan had a very different view. We were, he wrote, living through a technological transformation that could permit full employment, balanced growth and low inflation to continue for a long time.</br></br>Bush has rejected Greenspan's view. For this, given the news, he can't be blamed. But what about the image of binge and hangover? Does it succeed as diagnosis -- and as a guide to what we should now do? Were the '90s lived in a stupor, and is recovery merely a matter of sleeping it off? Is a drinking problem, in short, a good metaphor for our economic problem?</br></br>We do know that the tech boom was mainly bubble. Its scientific component was vastly oversold. Huge capital sums were raised, and wasted. Meanwhile, throughout corporate America, profits were overstated under the relentless pressure of the markets. And billions were diverted to the pockets of corrupt directors, officers and CEOs.</br></br>But the fact that profits were lower than we thought is not all bad news. Living standards were actually higher than many realized at the time. The '90s were a good time for American workers, who enjoyed full employment, rising wages and unprecedented access to credit. Poverty fell during these years, health improved, crime declined and inequalities in pay (though not wealth) diminished. Home ownership reached record levels. These things, unlike profits, cannot be faked.