Tuesday, August 03, 2010

There, That About Gets It

October 15: 1973: the End of Western Civilization as we Knew it.  That was the day before OPEC jacked up the price of oil by 70 percent (to $5.10 a barrel).  So it was also the last day when a guy as dumb unskilled as Homer Simpson could count on holding a job where he would earn enough to support a wife and three children in a house in the suburbs with a two-car garage.

Homer had had a pretty good run up to that time, from the end of World War II, during which American well-being was pretty well insulated from anything else in the world.  It wasn't tariff barriers per se: it was just that every other important economy came out of the war in such a mess that we could pretty much do what we wanted.   So unskilled "industrial union" worker could enjoy something like the same good fortune that historically shined on their better-protected brothers in the trades ((the AFL and the CIO had merged in the Eisenhower years).    So Charles Wilson and Walter Reuther could make a nudge/wink deal on how much to charge and how to divvy up the swag and we all drove crap cars.

Homer's long, slow decline was masked by three factors:
  • His wife went to work; family income stayed up,but on two incomes rather than one.
  • He suffered "stealth losses" through the corruption of the benefits package, specifically the starvation or looting of his defined-benefit pension plan.
  • He learned--or was taught--how to use his house as a piggy bank.
Homer believes he was impoverished by foreign competition.  There is some truth in that, but he also gained from bigger markets and cheaper goods.

Three factors.  And the fourth factor is--?

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