Mobs, Messiahs, and Markets

Not Your Father's Boom

Every generation suffers its own follies.

The generation of the 1930s learned to save and hated debt. They paid dearly for this instruction after World War II, especially in the 1960s and 1970s, when their savings were wiped out by inflation. Meanwhile, the next generation had its lessons. In 1949, investors were so negative on the value of General Motors stock that they sold it down to five times earnings, where it produced a dividend yield of 11 percent. With the war over, they must have thought that GM might not be able to turn a profit. But, the United States boomed in the postwar period. The soldiers got to work, started families, and bought houses—and cars.

It was a classic boom. Output increased. Wages rose. Eisenhower's economy made it possible for ordinary people to buy out of increased earnings. The nation's manufacturing centers, especially, flourished—Dayton, Detroit, Fort Wayne. Our cousins lived in Donora, Pennsylvania, and worked in the steel mills. In the 1950s and 1960s they all earned high wages, drove new cars, and lived in nice houses with all the latest conveniences.

But drive through those neighborhoods now! They are ghost towns, with empty houses, boarded‐up shops, abandoned cars, and rusty factories. Workers here have been left behind by economic history, earning in real terms the same as or less than they did 30 years ago. In the midst of the biggest boom of all time, they have fallen behind.

The boom is now in only a few places. ...