The Great Unraveling | 1, 2, 3, 4, 5

The Dreary Years

URING THE LATE 1990s, as everything seemed to be going right- as jobs proliferated, stocks soared, budgets moved into surplus, and even the crime rate plunged-the dreary mood of the decade's early years faded from memory. By 2000, few people remembered the national funk that prevailed in 1992. Yet that funk is essential background to what came later.

If you are one of those people who thinks that national greatness is defined by military success (and such people are running the country right now), the nation's foul mood in 1992 may seem puzzling. Militarily, America was on top of the world. Communism had collapsed. A war in the Persian Gulf that many had feared would become another Vietnam turned instead into a spectacular demonstration of American military prowess. We had already become what we remain today, the world's one and only superpower.

But glory doesn't pay the bills. A tag line of the time-drawing attention to the contrast between American stagnation and the seemingly relentless rise of Japan-said, "The Cold War is over. Japan won." Whether or not you bought the thesis that America was the victim of unfair Japanese competition (it wasn't), it was a time of national disillusionment.

Though Japan wasn't the villain some people imagined-and it was soon to experience economic setbacks that are a cautionary tale for all of us-America's economic woes were real enough. True, by 1992 statisticians had declared the recession of 1990-91 over. But in 1991-92 it was still a "jobless recovery"- that is, a period in which GDP grows but unemployment continues to rise. As far as ordinary Americans were concerned, it was a continuing recession. Nor were things all that great for workers who managed to keep their jobs: the real wage of the typical worker had been stagnant or falling for almost 20 years. Traditional industries like autos and steel, in which ordinary workers could earn good wages, seemed to be in steady decline. Poverty was rising, not falling-more than 20 percent of children were living below the poverty line, the highest percentage since 1964.

Popular culture reflected a deep sense of disillusionment. Among the big movies of the early 90s were Falling Apart, about a laid-off worker who erupts in rage, Grand Canyon, about the menace of crime, and Rising Sun, about American decline and the rise of Japan.

What about the promise of new technology? In the early 1990s, this seemed like a promise broken. For sure, new tech-nology was all around us-but it didn't seem to be delivering much in the way of results. More and more workers were equipped with computers, every office had a fax machine, cell phones and e-mail were starting to become widespread, but none of it seemed to pay off in employment or higher living standards. One prominent economist-he would later be a notable American triumphalist-told me privately that he regarded high tech as "high bull--."

Above all, the American people were disillusioned with their leaders, private and public. Every airport bookstore featured rows of volumes with samurai warriors on their covers, promising to teach readers the secrets of Japanese management; the point was not just that the Japanese seemingly knew how to run modern corporations, but that the people running American companies seemingly didn't. All the latest gadgets seemed to come from Japan; not only had "made in the U.S.A." ceased to be a guarantee of quality, many consumers had come to distrust domestic products. CEOs of major corporations were mocked as bumbling, overpaid incompetents-when President George Bush took auto company executives to Japan to demand economic concessions, the affair turned into a public relations disaster.

The loss of respect extended to our politicians. The most remarkable thing about the 1992 election wasn't that Bush lost. It was that H. Ross Perot, a candidate completely out of the mainstream, took 19 percent of the vote. In a nation where third parties have never flourished, that was a huge vote of no confidence in conventional political leaders.

In short, it wasn't the best of times-and many observers expected things to keep getting worse. Yet over the next eight years the nation would experience an amazing economic and social turnaround.

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