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Re m a r k s b y Da v i d P. Ea s t b u r n , Pr e s i d e n t F e d e r a l Re s e r v e Ba n k of Ph i l a d e l p h i a Sa i n t J o s e p h 's Co l l e g e A lumni A c c o u n t i n g A s s o c i a t i o n W i l l i a m s o n 's Re s t a u r a n t Ba l a Cy n w y d , P e n n s y l v a n i a No v e m b e r 3 , 1977 I've j u s t r e t u r n e d f r o m a s h o r t s t a y in Gr e e c e w h e r e I HAD AN OPPORTUNITY TO EXAMINE THE REMAINS OF CLASSICAL GREEK civilization. M uc h of it w a s t h e p r o d u c t of a r e l a t i v e l y b r i e f FRENZY OF ACTIVITY AROUND 450 B. C. WHEN PERICLES WAS IN POWER. Thi s w a s a g o l d e n a g e for Gr e e c e . It w a s r e m a r k a b l e in its TIME,, BUT IT HAS PASSED. P e r h a p s t h i s ha s i n f l u e n c e d m y c h o i c e of a t h e m e t h i s EVENING. A NUMBER OF PERCIPIENT ANALYSTS OF OUR CURRENT CIVILIZATION ARE SAYING THAT WE HAVE SEEN A GOLDEN AGE IN THE PAST 30-ODD YEARS AND THAT THIS AGE IS VANISHING. I WANT TO EXAMINE THIS IDEA, WHAT'S BEHIND IT AND WHAT IT IMPLIES FOR THE FUTURE. T he Go l d e n G e n e r a t i o n A GENERATION IS ROUGHLY 30 YEARS. If YOU WERE BORN 30 YEARS AGO— AS MANY OF YOU HERE WERE— YOU WOULD HAVE LIVED THROUGH A REMARKABLE ERA. LET ME GIVE YOU A FEW FACTS. F irst o f f , t h e r e h a s b e e n a s u b s t a n t i a l c h a n g e in h o w MUCH WE EARN. A FAMILY NOW HAS ABOUT TWICE THE PURCHASING POWER- EVEN AFTER ALLOWING FOR INFLATION— OF A FAMILY AT THE END OF W o r l d Wa r I I . A typical worker in 1947 had to wo rk a l mos t nine MONTHS TO EARN ENOUGH FOR A CARj TODAY, HE CAN EARN ENOUGH IN ABOUT FIVE MONTHS. AND BECAUSE OF THESE RISING INCOMES, THE TOTAL REAL WEALTH PER PERSON HAS QUADRUPLED. T h e r e ha s b e e n a t r e m e n d o u s l e a p in h e a l t h , e d u c a t i o n , We NOW CAN TRANSPLANT ORGANS AS COMPLICATED AS THE AND HOUSING, HEART, KIDNEY, AND PARTS OF THE EYE. A SHATTERED KNEE CAN BE REPLACED WITH AN ARTIFICIAL JOINT AND THE THREAT OF POLIO HAS BEEN ALL BUT ELIMINATED, A CHILD BORN TODAY CAN EXPECT TO LIVE ABOUT 15 PERCENT LONGER THAN HIS COUNTERPART OF 30 YEARS AGO AND HIS CHANCES OF SURVIVING THE ORDEAL OF BIRTH ARE ABOUT 50 PERCENT GREATER. We are better e d u c a t e d . The p r o p o r t i o n of th e p o p u l a t i o n OVER 25 YEARS OLD WITH FOUR OR MORE YEARS OF COLLEGE HAS JUMPED BY 50 PERCENT, AND THE TYPICAL AMERICAN NOW HAS BETTER THAN 12 YEARS OF SCHOOLING COMPARED TO 9 YEARS THREE DECADES AGO. W h a t w e l i v e in ha s a l s o c h a n g e d d r a m a t i c a l l y . Ne a r l y HALF THE POPULATION LIVED IN DILAPIDATED OR SUBSTANDARD HOUSING AT THE END OF WORLD WAR II. LIVES IN SUCH A FASHION. TODAY, ONLY 7 PERCENT OF THE POPULATION TWO-THIRDS OF US NOW OWN OUR HOMES; 30 YEARS AGO THE MAJORITY RENTED. AND OUR HOMES ARE FILLED WITH TV SETS, AIR CONDITIONERS, AND DISHWASHERS THAT WERE RARE OR NON-EXISTENT A FEW DECADES BACK. B ut p e r h a p s t h e m o s t s t r i k i n g a n d f a r -r e a c h i n g d e v e l o p ments HAVE OCCURRED IN TECHNOLOGY, SCIENCE, AND INFORMATION. HAVE THE COMPUTER. TODAY, BUSINESS— INCLUDING ACCOUNTING— COULD NOT FUNCTION WITHOUT THE COMPUTER. We SIMPLY It HAS ALLOWED US TO ANALYZE THE BURGEONING INFORMATION FLOW WITH A SPEED AND ACCURACY UNIMAGINABLE A GENERATION AGO. It PLAYED A MAJOR ROLE IN PUTTING MEN ON THE MOON AND IS CRUCIAL IN OUR SATELLITE COMMUNICATIONS NETWORK. IN SHORT, IT HAS GREATLY ACCELERATED THE SPREAD AND IMPLEMENTATION OF NEW TECHNOLOGY. We t a k e j e t t r a v e l , a t o m i c a n d n u c l e a r e n e r g y TELEVISION, SATELLITE COMMUNICATION, AND SPACE SHOTS FOR GRANTED, YET NONE OF THESE WERE A PART OF THE WORLD 30 YEARS AGO. Mo r e o v e r , t h e r a t e a t w h i c h n e w t e c h n o l o g y is b e i n g i m p l e m e n t e d IS ESTIMATED TO BE SOME 70-80 PERCENT FASTER THAN IT WAS PRIOR TO Wo r l d Wa r I I . So WE HAVE BECOME HEALTHIER AND WEALTHIER, IF NOT WISER, AT AN ASTOUNDING RATE DURING THE PAST THREE DECADES. THIS EXPLOSION OF TECHNOLOGY AND MATERIAL WELL-BEING SEEMS TO OUTSTRIP BY FAR THAT OF ANY OTHER PERIOD. MANY STUDENTS OF PROGRESS DO LABEL IT A GOLDEN AGE. A ll t h i s is n o t t o s a y t h a t t h e p a s t 30 y e a r s h a v e b e e n SWEETNESS AND LIGHT. and THEY HAVE SEEN TROUBLES APLENTY— THE KOREAN V ietnam w a r s , race r i o t s , g e n e r a t i o n a l c o n f l i c t s , breakdown of ou r c i t i e s , inflation. Wa t e r g a t e , a m a j o r r e c e s s i o n a n d f r i g h t e n i n g So , if it is t r u e t h a t we h a v e b e e n l i v i n g t h r o u g h A GOLDEN AGE, IT IS GOLD WITH A GOOD BIT OF TARNISH. AND, SOME SAY, IT CONTAINS THE SEED OF ITS OWN DESTRUCTION; THE GOLDEN AGE WILL BE VANISHING DURING THE REST OF THE CENTURY. T h e y se e t w o p o s s i b l e s c e n a r i o s . One w e m i g h t c a l l th e Mo t h e r Hu b b a r d s c e n a r i o , t h e o t h e r t h e Go n e F i s h i n ' s c e n a r i o . Le t 's LOOK AT EACH OF THESE BRIEFLY. Mot h e r Hubb abb W ill w e go t o t h e c u p b o a r d a n d f i n d it b a r e ? Ce r t a i n l y , w e h a v e b e e n u s i n g up r e s o u r c e s a t a f u r i o u s p a c e d u r i n g t h e g o l d e n _Z|. YEARS, It w o u l d h a r d l y h a v e b e e n p o s s i b l e t o p r o d u c e as m u c h AS WE HAVE/ TO HAVE IMPROVED OUR MATERIAL WELL BEING SO GREATLY/ WITHOUT USING UP VAST QUANTITIES OF RESOURCES. AND IT IS TRUE THAT WE HAVE BEEN SO PREOCCUPIED WITH OUR AFFLUENCE THAT WE HAVE GIVEN LITTLE THOUGHT TO THE RESOURCE BASE. I n LESS THAN TWO DECADES/ HOWEVER/ w e h a v e r e -f o c u s e d OUR CONCERN FROM GALBRAITH'S AFFLUENT SOCIETY TO THE CLUB OF ROME'S L imits t o Gr o w t h . Now g e o l o g i s t s / a g r o n o m i s t s / p h y s i c i s t s / a r e a t CENTER STAGE. WHETHER WE WILL HAVE SUFFICIENT BASIC RESOURCES TO SUSTAIN AND EXPAND LIFE AS WE HAVE COME TO KNOW IT DEPENDS TO A CONSIDERABLE EXTENT ON WHAT THEY HAVE TO SAY. B ut it a l s o d e p e n d s on w h a t e c o n o m i s t s h a v e to s a y . c a n 't s p e a k for t h e s c i e n t i s t s . I I d o n 't p r o p o s e to e x a m i n e th e GEOLOGY OF PETROLEUM DEPOSITS/ THE TECHNOLOGY OF SOLAR ENERGY OR THE CHEMISTRY OF THE GREEN REVOLUTION. BUT I WOULD LIKE TO SAY A WORD ABOUT THE ECONOMICS OF THE RESOURCES PROBLEM. St a r t w i t h t h e r e a l i t y t h a t r e s o u r c e s a r e l i m i t e d . T h e r e IS JUST SO MUCH OIL/ COAL AND IRON IN THE GROUND; THERE IS JUST SO MUCH CULTIVATABLE LAND. A t SOME POINT ON THIS COLLISION COURSE THE COLLISION HAPPENS; RISING DEMANDS ON RESOURCES RUN INTO THE LIMIT OF RESOURCES. NOBODY REALLY KNOWS WHEN. ALARMISTS SEE IT HAPPENING SOON ENOUGH THAT WE MUST IMMEDIATELY BEGIN SLOWING GROWTH. Ot h e r s — i n c l u d i n g m y s e l f — s e e g o o d p o s s i b i l i t i e s f o r t h e e c o n o m y TO WORK OUT A SOLUTION/ AT LEAST WITHIN THE TIME PERIOD MOST OF US CAN FORESEE AND CARE ABOUT. W h e t h e r t h e e c o n o m y a c t u a l l y can d o t h i s d e p e n d s on WHETHER WE LET IT DO IT. CONGRESS RIGHT NOW IS IN THE THROES OF DECIDING HOW TO DEAL WITH ENERGY. ADVOCATES OF A FLEXIBLE PRICE SYSTEM SAY WE HAVE THE SOLUTION BUILT INTO OUR ECONOMY. When t h e r e is m o r e d e m a n d fo r s o m e t h i n g t h a n s u p p l y w i l l s u p p o r t , ITS PRICE WILL GO UP. THIS INDUCES SOME TO CUT BACK ON THEIR DEMAND AND STIMULATES OTHERS TO INCREASE SUPPLY. As RESOURCES EVENTUALLY BEGIN TO RUN OUT, PRICES NOT ONLY WILL RATION WHAT'S LEFT BUT WILL INDUCE SOME PRODUCERS TO FIND ALTERNATIVE WAYS OF MEETING THE DEMANDS. IN THE CASE OF OIL, FOR EXAMPLE, RISING PRICES WILL CUT BACK ON CAR DRIVING AND ENCOURAGE PRODUCERS TO SINK NEW WELLS, As WE BEGIN TO RUN OUT OF OIL, RISING PRICES FOR OIL WILL HELP CONSERVE THE REMAINING SUPPLY AND ENCOURAGE THE DEVELOPMENT OF, SAY, SOLAR ENERGY. T his s e e m s so s i m p l e t h a t y o u a s k w h y d o e s n 't it h a p p e n . The c a t c h is t h a t for t h e p r o c e s s t o w o r k , fo r t h i s a u t o m a t i c CARROT-AND-STICK METHOD TO BE EFFECTIVE, SOME PEOPLE WILL SEEM TO GAIN AND OTHERS SEEM TO LOSE. IN THE CASE OF OIL, THE OIL COMPANIES MAY GAIN WINDFALL PROFITS, THE SMALL FARMER MAY HAVE TO PAY MUCH MORE TO RUN HIS TRACTOR. ITS UGLY HEAD. So THE PROBLEM OF EQUITY RAISES THE AVERAGE AMERICAN HAS SUCH STRONG FEELINGS ABOUT FAIR PLAY THAT IT IS HARD FOR HIM TO LET AN IMPERSONAL MARKET SYSTEM WORK OUT A SOLUTION. YOU MAY ARGUE WITH HIM THAT IT IS ALL FOR HIS OWN GOOD AND THAT IF PRODUCERS ARE NOT GIVEN SOME INCENTIVES TO PRODUCE THERE WILL BE NOTHING FOR HIM TO CONSUME. B ut I s u s p e c t a g o o d m a n y Am e r i c a n s w o u l d r a t h e r li n e up a t the GAS PUMP THAN SEE OIL COMPANIES GET WINDFALL PROFITS. THis p o s e s a r e a l d i l e m m a for p o l i c y m a k e r s , b u t n o t an IRRECONCILABLE ONE. THE PRICE SYSTEM CAN DO A MUCH BETTER JOB THAN CONTROLS IN DEALING WITH THE RESOURCES PROBLEM. BE ALLOWED TO WORK. I t SHOULD TOGETHER WITH A FREE REIN FOR DEVELOPMENT OF NEW TECHNOLOGY IT CAN HELP TO STRETCH OUT EXISTING RESOURCES, DEVELOP NEW SUBSTITUTES AND DIRECT THEM TO THE MOST PRODUCTIVE USES, T he e q u i t y p r o b l e m t a k e s a lo ng v i e w . At t i m e s s o m e PRODUCERS MAY HAVE TO BE REWARDED ESPECIALLY WELL WHEN SUPPLIES ARE SHORT AND THERE IS A NEED TO EXPAND THEM. OVER A LONGER PERIOD, HOWEVER, IT SHOULD BE EASIER, THROUGH TAX AND SUBSIDY PROGRAMS OF GOVERNMENT, TO PREVENT GROSS INEQUITIES FROM PERSISTING. Ob v i o u s l y , t h i s k i n d of s o l u t i o n is a t r a d e o f f . Co m p l e t e l y c o n t r o l l e d p r i c e s in t h e i n t e r e s t s of e q u i t y can c r e a t e havoc. Co m p l e t e l a i s s e z - f a i r e w i t h o u t r e g a r d t o e q u i t y w i l l n o t BE ACCEPTED BY THE AMERICAN PUBLIC. POLICYMAKERS MUST STEER A COURSE IN BETWEEN. I HAVE HOPES THAT THIS CAN BE DONE WITH SOME DEGREE OF success. If it i s , t h e Mo t h e r Hu b b a r d s c e n a r i o n e e d n o t be in ou r FUTURE FOR A LONG TIME TO COME. I SEE NO NEED FOR IT TO FORECLOSE MANY MORE GOLDEN YEARS. Go n e F i s h i n ' T he o t h e r t h r e a t t o t h e g o l d e n a g e is t h e Go n e F i s h i n ' scenario. tive T h i s w o u l d h a v e t h e Am e r i c a n p e o p l e b e c o m e so u n p r o d u c AS TO SLOW GROWTH AT BEST TO A SLUGGISH PACE. THE HORRIBLE EXAMPLE HELD BEFORE US IS ENGLAND WHERE, IT IS SAID, FACTORIES ARE INEFFICIENT, MANAGERS INCOMPETENT, AND WORKERS PREOCCUPIED WITH AFTERNOON TEA, THE WELFARE STATE ATTEMPTS TO GIVE EVERYTHING TO EVERYBODY FROM CRADLE TO GRAVE, BUT NO ONE IS INTERESTED IN PRODUCING ENOUGH TO MAKE IT ALL POSSIBLE. HOW REALISTIC IS THIS FOR AMERICA'S FUTURE? I CAN SEE TWO ASPECTS OF THIS SCENARIO, ONE OF WHICH DOESN'T SEEM A THREAT, THE OTHER WHICH DOES, THE FIRST IS THE WORK ETHIC. THIS IS A DISTINCTIVELY AMERICAN PHENOMENON THAT IS CREDITED WITH MUCH OF THE ADVANCES IN WELL BEING THAT WE ENJOY. W e WANT MORE THINGS AND ARE WILLING TO WORK FOR THEM; WE WORK HARD AND SO PRODUCE MORE. ethic, NOW I HAVE TRIED TO GET A FIX ON THE REALITY OF THE WORK Ma n y r e s p e c t e d o b s e r v e r s c l a i m it is . r e a l a n d c i t e s t u d i e s AND STATISTICS TO SUPPORT THEIR VIEW, OTHERS POINT TO THE DEHUMANIZING ASPECTS OF THE ASSEMBLY LINE, A DECLINE IN PRIDE OF WORKMANSHIP, AND CHEATERS ON UNEMPLOYMENT AND WELFARE ROLES. Bo t h a r e p r o b a b l y r i g h t , On b a l a n c e , I'm i n c l i n e d t o p l a c e a g o o d DEAL OF FAITH IN THE WORK ETHIC. WE HAVE MORE IMPORTANT THINGS TO WORRY ABOUT. One of t h e m is a lag in i n v e s t m e n t in p r o d u c t i v e p l a n t AND EQUIPMENT, I n A RECENT SPEECH ARTHUR BURNS HAS EXPLORED THE PROBLEM AT LENGTH AND I COMMEND IT TO YOU. THE CONCLUSION IS THAT BUSINESS IS NOT INVESTING SUFFICIENTLY IN NEW PRODUCTIVE CAPACITY TO ENSURE RAPID GROWTH IN OUTPUT IN THE FUTURE. REASONS CAN BE BROUGHT TO BEAR. MANY BUSINESS HAS EXPERIENCED A NUMBER OF MAJOR SHOCKS IN RECENT YEARS, UNCERTAINTIES ABOUND, PROFITS HAVE BEEN RELATIVELY LOW, ETC. My OWN ASSESSMENT IS THAT MATTERS HAVE NOT PROCEEDED SO FAR THAT CORPORATE LEADERS WOULD RATHER GO FISHIN', BUT THIS IS A DANGER TO BE GUARDED AGAINST. A g a i n , in b o t h a s p e c t s , e q u i t y p l a y s an i m p o r t a n t p a r t . T he w o r k e t h i c w i l l d i s a p p e a r if fa ir r e w a r d s for w o r k a r e n o t f o r t h c o m i n g, and i n v e s t m e n t can l a n g u i s h if b u s i n e s s p r o f i t s ar e UNFAIRLY LOW. In SHORT, I SEE MORE THREATS IN THE GONE FiSHIN' SCENARIO THAN IN THE MOTHER HUBBARD SCENARIO. RUT THEY ARE STILL ONLY THREATS AND IT IS BY NO MEANS TOO LATE TO DEAL WITH THEM. Co n c l u s i o n s So I AM AN OPTIMIST. INTELLIGENT ACTION BY THOSE IN RESPONSIBLE POSITIONS IN THE PRIVATE AND PUBLIC SECTORS £ M CONTINUE WHATEVER GOLDENNESS WE MAY HAVE ENJOYED IN THE LAST 30 YEARS. Th a t is t o s a y , e c o n o m i c g r o w t h can c o n t i n u e t o BE RAPID, TECHNOLOGICAL ADVANCES CAN PROCEED APACE, RESULTING ENHANCEMENT OF MATERIAL WELL-BEING CAN FLOW TO SOCIETY. T h i s is mi t o s a y t h a t li fe w i l l be j u s t t h e s a m e . WILL BE INCREASINGLY CONSCIOUS OF THE MOTHER HUBBARD PROBLEM. We We CAN NO LONGER BE SO PROFLIGATE IN OUR USE OF RESOURCES OR ABUSE OF THE ENVIRONMENT. AND I SUSPECT WE WILL BE SUFFICIENTLY IMPRESSED WITH t h e Go n e F i s h i n ' s c e n a r i o as t o go f i s h i n ' m o r e o f t e n . St u d i e s s u g g e s t , t h a t t h e r e is n o t a l w a y s a c l e a r r e l a t i o n s h i p BETWEEN HAPPINESS AND AFFLUENCE. I BELIEVE THE AMERICAN PEOPLE WILL CONTINUE TO SEEK MORE MATERIAL THINGS, BUT INCREASINGLY THEY WILL BE SEEKING HAPPINESS AND WHATEVER, IN ADDITION TO THINGS, THEY NEED TO PRODUCE IT— LEISURE, CONTEMPLATION, AND ESCAPE FROM THE RAT RACE, OVER A CENTURY AGO A GREAT ECONOMIST, Joh n St u a r t M i l l , e n v i s i o n e d a t i m e w h e n we ca n t u r n ou r m i n d s to " i m p r o v i n g t h e A rt of L i v i n g " r a t h e r t h a n b e i n g "e n g r o s s e d BY THE ART OF GETTING ON," TO A TRULY GOLDEN AGE, IN THIS SENSE WE CAN LOOK FORWARD
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