What makes America work



Louis Galambos, 75, has studied the American economy for 50 years, and he has lived to see some of its most striking transitions - from enduring a crippling depression to producing nearly half the world's goods to looking overseas for labor its citizens used to do.

A history professor at the Johns Hopkins University, Galambos has lent his half-century of expertise to the Library of Congress, having been named to the library's Maguire Chair in American History in January.

For six months, he is examining what makes the world's greatest economy work, what has failed it and what's in store.

Such an inquiry couldn't come at a more pivotal time, as throngs of immigrants march through the nation's urban centers demanding the right to stay and work, many Americans bemoan jobs being outsourced to India, and companies like General Motors and Delta Air Lines appear headed the way of now-defunct Eastern Airlines.

"Immediately after the second world war, we were on top of the world," said Galambos, the fourth person to hold the Maguire Chair. "We were the dominant power economically, and people could plan on careers at their jobs. If you went to work at General Motors, you were there until you retired. All of that has changed since the late 1960s, when we overturned our economy and became increasingly a services economy."

As holder of the Maguire Chair, Galambos conducts research on ethical issues in American history, including the conduct of politics and government and the social responsibilities of businesses.

A former editor of the Journal of Economic History, Galambos has written extensively on U.S. business history, business-government relations and the rise of the bureaucratic state.

He was born in the midst of the Great Depression, and by the time he graduated from the University of Indiana in 1955 with a B.A. in history, the nation become the leading free-market power, one far more willing to take risks than its counterparts.

"From 1830-1930, you had regular, deep depressions twenty years apart. It was a natural aspect of capitalization," Galambos said. "Yet, since the second World War, we haven't had one depression. We've had recessions, but not a depression where 25 percent of the work force is unemployed.

"Eventually we worked those things out; we made our government sector larger, we made a more active federal reserve system. We had more influence from the government in the size and pace and growth of our economy.

"We started with a tremendous resource base in the 19th century," added Galambos. "Then we built an economy that favored entrepreneurship and innovation. We've always been a society friendly to people who want to change things instead of being steeped in tradition."

The government also relied on America's vast educational base, making certain that experts in fields such as business and science advise the president on the economy. And it allowed for more corporate control of the delivery of goods and services, even if the company was based overseas.

But then the economy went from one based in manufacturing to one oriented to service. That was followed by the information technology age and globalization. America began going outside its boundaries to meet many of its needs, particularly in technology.

Many American workers at all levels who had been steeped in one way of making a living couldn't keep up, and an economy with scant transition training offers little help.

"In the 1980s, and 1990s, millions of white-collar people retired early, or as a bad way of putting it, were sent out to pasture," said Galambos. "For the first time in history, our managerial class was hit hard.

"We were faced with the enormous pressure to deal with the changes that came in the information age. Older people in offices had to learn to use computers. ... During globalization, there was talk of protection, but the U.S. has always been on the side of global competition. Now, we have our businesses microwaved."

Galambos said he's witnessed such globalization in books he's published, having one done by a British company that contracted the work to India. He said the upside to such a response to globalization is that competition yields better and cheaper goods and services.

The downside, he said, is that millions of American workers who thought their work experience would be the same as their parents' and grandparents' have had to face drastic changes. "When they talk about synergy, it means they're laying off," said Galambos. "When they're talk `right-sizing,' it means someone's going to have to find a job somewhere else. If you're 55 years old and you've done a job all your life, you don't like to be told, `We can do this cheaper in India.'"

Still, Galambos said there's no one to blame. The changes have occurred regardless of who is in the White House, through the bull and bear markets and during great or small influence from foreigners or foreign markets.

It's part of the evolution that comes with a free-market system, he says, and even companies that have been the backbone of the American economy are not immune to it.

"That's what capitalism does. It cleans out things," Galambos said. "Bankruptcies work; companies liquidate or they split up or they sell out. But the process works. Companies just have to be faster than they used to be [in adapting to the changes], and in the future the change is going to be greater."


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