Madrick tells of America's second frontier of mass production which had once given the U.S. a great competitive advantage: having the operating experience to produce large qualities at a small enough unit price and distribute it over the nation's large consumer base -- which is unparalleled in the world. While American businesses were caught up in a paradigm of mass production of standardized products with broad marketing, the rest of the world began systems of flexible production of specialized products, produced for narrower markets. This coupled with the reduction of trade barriers and the ease of entrance into U.S. markets created competition that American companies had never before experienced, and were unprepared for. As their corporate paradigm shifted, and companies began to realize that what had once been was no longer, they reacted by trying to compete through reducing costs-- such as reducing labor or wages-- rather than focusing on increasing their productivity. Corporate America's failure to adapt to the changing market conditions, essentially caused an economic retreat in industries where American companies felt they couldn't compete -- most noticeably in manufacturing. Madrick presents a model which represents the cyclical decline created by the internationalization and fragmentation of markets which create cost cutting and lower wages, which further creates uncertainty, which creates weak investment, which leads to lower productivity and more lost jobs, then reduced consumption which compounds the slow growth, which only starts the cycle of cost cutting once again.
All in all, Madrick has written an excellent book that is easy and enjoyable to read.
Madrick begins by noting that since the early 1970's the US has been in the doldrums economically; starting in 1973, the long-term economic growth rate fell by over 1% annually (contrary to the previous reviewer, this is still the case). Madrick notes many of the consequences of this slowdown. He contrasts the present period with the rapid growth of the past in a concise but informative review of US economic history--this segment by itself makes the book worth reading.
Madrick then turns to what he sees as the main cause of the slowdown. As European and Japanese firms adopted American methods of mass production and distribution, this increased international competition eroded much of the US's long-standing advantages. The slowness of US firms, such as the automakers, to adopt new methods of flexible production, and the lagging rate of US capital investment, further aggravated this trend. A major consequence of this trend has been a sharp decline in the availability of well-paying jobs for those without college degrees.
Madrick criticizes the "misplaced optimism" of those who see our problems as minor or readily solved. He critiques some alternative explanations for the growth slowdown, such as our allegedly insufficient savings rate and supposed "skills shortage." While he offers little in the way of specific solutions, he does give a solid refutation of the Republican Party's ever-resurrected "solution" of yet one more round of supply-side, trickle-down tax cuts.
Madrick's analysis is often solid, but he falls short in two respects. First, he is too focused on a single explanation for our "end of affluence," international competition, and neglects other factors that also are important--the collapse of the labor movement comes to mind as one. Second, his vision is centered too narrowly on GDP and related economic measures, and so neglects issues like environmental degradation, which are of considerable importance, but are not captured in convential economic statistics.
While Madrick's story is an incomplete one, his superb reporting makes his book, even though it is somewhat dated, worthwhile reading.