Growth is Not Enough.

• Author: LEVY, FRANK
• Position: Economic growth must consider the poor

If you think a robust economy will automatically generate prosperity for all, think again

IN A RECENT ASSESSMENT OF GEORGE W. Bush, Wall Street Journal columnist Paul Gigot noted with approval that Bush had selected policy advisers who were "credible with the party's growth wing". At first glance, Gigot's description seems out-of-date: is there any discernible non-growth wing in the Republican Party, or, for that matter, in the Democratic Party? In 1992, not even Steve Forbes would have dared to claim he could deliver the combination of low inflation and low unemployment we have enjoyed since mid-decade. Bill Clinton has taken the growth issue away from the Republicans, just as he has taken so much else. Or, I should say, "retaken the growth issue". It was, after all, John Kennedy who 39 years ago proclaimed, "A rising tide lifts all boats"

But the economy has changed in several important respects since Kennedy's time. People who think there are no economic problems left in America, and that there need be no appreciable differences between the attitudes of liberals and conservatives about economic growth, need to look at the present-day American economy more closely. If we don't generate a discussion about the nature of our prosperous economy, there's a real danger that we're going to grow our way to a society that doesn't work for a good portion of its people.

Economic growth comes in two flavors. Business cycle growth expands the gross domestic product (GDP) by lowering the unemployment rate and putting people into jobs. We have probably now reached the limit of the business cycle growth rate; few people believe unemployment can fall much lower than it is now.

Over the longer run, GDP grows through gains in productivity--output per worker. Rising output per worker translates into rising wages and incomes. The productivity gains of the last 70 years help explain why average family income today is more than three times higher than it was in 1929 (corrected for inflation) even though the 1929 unemployment rate was 3.2 percent.

In Kennedy's time, the nation was in a 26-year productivity boom in which output per worker was rising at a very high 3 percent per year. The result was a long run of upward mobility, in which most people made big income gains over their careers. For example, in 1949, the average 30-year-old man earned about $16,800 (in 1997 dollars). That isn't much money in today's terms--little more than the poverty standard for a...