Although few perceived it at the time, the economy was undergoing a transformation of historic dimensions. Much as the depression after 1893 had strengthened the nation’s economy by wiping out thousands of inefficient steel and machinery firms, the seismic economic upheavals after 1973 toppled many inefficient manufacturers but created the foundations for more efficient global conglomerates. As weeds grew in the parking lots of the factories of the “Rust Belt” of the Midwest, new technology industries sprouted in the “Silicon Valley” of California, along Route 128 outside of Boston, and in booming cities such as Seattle, Washington, and Austin, Texas.
By the end of the Reagan era, the economy consisted of two separate and increasingly unequal components: a battered sector of traditional heavy industry, characterized by declining wages and diminishing job opportunities; and an advancing high-tech and service sector dominated by aggressive, innovative, and individualistic entrepreneurs. (See American Lives, “Bill Gates,” pp. 810-811) The older corporations that survived the shakeout of the 1980s were leaner and better equipped to compete in expanding global markets.
Yet American society was becoming as fractured as the “bipolar” economy from which it drew sustenance.
A worker studies a lighted diagram of an integrated circuit at a California computer factory.
The Reagan tax cuts had disproportionately benefited the wealthy, as had the extraordinary rise of the stock market. Conversely, the economic transformation struck low - or semiskilled wage earners hardest; at the same time, the Reagan administration’s shifting of much of the burden of social welfare onto state and local governments reduced benefits to those who lost jobs or could not find work in the strange new economy dominated by information services and bewildering new technologies. At the end of Reagan’s second term the standard of living of the poorest fifth of the population (40 million people) was 9 percent lower than it had been in 1979, while that of the wealthiest fifth had risen about 20 percent.
World History
