In his book The Ages of American Capitalism, University of Chicago historian Jonathan Levy describes the age of capitalism we live in as an age of chaos: a time in which capital has become more open, fluid, and volatile, constantly flowing in and out. of booms and busts, in contrast to the well-established—and widely shared boom—that characterized the post-war industrial economy. Levi began the story in 1981, the same year Forbes considered his list. That was the year the Federal Reserve, under its chairman Paul Volcker, raised interest rates to 20 percent with the goal of ending inflation. The Volcker Fed succeeded, but the decision, Levy notes, had far-reaching consequences besides accelerating America’s transition from commodity production to a form of capitalism never seen before. The value of the dollar rose dramatically, making US exports less attractive and imports cheaper; Many of the factories that remained profitable were closed, because compared to the enormous returns that money could generate in such a high-priced environment, they simply weren’t profitable. enough. When the Fed began loosening its grip, widely available credit unleashed a speculative boom, which benefited the newly empowered class of companies that felt little commitment to their workforce and deep commitments to shareholders.
An economy typically expands when productivity is invested, but this expansion was different: Levy wrote that “the only recorded, before or after, is that in which fixed investment declined as a share of GDP.” In other words, our industrialists were investing less in productivity things Ships, factories and trucks – while earning more money for doing so. In fact, they would often rip those things off and ship them abroad; This was the age of corporate raiders, who would make huge profits while putting Americans out of business. You can see this, from a crude perspective, as the birth of the Wall Street-Main Street divide: the separation of the finance industry from the “real” economy.
This shift to a highly financed post-industrial economy was aided by the Reagan administration, which liberalized the banks, lowered the top income tax rate to 28 percent from 70 percent and targeted organized labor—a political scapegoat for the sluggish and inflationary economy. the seventies. Computer technology and the rise of the developing world will amplify and accelerate all of these trends, turning the United States into a kind of frontal shell of the globalized economy. Equally important, the technical revolution has created new ways for entrepreneurs to amass vast fortunes: software is by no means cheap to develop, but it requires fewer workers and less constant investment, and can be reproduced and shipped worldwide instantly and at virtually no cost. cost. Consider that Ford Motor Company, the capitalist power of the twentieth century, now employs about 183,000 people and has a market capitalization approaching $68 billion; Google employs about 156,000 people and has a market value of about $1.8 trillion. This new economy will be run by, and for, knowledge workers, who will reap most of the gains, and therefore have more money to spend on services — a sector that will somewhat, but not completely, replace manufacturing that this shift has gotten rid of.
Levy writes, “During the Reagan years, something new and distinctive emerged that has persisted to this day: a capitalism dominated by rising asset prices.” Any economy in which rising asset prices – stocks, bonds, real estate – to some extent, contrary to expectations, fuel economic growth. In other words, it was a good time to own a lot of assets. And owning assets is often what billionaires do.