Prosperity
The Coming Twenty-Year Boom and What It Means to You

CHAPTER ONE

Broadly Shared Prosperity

    Sometimes a careful observer can see something big happening in the economy before it shows up in the official statistics. This is one of those times. The seeds of prosperity are sprouting. The next ten to twenty years will see the flowering of an era of broadly shared prosperity for the American middle class, a contrast to the economic disappointments of the past twenty-five years.

    What makes us so sure?

    We are newspaper reporters, and this is a book of reporting. We see technology, education, and globalization already shaping our economic future for the better. We have been to factories in Milwaukee, Wisconsin, and offices in Columbus, Ohio, to see workers benefiting as their efficiency improves. We have been to Greenville, South Carolina, and Bangalore, India, to see the gains, and the pains, of international trade. We have been to a community college in Cleveland to see education equipping people for technology-driven jobs, and to the U.S. Army's Fort Knox to see technology simplifying computer-powered tanks so that average high school graduates can use them. We have looked into the past in Newton, Iowa, where Maytag Corporation makes washing machines; examined the present through the eyes of middle-class families in Chattanooga, Tennessee, and explored the future of technology in Silicon Valley and Boston.

    Not so long ago, the prognosis for the American middle class seemed bleak. According to popular wisdom, repeated in the press and by politicians, factory workers and middle managers would be downsized out of their middle-class jobs and relegated to flipping burgers at McDonald's or cleaning toilets as outsourced janitors. The top tier--investment bankers, corporate lawyers, heart surgeons, and software geniuses--would enjoy the bounty of the American economy, and everyone else would scrape and claw for what was left over. That isn't going to be America's future. The future is to be welcomed, not feared. Government numbers don't fully show it yet, but the economy is beginning to deliver a better life for middle-class Americans.

    Randy Kohrs gives reason to hope. After the video store he had been managing in Cedar Rapids, Iowa, shut in June 1991, he was jobless--again. With only a high school diploma, the 37-year-old Kohrs couldn't find work that paid more than minimum wage, much less a job that offered his family health insurance. He remembers pondering his life insurance policy and thinking, "If I died, all the bills would be paid."

    His wife pushed him to check out classes at the local community college. Three years later, he graduated with a degree in respiratory therapy and quickly landed a job at an Iowa City hospital. The job paid twice what his old job had, and came with health insurance. He now has a new car, a new three-bedroom mobile home, and enough money to celebrate his son's twenty-first birthday with a trip to Las Vegas.

    Teresa Wooten also shows the opportunities of the coming era. When she was growing up in the dreary milltown of Clinton, South Carolina, she figured the best she could hope for was to be a secretary. For years, she worked at one of the clothing factories that dot South Carolina's Piedmont Mountain region, until the factory started downsizing and threatening to move to Mexico. Teresa didn't become a poster image for those who demonize foreign trade and globalization. The 37-year-old Wooten now supervises brake installers at a German-owned factory that makes BMW Z3 roadsters or customers in the United States and abroad--a tangible reminder that Americans prosper as our economy becomes more international. Wooten makes around $40,000 a year, drives a BMW model 328, and has started saving for retirement and her teenager's education.

    The American middle class has been squeezed since 1973, a watershed that divides the years after World War II into two economic epochs. In the Golden Age, which stretched from 1950 to 1973, the incomes of husbands and wives living at the middle of the middle class doubled, after the effects of inflation are eliminated. In the Age of Anxiety, which stretched from 1973 through 1996, their incomes grew only 15%.

    In other words, the income of the typical American married couple rose as much, in percentage terms, in the first three years of Lyndon Johnson's presidency as in twenty years of Presidents Ford, Carter, Reagan, Bush, and Clinton.

    The new American pessimists say that the 60 million or so families in the American middle class don't appreciate how good their lives are, and should accept the painfully slow economic progress of the past ten or twenty years. A spate of books with such baleful titles as America: Who Stole the Dream?, The End of Affluence, and The Good Life and Its Discontents delivered a message to Americans that the economy's best days are over and they should stop whining about it. "We cannot, or at least should not, blame ourselves for the impermanence of a Golden Age. We have to get over it," British-born journalist Michael Elliott writes, in one of the cheerier books on America's economy, The Day Before Yesterday: Reconsidering America's Past, Rediscovering the Present.

    Elliott and his ilk are wrong. The three big forces of future prosperity--technology, education, and globalization--will make the next twenty years better for American middle-class families. Here's why:

x * The pace of economic progress will quicken. The $2 trillion invested in computer and communications technology since 1973 will finally produce faster economic growth and more rapidly rising living standards. For the past twenty years, American businesses and workers have stumbled as they tried to use successive generations of computers to improve efficiency; in the next two decades, they will master the new networked computers and unleash a surge in productivity.

x * This new prosperity will be widely shared, helping millions of Americans who thus far have been pushed to the sidelines in the high-tech economy. The forces that have widened the chasm between more educated and less educated workers will be reversed. Community colleges, the unheralded aid stations of American education, will help millions move from $7-an-hour jobs to $17-an-hour jobs. And technology will become easier to use, opening to many more Americans jobs now reserved for educated elites.

x * Globalization, seen as a threat to middle-class prosperity by many workers and by politicians as different as Richard Gephardt and Pat Buchanan, will prove to be a boon. The pain caused when imports put Americans out of work will be offset by bigger gains from trade. New and better jobs will be created by U.S. companies that export to developing countries that were once too poor to buy anything made in America, and by foreign companies that build plants and offices in the United States. American consumers will benefit from cheaper and better imported goods. The United States will prosper alongside India and China as their huge populations climb into the ranks of global middle-class consumers.

    Middle class is an elastic concept in American discourse. It is used to describe everyone who earns more than a McDonald's cashier but less than Microsofts Bill Gates. In Washington, middle class seems to describe everyone who makes as much as a congressman, even though the current $136,700 salary puts a Representative's family among the best-paid 5% of Americans. Statistically, the typical middle-class American family is a married couple living at the median income--$49,700 in 1996. Half of all American couples have higher incomes, and half live below the median. This book primarily focuses on the future of American families whose incomes are between $35,000 and $75,000 a year--roughly, four of every ten families. This book isn't about the poor or the rich, but about the bulk of Americans who live in between.

    We have in mind people like Jim and Ann Marie Blentlinger, a hardworking, churchgoing young couple in Chattanooga, Tennessee. Jim and Ann Marie have two children, two jobs, two cars, two televisions, and a three-bedroom house. Jim, a graduate of the local community college, has had four jobs in three years, and is now using a computer to design the interiors of buildings for a local engineering firm. Ann Marie is a public-school teacher, though she sometimes thinks she would rather be staying home with her kids. Working two jobs, Jim and Ann Marie wonder why they aren't living twice as well as couples were a generation ago, when only the husband brought home a paycheck. They wonder why other young Chattanoogans living in mountaintop houses overlooking the city are doing so much better. They quietly hope that Ann Marie's parents will be willing to help them with their mounting bills.

    Despite their worries, people like the Blentlingers and their children will be winners in the economy of the next twenty years as technology, education, and globalization combine to improve their income and standard of living. We concentrate on married couples like the Blentlingers because they still represent the dominant, even if shrinking, share of the American population. The Census Bureau says 56% of all Americans over 18 are now living with their spouses, and 69% of children under 18 are living with both parents. We also focus on married couples because if the American economy can't deliver a rising standard of living for them, it won't do so for the single mom, the young man who can't read, or the child who is trapped in the violence and despair of an inner city. A rising standard of living for the middle class won't eliminate drugs, crime, fear, rotting inner cities, or children mired in poverty. This book isn't about those problems, as severe as they are. But America will have neither the will nor the wallet to eradicate social blight unless its middle class lives better.

    In this book, we try to unravel a number of mysteries, especially why living standards have grown so slowly during an era of revolutionary technological change. We have looked at the past to see what we could learn about the future. A century ago, electricity was 'America's great technological hope. Enthusiasts predicted electricity would revolutionize factories and homes, and would lift the living standards of everyone. Eventually, it did just that, but it took decades longer than experts predicted. Technology changes at dizzying speeds, but people and organizations don't--a lesson that is relevant to today's computer industry.

    Dusty factory records at Maytag Corporation, and interviews with veterans of Maytag's first decades as a washing-machine maker tell the story. For years, manufacturers built factories that now seem laughably inefficient. Machine tools were powered by leather belts connected to a central shaft that ran the length of a factory ceiling. To turn on a single machine, a foreman literally had to turn on an entire factory. By 1900, engineers had invented a better way: equipping machine tools with small electric motors. Workers could proceed at their own pace, and energy was conserved. But it took until 1925--decades after the birth of electric technology--before Maytag and many other manufacturers understood how best to use the new power source and reorganized their workplaces. "it all takes time to change people's ideas and attitudes," says Thomas Smith, Maytag's former chief of research and development, who started work at Maytag in 1926.

    The same goes for computers. In the mid-1970s, industry analysts predicted that the personal computer would soon lead to paperless offices and robotic workplaces. Billions of dollars were invested in making those visions come true--and billions were wasted. Just as with electric technology, managers needed decades to learn how best to use computer technology and reorganize workplaces for efficient production.

    This frustrating period of education is nearing completion. Companies are learning how to use technology not simply to automate old ways of doing business, but to find new ways that make their workers more productive. In Atlanta, insurance broker Mark Swank taps into a global computer network to find information gathered by thousands of other brokers who work for the insurance firm of Johnson & Higgins. Using the network, Swank queries brokers around the world and digs into reports once hoarded by the firm's New York headquarters. When Swank was drafting a proposal to restructure insurance for the international operations of bottler Coca-Cola Enterprises Inc., the best advice came, via computer, from a broker in France--someone Swank had never met.

    Figuring out how to use computers more wisely will help boost productivity and living standards, but that isn't the only reason to be optimistic. Figuring out how to use people more wisely will contribute as well. Beneath all the management fads and buzzwords that are so easy to ridicule, successful American businesses and workers are changing the organization of the workplace--and improving efficiency in the process. Miller Brewing Company's brewery in Trenton, Ohio, a small town in southern Ohio's factory belt, makes 50% more beer per worker than Miller's next most productive brewery, which has essentially the same equipment. The trick--easier to describe than to achieve--is to rely heavily on teams of well-trained workers to run the brewery without supervisors constantly looking over their shoulders. This is more than the latest management fad; this reorganization of the workplace is a major avenue to faster growth in productivity.

    Productivity--the goods and services produced from each hour's work--is crucial to improving the lot of the middle class. Increasing productivity means making more stuff for less effort. Growth in productivity is the reason we have more and better things than our grandparents did. Disappointing growth in productivity is a major reason the middle class has fared so poorly over the past quarter-century. And faster growth in productivity is a big reason the middle class will do better. "Productivity isn't everything, but in the long run, it's almost everything," economist Paul Krugman of the Massachusetts Institute of Technology has said. "To a pretty close approximation, the rate of growth of our living standard equals the rate of growth of our domestic productivity. Period."

    From World War II to 1973, productivity grew at a brisk 2.7% a year, doubling living standards in twenty-five years. But, for reasons that remain unclear, productivity has grown by only 1.0% a year since 1973; at that rate, it will take nearly 70 years to double living standards.

    These days, productivity has a bad reputation. Corporate executives boast of "productivity gains" when they fire people, battle unions, and downsize. But, for the economy as a whole, a gain in productivity is terrific news. Improved productivity may reduce employment at a particular company, but it boosts employment and living standards economy-wide. Unemployment was much lower in the 1950s and 1960s, when productivity was rising faster than at any other time in the post-World War II years.

    Agriculture is a good example of how greater productivity benefits America overall, despite the pain and dislocation that can accompany it. In 1800, it took an American farmer 344 hours to produce 100 bushels of corn. A century later, it took 147 hours. By 1980, it took only three hours of work. Richer land was farmed, better machinery was used, and labor-saving techniques were adopted. Fewer workers were needed to feed a larger population. The percentage of Americans working on farms, which was about 75% of the labor force in 1800 and about 40% in 1900, has fallen to less than 3% today.

    This transformation staggered farmers from the 1880s through the Great Depression. Many could no longer make a living cultivating the land their parents had left them. Many didn't live as well as they once had. Many were forced to sell their homesteads, move to the city, and take up dirty and dangerous factory work. "There is something radically wrong," a leading farm journal's editor wrote in the 1890s, an era when the pace of change was as frightening as it is today. "There is a screw loose. Manufacturing enterprises never made more money and were in a more flourishing condition, and yet agriculture languishes."

    Collectively, today's Americans are better off. We have food to spare, which we trade with other nations to get VCRs and oil. With fewer people on farms, we have freed workers to do things unimagined by our nineteenth-century ancestors, from etching semiconductors to teaching toddlers in nursery schools. We consume as many or more calories and as much protein as Americans did in 1900, yet we spend far less time working to buy food. We would have more farm jobs if we turned back the clock and undid two centuries of improved farm productivity. But few of us would choose living conditions circa 1800 over today's.

    The same logic applies to manufacturing. In 1950, an average factory worker turned out $19 worth of goods, measured in today's dollars, for each hour on the job. In 1996, an average hour's factory work produced $61 worth of goods. This threefold increase in productivity has made possible higher wages, better health benefits, bigger profits, and higher stock prices. Had productivity remained at 1950 levels, we might have three times as many factory jobs as we do today, but, for three times as much work, we wouldn't have one more thing to consume or sell. It would be as if every worker in every U.S. factory worked three shifts instead of one, but didn't produce any more goods and didn't take home any more money.

    When economy-wide productivity rises, wages rise too. Sometimes, it takes a while for wages to catch up with productivity gains, but they do eventually. All workers benefit, even those whose individual productivity hasn't improved. Think about barbers. A barber cuts, perhaps, three heads of hair an hour--no more than a barber did in 1898. Barbers' productivity hasn't increased at all, but their wages have increased. Why? If barbers were still being paid what they were paid in 1898, no one would work as a barber. People will stay in the haircutting trade only if they make roughly as much as they would make in some other job. So, as the overall level of wages in the economy rises, barbers' wages rise, too.

    We expect productivity to grow at least a half-percentage point faster over the next two decades than the approximate annual increase of 1% a year during the past two decades. That rate of growth will lift the living standards of American families across the board. What will push productivity into high gear? Computer technology, the reorganization of work, and the improved education of workers will, as we elaborate later in this book. A half-percentage gain won't return the United States to the pace of productivity gains in the Golden Age, but it would be the biggest economic story in a generation. It would make a huge difference.

    Here's one way to look at it. If the economy chugs along as it has been doing, with 1% annual growth in productivity, the income of the typical married couple would grow from around $49,700 in 1996 to around $60,650 in 2016. Add another half-percentage point of productivity growth, and the couple would make an additional $6,000 in 2016. That's $6,000 more--measured in today's dollars so that the comparisons aren't distorted by inflation--for every American family without a minute's more work. To middle-class families, $6,000 a year is eight months' worth of mortgage payments on the typical newly purchased single-family home.

    Or think, as many Americans do, about the prospects that Social Security will go bust when the baby boomers start retiring. If productivity and wages grow a half-percentage point faster than Social Security's experts have assumed, the fifty-year price tag for fixing Social Security will be cut by more than a third--without any change in tax rates, benefit formulas, or the retirement age.

    "Yes," comes the frequent rejoinder to promises about faster economic growth, "but Alan Greenspan and other officials at the inflation-obsessed Federal Reserve will never let the economy grow that fast." Not so. The Fed will welcome and nourish a productivity-led growth spurt.

    To a degree unappreciated by the public, the Fed's powerful chairman is convinced that productivity will quicken in the years ahead. Although Greenspan's every comment on the current state of the economy is scrutinized for clues to the next jiggle in interest rates, his emphatic optimism about the future of the U.S. economy gets less attention than it deserves. Greenspan is scanning the horizon for hints of inflation, but he is looking almost as intently for the rise in productivity trends that he forecasts with increasing confidence.

    Faster productivity growth by itself would be a big boost to the middle class. But we see another development that will have equally profound consequences: a narrowing of the gap between well-heeled Americans and those in the middle of the middle class.

    The wage gap between the top earners and the rest of America's workers has grown steadily wider since the 1970s. Some predict it will get wider still, and a small platoon of workers with choice jobs will retreat into guarded, gated communities while the rest of America stagnates. In that view, the middle class will wither. But we expect a far different and better outcome as the supply of educated workers increases and the appetite of employers for ever-more-skilled workers diminishes. The widening income inequality that has distinguished the past twenty years comes in many forms and has many causes. Divorce and unwed motherhood have created a growing number of single-parent, single-paycheck families at the bottom of the economy Marriages of well-paid professional men and well-paid professional women have created a growing number of well-off families at the top. A new willingness to pay extraordinary salaries to superstars--in music, sports, television, investment banking, law, medicine--has created a small but highly visible super-rich elite.

    Ultimately, though, most Americans live on their paychecks, and the root of discomforting inequality can be found in wage disparities. Among the most important factors driving inequality has been employers' growing demand for educated workers, at a time when there is a glut of unskilled workers. That drives up the wages of the educated, and drives down the wages of the less educated.

    This won't persist. Now that wages for workers with a college education have risen far above those of workers who finish only high school, more Americans are deciding to go to college--and many others are going to community colleges. The two-year schools often are derided as destinations for people not smart enough, motivated enough, or rich enough to go to four-year colleges. That's an outdated image. The nation's 1,100 community colleges have evolved into institutions that successfully give workers the skills that employers need.

    Sue LaPorati was 24 years old, divorced, raising two preschool children, and working in a checkout line of a Cleveland supermarket when her union threatened to call a strike. "I went home that night and said, `This is ridiculous. I can't survive like this.' Like Mom always told me: I should go to college." The union didn't strike, but in the fall of 1988 she enrolled anyway at Cuyahoga Community College, known locally as Tri-C. Living on a $6-an-hour part-time job at the supermarket, child-support payments, and food stamps, LaPorati spent six years as a part-time student, shored up along the way by a Tri-C program for "displaced homemakers"--women who are divorced, widowed, or separated.

    LaPorati tapped the program for books, and got federal grants to cover most of her tuition. Her children went to a federally funded Head Start preschool, and often spent weekends with their father while she worked at the supermarket. At Tri-C, LaPorati stumbled into an introductory computer course and was hooked. She completed an associate degree in computer studies in 1994, and two years later finished a bachelor's degree in business at a local private college. Even before graduating from Tri-C, she got a part-time computer job at Allied Signal Corporation. She now works there full-time, monitoring on her desktop computer the prices her company charges for its truck brakes. She earns $30,000 a year. "I'm not complaining," she says with more than a little understatement. "Tri-C was a very good stepping stone for me."

    Community colleges will help increase the pool of well-trained workers over the next decade, by offering graduates a way to prosper and by easing the shortage of trained workers that has pushed their wages far above those of high school graduates. Education promotes equality by increasing the supply of the most desired workers. College and high school graduates alike will enjoy rising wages; improving productivity will see to that. But wages of high school graduates will rise more rapidly than wages of their college-educated counterparts because employers won't have to pay quite as much of a premium for education as they do today The wage gap will narrow, and prosperity will be more widely shared.

    Think of two teams of mountain climbers scaling a peak. The first team, already high up on the mountain, represents college-educated workers. The second team, stumbling at the base of the mountain, represents workers with high school diplomas. In the era of broadly shared prosperity, the college team will continue to climb higher, but the high school trekkers will finally head upward too, and will reduce the distance between them and their college-educated peers.

    Another reason to expect a narrower wage gap is that the appetite of employers for highly skilled workers won't continue to grow as voraciously as it has in recent years. For the past quarter-century, computers have undermined the wages of low-skilled workers and enhanced the wages of those who can master the machines. Technology has led employers to demand better-trained workers who are agile at solving problems. Americans who use computers at work earn close to 20% more than those who don't, according to an influential analysis by Princeton University labor economist Alan Krueger.

    But computers also have the potential to make less skilled workers more productive and more desirable. That's happening already. Grocery clerks once had to be able to add and subtract in their heads. Later, they had to have nimble fingers to punch the cash register keys. With modern scanners, they simply have to position bar codes on packages over a red laser light.

    Today, much of the push to simplify technology comes from those working with the handicapped and from the military, whose machinery must be designed so that it can be used by ordinary young Americans. Simplified technologies designed for these special users then spread throughout the economy. Text scanners, for instance, were created so that books could be entered into computer databanks and read to the blind; now, they make it possible for people who can't type to enter data into a computer. Voice-recognition technology was designed, in part, as a way for those without the use of their hands or eyes to run computers; by eliminating the keyboard, the technology will make computers easier for others to use, too. Army tank designers are pioneering ways to simplify software so high school graduates can operate increasingly sophisticated computer-controlled devices; civilian computer designers are sure to catch on soon.

    Faster economic growth in the 1990s offers tantalizing evidence that growth itself will help reduce inequality, even though it didn't do so during the 1980s. To the rule that economic expansions boost wages and job prospects for the worst-paid Americans, and foster equality, the 1980s may have been an unhappy exception.

    In Davidson Plyforms Inc.'s cavernous factory in a modern industrial park on the outskirts of Grand Rapids, Michigan, a hearty economy and a very low unemployment rate are paying off for men and women with few skills. With high-powered vacuums sucking up the sawdust, woodworkers, many of them Hispanic, feed sheets of plywood veneer into presses, and shape the plywood into chair seats for office furniture. In 1995, Davidson lost a remarkable 43% of its workers to turnover, mostly because workers found it so easy to get jobs elsewhere. Turnover in a factory is expensive; recruiting and screening applicants is costly, and new workers don't work as efficiently as experienced ones.

    With business booming among Grand Rapids manufacturers and with fierce competition for workers, Davidson raised the $7-per-hour starting wage to $8 an hour in the summer of 1997, and improved the company's performance-bonus plan. Just as important, it stepped up its effort to groom supervisors and "leadmen" from the production ranks, and it methodically improved worker training--steps that will brighten the future earnings prospects for the company's low-wage workers. If sustained, this recipe--robust economic growth, a low unemployment rate, higher wages for the worst paid, more training for the least skilled-holds enormous promise for workers who have been left behind for the past twenty-five years.

    Along with technology and education, a third big factor affects the well-being of the American middle class: globalization. Foreign trade is blamed for everything that has gone wrong for the U.S. economy over the past quarter-century, especially for destroying jobs in American factories. Trade often is accused of widening the gap between the wages of those at the top and those at the bottom, but technology has done far more than trade to worsen wage inequality. Overall, the United States greatly benefits from global trade and investment, which bring Americans jobs, better and cheaper goods, and a higher standard of living than they otherwise would enjoy.

    If any place in the United States should be complaining about globalization, it would seem to be Greenville, South Carolina, a long-time garment and textile center, in a state where imports have eliminated about one-third of apparel jobs since 1986. But Greenville is prospering precisely because of the growth of the global economy. Tiny South Carolina attracts as much foreign investment as all of the giant nation of India does, and much of that investment ends up in Greenville and nearby Spartanburg. German, Japanese, and Swiss-owned factories are now welcome in an area once known for its hostility toward outsiders. To meet the foreign firms' exacting demands, local suppliers are increasing productivity and expanding exports. As a result, wages have risen throughout the region. At Spartanburg Steel Products Inc., a local firm that stamps out auto body parts for BMW and Toyota, workers get productivity bonuses averaging about $1 an hour, on top of the $11-an-hour base pay, when they exceed production and quality standards.

    Americans who fear international trade look at places like Bangalore, a burgeoning center for software programming in southern India, and fret that the low wages paid to programmers there will undercut wages paid in America. Some American programmers will surely lose out to competition from Bangalore, but the threat of low-wage foreign competition is greatly overstated. American wages and technological panache lure the best of Bangalore's talent to move to the United States, and Bangalore's software houses are largely left doing the dull work Americans don't want to bother with anyway.

    At the same time, as Bangalore and other third world boomtowns prosper, they become better markets for American wares. In Milwaukee, about 100 General Electric Company factory workers, each earning about $45,000 a year, are building ultrasound machines to ship to Indian village hospitals and to other markets in developing nations.

    For all the reasons we've mentioned, we are confident that living standards for the middle class will improve. But we aren't cocky; predicting the economic future is a hazardous vocation, and experts often get it wrong. Many social scientists predicted that World War II would be followed in America by a depression instead of a boom. Few economists anticipated in the mid-1960s that the civil rights movement would produce significant gains for African Americans.

    Forecasting the impact of technology isn't any easier. Thirteen years before their flight at Kitty Hawk, Wilbur Wright told his brother Orville that humans wouldn't fly for fifty years. In 1941, Simon Kuznets, a Nobel laureate in economics, argued that "the cumulative effect of technical progress in a number of important industries has brought about a situation where further progress of similar scope cannot be reasonably expected" and that "economic effects of further [technological] improvements will necessarily be more limited than in the past." The invention of the transistor, the personal computer, genetically engineered drugs, lasers, space satellites, and nuclear power made hash of that prediction.

    Many gloomy predictions are simply extrapolations of the recent past, a technique that never captures the historic moments when an economy changes direction. We go beyond extrapolation to predict a turn in the economy that will have long-lasting benefits for the majority of Americans. The United States inevitably will suffer again from recession. The stock market will not rise inexorably every day for the next twenty years. But that's not what matters. The trajectory of the American middle class, at long last, has turned upward.

    We take a hardheaded attitude toward future-gazing. It has taken decades for the forces of technology, education, and globalization to begin to improve living standards for middle-class Americans. If we're right, evidence of the changes that will dominate the economy of the next two decades should be visible today, not just in the nation's technology centers, but in quieter places around the nation. That principle has guided our travels, and has taken us to steamy Southern cities and frosty Midwestern towns far from the coastal centers of innovation. We We're heartened by what we have found. The forces we're writing about already are transforming even small cities in the heartland of America. "The future is out there in small pieces that you can see right now," says Ramana Rao, chief technologist at InXight Software Inc., a Silicon Valley company developing ways to simplify computers.

    This book is divided into three sections. In the first section, The Past, we describe the reassuring parallels with the early years of the twentieth century, a time of slow economic growth and widening inequality that was followed by a burst of innovation and prosperity. In the second section, The Present, we trace the rise of the American middle class after World War II, the strains of the Age of Anxiety, and the puzzling failure of computer technology to produce more prosperity in recent years. In the third section, The Future, we look ahead to show how the combined effect of computers, education, and globalization already are beginning to create an Age of Broadly Shared Prosperity.