1980s AD

National Review, August 31, 1992 by Richard B. McKenzie

WORRYING that the 1990s would be the decade in which the bills of the 1980s would come due, a Time magazine reporter declared, "The past decade brought growth, avarice, and an anything-goes attitude," and then glibly summarized the 1980s with five words: "Get rich, borrow, spend, enjoy."A month later another Time reporter picked up on the same theme of a decade of decadence when reviewing five recently released books: "Doesn't anyone have a kind word for Wall Street's gilded '80s? The new decade is barely six weeks old and already stores are piled high with books that portray the past ten years as a sink of avarice and excess. The melodramatic titles depict the American free-enterprise system as overrun by barbarians and liars, ambition and greed."

Dubbed the "Decade of Greed," the 1980s were seen by many as one long consumption binge, fostered by the Reagan Administration and characterized by what political pundit Kevin Phillips called "conspicuous opulence." The evidence offered in support of this contention includes casual references to the jump in the sales of luxury automobiles, the number of MBAs (most of whom, presumably, set their sights on making money on Wall Street), the number of get-rich and self-help books, and the number of Wall Street brokers who went to prison.

John Kenneth Galbraith, of course, won't let the decade die. It lives on, he says. How? In the recession. In a recent article titled "The Economic Hangover from a Binge of Greed," the venerable professor says it's time to cut through the excuses: "The present recession is not an autonomous, self correcting economic drama. It is the wholly predictable response to the speculative extravagances and insanities--and specific government policies-of the 1980s." The country's continuing problems could be blamed on a simple five-letter word: Greed.

That's the widely believed bad news. The good news is that the bad news never amounted to anything more than bad reporting.

More Blessed to Give

While many critics suggest Americans were more selfish and less charitable during the last decade, none have actually looked at the most direct means of assessing greed--the pattern of charitable giving. If they had, they would have quickly discovered that they had told only half the story, leaving out the most positive and striking parts. Measured by giving, the 1980s were not the "Decade of Greed" at all. On the contrary, charitable giving by individuals and corporations jumped dramatically. This finding holds for giving measured not just in absolute terms, but also in total real dollars contributed, real charitable contributions per capita, and charitable contributions relative to national income.

Indeed, giving in the 1980s was above the level that would have been predicted from the upward trend established in the 25 years prior to 1980. This conclusion holds even after adjusting for several economic and policy changes that might reasonably be expected to have boosted charitable contributions. In view of total, aggregate giving from 1955 to 1989, the 1980s in America were actually a decade of unusual generosity.

Total giving is composed of gifts from individuals (including bequests), corporations, and foundations. The first graph on p. 53 shows the pattern of giving from 1955 through 1989. In the 25-year period prior to the "Decade of Greed," total charitable giving, in real terms, more than doubled, increasing from $34.5 billion in 1955 to $77.5 billion in 1980-or at a compounded annual growth rate of 3.3 per cent. Between 1980 and 1989, total giving in real dollars expanded by 56 per cent to $121 billion, or by a compound growth rate of 5.1 per cent. The annual rate of growth in total giving in the 1980s was nearly 55 per cent higher than in the previous 25 years.

Because giving by living individuals accounts for more than 80 per cent of all giving, it is not surprising that this category also more than doubled, from $30.2 billion to $64.7 billion between 1955 and 1980 (a compounded growth rate of 3.1 per cent a year). Individual giving reached $102 billion in 1989, after expanding at a compounded rate of 5.2 per cent since 1980.

Moreover, the growth in private giving over the decade (58 per cent) approximated or exceeded the growth of expenditures on a variety of goods and services that might be considered extravagances-for example, new automobiles (60 per cent), jewelry and watches (41 per cent), alcoholic beverages (1 per cent), meals eaten outside the home (22 per cent), tobacco products (-12 per cent), and personal services such as health clubs and beauty salons (38 per cent). The increase in total giving by individuals even exceeded the increase in total consumer credit outstanding.

Corporate-giving levels are much more erratic, in large part because of fluctuations in the business cycle. Before-tax corporate profits represented nearly 15 per cent of national income in 1955 and only a little more than 7 per cent in 1989. After-tax corporate profits represented 8 per cent of national income in 1955, falling to half of that share in 1989. Nevertheless, corporate giving in real terms rose during the period from just under $1.9 billion in 1955 to nearly $5.3 billion in 1989, increasing in the 1980s at a compound rate of 4.1 per cent. The growth rate in corporate giving was 52 per cent higher in the 1980s than in the earlier decades covered by this study. In spite of a drop-off in corporate giving after 1986 (due in large part te changes in corporate tax laws), charitable contributions by corporations as a percentage of profits before and after taxes remained higher in the late 1980s than in the decades preceding.