The Economy: New & Exuberant

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"There is a new spirit within business which bodes well for 1963 and into 1964," says Inland Steel Chairman Joseph L. Block, 60, whose family-founded company is the most profitable major producer in the nation's least profitable big industry. Michael W. McCarthy, 60, chairman of Merrill Lynch, Pierce, Fenner & Smith, seems pleased that "the economy has confounded a lot of experts"—and well he might be; his brokerage house, the nation's largest, has profited mightily by the stock market's 34% rise since last June. The only real concern that businessmen seem to have is about what lies ahead in the uncharted territory into which the rising economy is leading the U.S. "The important question is not whether we are moving into a boom," says Mark Cresap, 53, a onetime corporate planner whose long-range judgments lifted him to the presidency of Westinghouse Electric, "but what kind of boom it will be."

Exploding the Theories. Whatever it is called—and however far it carries the nation's business—the U.S. economy in the 27th month of the fifth surge in business since World War II is unlike anything the nation has ever experienced. In every important sense, it is a new kind of economy. Consumers are earning more, yet going deeper into debt than ever before. Businessmen are selling more goods than ever, but finding it tougher to turn a profit. The number of jobs is rising, but so is the number of jobless. Inflation, the almost inevitable companion of every postwar advance, is barely visible. Stable prices in times of rising incomes are opening a golden era for the consumer.

The new economy has thus exploded some classical economic theories. The competitive efficiency of the U.S. corporation in 1963 defies the logic of Adam Smith, the absent-minded professor who believed that hired managers would become negligent and sloppy and be overwhelmed by men in business for themselves. The expansion of U.S. markets through a steady population growth belies the gloomy forebodings of Parson Malthus, and modern capitalism's increasing ability to adapt itself readily to change has proved that Karl Marx was a better journalist than prophet. Today's U.S. economy would surprise even those who helped to shape its past. Alexander Hamilton would be shocked by the size of its mounting debt, and Thomas Jefferson would frown on the sprawl of the megalopolitan cities that feed it. The new economy has more competition than Theodore Roosevelt would have deemed possible, and more peacetime Government direction than Franklin Roosevelt ever dreamed of.

The Consumer: a Hero. The real hero of the current upturn is the U.S. consumer. He is changing his habits. He has usually spent about 92% of what he took home and banked the rest. Now he is saving less but enjoying it more. This year he is spending at least 94% of his income—or $8 billion more at an annual rate—and sending cash registers ringing to new records.