Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, March 22, 1990 TAG: 9003222546
SECTION: EDITORIAL PAGE: A-10 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Medium
In a New York Times piece, printed Sunday in this newspaper, Peter Passell took a look at the question by offering a statistical sketch of the economy.
He found some good, some bad. Unfortunately, it's easier to find rebuttals for the good than for the bad.
One "good" statistic: The American economy remains huge. Its purchasing power is three times Japan's, twice the combined economies of West Germany, France and Britain.
Unmentioned, however, was that America's population is twice Japan's, and 40 percent greater than the combined population of West Germany, France and Britain. The U.S. economy is bigger than the others, but the difference shrinks when relative populations are taken into account.
Moreover, the relative enormity of the U.S. economy may be more a function of the past than a harbinger of the future. Japan's growth rate slowed in the '80s; it was still bigger than America's.
So long as China and India remain impoverished, and so long as the Soviet economy continues its downhill slide, mere population will see to it that the American economy will remain the world's largest for a long while. But prospective political and economic groupings - a united Europe, say, or a Pacific Asia combine - could render the designation meaningless.
Another "good" statistic: Japan, Europe and the United States spend about the same percentage of national income on research and development; because the U.S. economy is so much bigger, however, it can spend more in absolute terms.
Yet as Passell notes, that investment is leading neither to growth in U.S. productivity nor to the sort of breakthroughs in applied technology that Japan and Germany are enjoying. Why? An obvious suspect, also noted by Passell, is the diversion of U.S. research resources into military programs.
Is the diversion a consequence of America's position as the largest economy in the world - of a perceived need to defend that position and to project a military power commensurate with it?
If so, the size of the American economy may be as much bane as boon. The American economy is big because America is the most populous of the world's industrialized nations. But American income per capita could decline because of the defense costs exacted by the economy's size.
A third "good" statistic: the U.S. trade deficit. Yes, the trade deficit. Rather than seeing it as an ominous sign of America's inability to compete in the international market, says Passell, some economists argue that the deficit should be viewed as a global rush to invest in America, to buy into America's future.
The point, though contrary to conventional thinking, isn't ridiculous on its face. In the 19th century, the capital of foreign investors - by the British, for example, in the development of U.S. railroads - speeded America's development into an industrial power.
The question, though, is what the foreign investment is used for. Railroads (and other "infrastructure" improvements) or swank condos? Computer technology or boutiques?
Passell's "bad" statistics suggest the answers aren't infrastructure and computers.During the '80s, Americans' individual income rose, because of the growth in the number of working women, but wages declined. The wealthy grew wealthier, but the poor grew poorer. The elderly advanced economically, but children lost ground.
The optimist sees the glass half full of water, goes the old saw, while the pessimist sees it half empty. But either way, it's troubling when the water level seems to be dropping.
by CNB