Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, January 2, 1992 TAG: 9201020169
SECTION: EDITORIAL PAGE: A-7 EDITION: METRO
SOURCE: RAY L. GARLAND
DATELINE: LENGTH: Long
THE TURNING POINT
TIME HAS proven the timeless value of certain rituals and traditions. I am always a little depressed as the clock draws toward midnight on Dec. 31. But New Year's Day puts a spring in our step. The notion of beginning anew is wonderfully bracing, no matter how clearly we understand that our mistakes are likely to be repeated.Twice in American history a profound national sacrifice was followed by a turning away from problems and opportunities.
The first was after the Civil War, when the nation quickly lost interest in the plight of those recently freed from slavery. The second came after World War I, when America withdrew into isolationism and left Europe to stew in its own juices. Both issues had to be revisited at much higher cost.
Those whose responsibility it was to pick up the pieces after World War II were determined to learn from the mistakes of the past. Free trade, democracy and collective security were their watchwords. Those who went with that flow have prospered. Those who stood against it have now been almost completely undone.
Only two nations that I know of have voluntarily gone out of business. The first was in 1707, when Scotland accepted a money payment and other assurances from England by way of peacefully merging two kingdoms into one. The second occurred just the other day when the U.S.S.R. ceased to exist by the simple expedient of Gorbachev turning off the lights in his office.
For the first time since the rise of nationalism and improvements in technology made large-scale military operations possible, there is a genuine opportunity for a new world order.
But at this historic juncture - representing the culmination of 50 years of American policy and sacrifice - what is the perceived wisdom of the American people?
It is that the one man in the world who has shown the surest touch in building alliances among nations - President George Bush - should stay home and "jump-start" the economy.
For all the hysteria the media has served up, the unemployment rate hasn't exceeded 7 percent. We might recall that it reached 10.8 percent in the 1981-82 slump, and was higher than now in six of the past eight recessions.
It's not impossible that we're dealing with something more menacing. But recessions also serve to cleanse the economy of excesses such as high levels of debt, interest rates and inflation - providing a springboard for new growth.
While layoffs at General Motors were front-page news, the back pages of these same papers carried a lot of good news. American exports in November set a new record of $37 billion - up 4 percent from September - and this despite the fact that the economies of many other nations were in worse shape than our own. We also learned that the median-price home is now within reach of more households than at any time in the past 20 years and housing starts have increased 30 percent from their low point last January.
It was also only three weeks ago that many "experts" were predicting disaster for the stock market. As the market now almost daily establishes a new record, these same people are telling us that stocks are the place to be.
The new year is typically a time for people to make investment decisions. I have always preferred the relative safety of bonds, but bond yields are now so low that you have to look at good stocks. It pays to remember that people who have put their faith in such well-managed American companies as General Electric, Philip Morris, Merck and Coca Cola have made tons of money over the long haul.
While interest rates, apparently, can be almost anything the Federal Reserve decides they ought to be, the long-term trend is almost certainly toward the low side. For 30 years the conventional wisdom was that inflation paid you to borrow and spend. That psychology has now been broken. The result is likely to be a new appreciation for the virtue of saving money and investing it in companies with a proven capacity to increase their earnings year after year.
With substantially lower rates of interest a host of things that weren't possible become possible. People who couldn't afford to buy a home or a car suddenly can, and businesses that were nearly bankrupt can save themselves b refinancing their debt. And every time interest rates drop one percent, Uncle Sam saves another $30 billion a year in servicing our national debt.
The important thing is never the state of our pocketbook but the state of our will. When Japan struck Pearl Harbor 50 years ago we were just emerging from the Great Depression and were ill-prepared to wage global war. But there was no discussion of the possibility of defeat, and suddenly there was money for every purpose under the sun.
Still, we ended World War II with a national debt larger by far, relative to the size of the nation's total economy, than it is today. But there was no talk then of going broke or retreating into our shell. We found the will and the wherewithal to launch the Marshall Plan for the reconstruction of Western Europe, and NATO for its defense against Soviet imperialism. No nation ever made a better investment.
The human and material resources of Russia are monumental. But never forget, if the political evolution of Russia fails, her military capacity will still be there, waiting for stronger hands to assume the levers of power.
Investing in peace is always cheaper than preparing for war, and that's what we ought to be doing in 1992. Happy New Year.
Ray L. Garland is a Roanoke Times & World-News columnist.