May 02, 1997
WHAT ACCOUNTS for the extraordinary performance of the American economy? After seven years of sustained growth, U.S. productivity leads the world, a strong dollar draws in cheap imports for consumers, inflation remains low despite nearly full employment, and savings fostered by IRA and 401(k) plans pour into Wall Street as the bulls keep charging.
Huge budget and trade deficits, falling real income levels for displaced workers, threatened insolvency in the Social Security and Medicare programs, illiteracy and joblessness in the inner cities -- these are the bleak underside of the economic story. They could cause havoc in a sharp recession. But despite frequent predictions of doom, prosperity keeps bounding along to the surprise of many a financial expert.
Perhaps part of the answer lies in the exponential growth of technology. New inventions of the information age come along so quickly and in such profusion that the old ups and downs known as the business cycle seem for the moment to be in abeyance.
The latest sign of exuberance was a blockbuster surge of 5.6 percent in the nation's gross domestic product during the first quarter of 1997. This is more than double the pace that mainstream economists feel can be sustained without triggering inflation. Yet most of the current data suggest inflation is under control even though the Federal Reserve Board remains ever-ready for a pre-emptive strike.
In the storybook first quarter, average wages rose sharply but employee benefits did not. The result: only moderate increases in the cost of labor -- a vital factor in protecting the U.S. competitive position globally.
Foreign nations are monumentally irritated by the go-it-alone conduct of the U.S. government and many U.S. industries. But such is the U.S. dominance of the world economy -- a dominance matched only in the early post-war years -- that other countries often have little choice but to go along. Access to U.S. technology and the U.S. market must be ensured.
While Wall Street is engaged in another of its bounce-backs despite yesterday's minor decline, its irrational performance has little relevance to the actual performance of the U.S. economy. What counts is knowledge -- knowledge and all the skills, information and products that come from it. That may be the secret of the current prosperity.
Pub Date: 5/02/97
