Unless the 1989 economy grows more than twice as fast as now appears likely, the decade of the 1980s will be the worst for economic growth since the 1930s.
That startling observation seems to contradict what almost every American knows - so oft is it repeated - that in the 1980s we have achieved what is said to be the longest peacetime expansion of the century.The statements don't conflict. The expansion, now in its 77th month, may be unmatched in persistence but not in accomplishment, because so far in the 1980s the U.S. economy has grown at an annual average of just 2.5 percent.
That message was delivered recently to the Hartford Society of Financial Analysts by John Winthrop Wright, whose approach to investing might be called classical or fundamental but who in these odd times finds himself a contrarian.
An economic or investment contrarian is one who sees things differently and who seeks to use that different perspective to protect himself from the madness of the popular mind, such as in extolling the great expansion.
A tenet of Wright's philosophy, and of the company he founded, Wright Investors Service, Bridgeport, Conn., is to take the long perspective lest you be swept into the latest fad or phobia and thereby lose your perspective.
That is why he suggests we take a decadelong look at the economy rather than lose our minds to the latest figures. He suggests that 77 straight monthly gains in gross national product figures may have created a false impression.
It is true, he said, that the 1982 recession depressed the decade's figures and that since that time the economy has grown at a 4 percent rate. But so what? How many decades have escaped a recession? None.
Of course, Wright continued, the 1970s weren't that great either. After 30 years of economic growth averaging more than 4 percent a year, the country has been growing at just around 2.5 percent a year for nearly 20 years.
Furthermore, he said, "we've had to work harder to get what meager growth we've gotten." That is, the country has had to put a greater proportion of its population to work in order to maintain standards to which we're accustomed.
For example, two of every three civilians are now in the labor force, and a record 63 percent of civilians are working, up from 59 percent at the beginning of the decade. Most households have multiple breadwinners now.
In other words, said Wright, real gross national product and per capita GNP have remained close to the trendline growth in recent years only as a result of putting an increasing percentage of the population to work.
Real GNP per worker is still below the long-term trend line. In real terms, with inflation wrung out, hourly earnings are no higher than they were 15 years ago.
Little wonder, said Wright, that like the Red Queen from "Alice in Wonderland," many families feel as if they have to run faster just to stay in place.
Wright's purpose in describing his perspective was not to disparage the accomplishments of those who helped keep the economy expanding but to ask a few questions about the manner in which it is now being led.
Specifically, why has the Federal Reserve pushed up interest rates?
"Our view," he said, "is that the underlying trend of inflation is still under good control and that inflation is probably now close to its peak rate for the current business cycle."
We should be reminded, he said, that the United States has a long history of moderate inflation, averaging just over 3 percent for the 20th century to date. It is always around, if not as a reality then as a threat.
"Slowing the U.S. economy when it is hardly booming seems a strange way to deal with inflation caused by bad weather and the higher cost of both domestic capital and imported products," he said.
Sooner or later, he concluded, the Federal Reserve will "see the error of its ways in trying to beat down the entire economy in order to offset price pressures which are beyond its control."