Don't look now, but this much-abused American economy may be closing in on a rather spectacular record.
And the rest of the Western world is coming along for the happy ride.The prospect, which has much to do with the crumbling of anti-capitalist sentiment on the other side of the Iron Curtain, is for what would be, quite simply, the longest sustained expansion in the history of economics. And it's now reasonably in sight.
Already the unbroken national growth that began in late 1982 has set a record for a peacetime period free of recession. Now a mark that many academicians assumed was unassailable - the wartime record set in the 1960s - is within reach, and some notably shrewd forecasters think it will tumble next year.
The dawning realization that the gloomsters have been proved nuts once again lies behind the recent fireworks on Wall Street. For, just as a bunch of haywire "gurus" have been doubting the stock market throughout the eight-year period in which it has nearly quadrupled, so the economic field has produced a succession of best-sellers about imminent, horrible depressions, which somehow never arrived. In 1990 again, it seems, the recession will be a little late this year.
Ironically, one reason that both stocks and the economy have kept moving forward is this widespread disbelief in what was occurring. In the case of the economy, euphoria was contained also by the fact that the expansion was never quite a nationwide boom. This year, for example, is shaping up as the most sluggish since the expansion began.
But the news is not that the economy is having its troubles, which everybody knows, but that it seems increasingly to be merely catching its breath. Consider:
- The Blue Chip Economic Indicators survey of 48 top business economists, one of the few groups that have correctly called the continuing expansion, reports that more than two-thirds of its members now believe that the next recession will not start until 1992 at the earliest. That would mean, at minimum, a new all-time longevity record for a period free of national recession.
- The latest "World Economic Outlook" from the International Monetary Fund sees no recession in any Western nation this year and looks for an actual acceleration in economic activity starting in 1991.
- The London-based Economist criticizes those in America, including the Bush administration itself, for failing to perceive the underlying strength of the U.S. economy, whose "death warrant," it says, will come only if we fail to control inflation.
Such comments have history on their side. It was the neglect of inflationary pressures that doomed the 1960s expansion. Fueled by a government that spent wildly in an attempt to provide both "guns and butter" (also known as the Vietnam war and the Great Society), the U.S. economy grew for 106 straight months from February 1961 to December 1969. Part of the legacy, unfortunately, was the inflation that took such a toll on the following decades. The Federal Reserve merrily accommodated Washington's excesses, and rising prices eventually crippled the nation.
This time around, more positively, we have managed to lower both unemployment and inflation. If Alan Greenspan has erred at all since becoming the Fed's chairman in 1987, it has been on the side of excessive caution - which is not the worst way for a Fed chairman to err. It means, though, that he can reasonably begin to ease credit and let interest rates come down in 1990.
The easiest prediction in economics is that we will someday have another recession; we always have, and there is, alas, no evidence that the politicians have permanently repealed the business cycle. But recessions do not come without cause. Some of the usual private reasons, such as an inordinate buildup of inventories by businesses, may be easier to avoid in this computer age.
Other threats require a modicum of sense in Washington to combat them. For example, the currently fashionable notion of raising taxes in a fragile economy is a form of ideological lunacy that ought to be set aside fast. If we can match the economic growth in the nation with some intellectual growth in our politicians, the 1990s can truly be one for the books.