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REPORTS OF U.S. DECLINE ARE MISLEADING

The Competitiveness Policy Council, an advisory committee appointed jointly by Congress and the White House, recently issued a report warning of a decline in America's position in the world economy, and calling for major initiatives to deal with the situation.

There are two problems with the council's report: It is misleading about our position in the international economy, and its most significant reform proposal is misguided.The council correctly notes a "slow erosion" in our competitive position. But there is nothing new or particularly worrisome about that.

Our overwhelming economic dominance in the decades following World War II was abnormal: Our major competitors such as Germany and Japan had been crippled, and other industrious people - South Korea, Taiwan, Singapore - had not yet entered the takeoff stage of modernization.

Those "good old days" will never return, but that doesn't mean we're headed for decline. In an expanding economy, everyone can become better off.

In a recent (March 8) article, Sylvia Nasar of The New York Times noted that, when adjusted for purchasing power, America's per capita gross domestic product ($21,449) is first in the world, whereas Japan's ($17,634) is sixth. And that's true even though, on average, the Japanese spend about 10 percent more hours on the job than we do.

Explanation? Output per employee in America is 40 percent higher than in Japan. So contrary to the conventional wisdom, we are more efficient than they are.

In a recent (Feb. 7) Wall Street Journal article, Harvard economist Lawrence Lindsey pointed out that U.S. manufacturing is not in decline.

It now amounts to 23 percent of gross domestic product (GDP), which is actually slightly higher than the figure (22 percent) during the late 1960s, when we were universally viewed as the dominant industrial force in the world.

What has occurred since the late 1960s is a trend away from making consumer products and toward producing capital goods, such as computers, aircraft and machinery. These have risen from 28 percent to 38 percent of the manufacturing base. And they sell very well overseas: Whereas only 20 percent of U.S. capital goods used to be exported, with a value of 1.4 percent of GDP, now 45 percent of our capital goods - amounting to 4 percent of GDP - are sold abroad.

Nor are we resting on our laurels. A Feb. 20 report by a panel of the National Science Foundation showed that U.S. spending on non-defense research is larger than the combined total of our two biggest rivals, Japan and Germany.

None of this is meant to promote complacency, but it should counter the hype spread by those deluded enough to believe that Washington needs to "manage" the economy.

The attitude behind this approach was expressed by Sen. Jeff Bingaman, D-N.M., who says: "One problem we have is that we don't have anyone in charge of manufacturing in our government."

Oh, brother! Putting elected officials and their political and bureaucratic appointees "in charge" of anything, especially where large amounts of money might be at stake, all too often results in partisan shenanigans, exorbitant spending, patronage hiring, pork barreling, log rolling - just what we need to assure that predictions of our economic decline turn out to be true.