May 23, 2002

Strong American Relative Growth

During the 1990s, U.S. economic growth by far outstripped that of the other major industrial economies. American industrial production grew by 46.6% over the decade; European industrial production grew by only as much; Japanese industrial production grew by only one-eighth as much as did American. A small part of this difference was due to differences in population growth--birthrates and immigration. However, most of the U.S. edge in economic growth in the 1990s came from just three factors: better business cycle management (and thus falling unemployment with stable prices); high investment (the result of curing the deficit, among other factors); and the faster diffusion of the new technologies and new forms of business organization associated with the coming of the information age.

These three factors were in their turn driven by an expert Federal Reserve; by a President and a Congress that cared deeply about responsible budgeting; and an open, flexible, and entrepreneurial society. The third of these factors is a deep, enduring American strength. The other two are not. Budgeting was not responsible in Ronald Reagan's 1980s. The Federal Reserve was not as skilled at managing the business cycle in the 1970s.

Thus, like it or not, continued good relative economic performance hinges on a good government. It thus hinges on our ability to elect good macroeconomic managers.

I'm Brad DeLong from Berkeley.

Posted by DeLong at May 23, 2002 02:27 PM | TrackBack

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