Reporters Have Missed the Real Story on US Economy

By , Everett Carll Ladd is executive director of the Roper Center for Public Opinion Research, University of Connecticut.

COMMENTARY on the American economy is overly occupied with the short term. The immediate ebbs and flows of the business cycle do matter, of course. Still, it's the long-term course that is most consequential. An understanding of this requires broad-based comparison of United States performance to other industrial countries. Economic reporting performs this important task sporadically - and poorly. Fortunately, those who want to keep track of comparative performance have available a useful source. Each June, the Organization for Economic Cooperation and Development (OECD) brings together information on the economies of its 24 member nations, including all major industrial democracies. The 1991 edition of "OECD in Figures" has just been released.

Chances are that most people examining this publication for the first time will be surprised by the composite picture, which contradicts much of the conventional wisdom. It shows the US with weak areas, to be sure, but with remarkable strength overall. Japan has made impressive gains, but its economy per capita is essentially on a par with, not ahead of, those of Western Europe. Among the established European democracies, the story is not one of growing German ascendancy but of substantial parity.

Health-care spending in the US has grown so fast, to such a high proportion - about 12 percent - of our national product, that it's become a drain on our standard of living. The OECD data show no other industrial nation spending as much. While our trade balance has improved, it remains a weak area. At the end of the 1980s, when Germany's trade balance, as a proportion of GNP, stood at plus 5.3 percent and Japan's at plus 1.5, the US was in the red at minus 1.8 percent.

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In most areas, though, the comparative US position is impressive. In a period when scientific and technological advances come with great rapidity, industrial economies must invest heavily in research and development. Expressed in purchasing power equivalents, R&D spending in 1988 (the latest year for which full comparative data are available) by the US was more than two and a half times that by Japan, five times West Germany, and eight times France and Britain. In per capita terms, the US lead isn't as l

arge, but it is still substantial over every other industrial country.

Higher education is also critical to the development of post-industrial economies. It's the consensus of experts in comparative higher education that US performance, for all its faults, is the best in the world. We spend more in this area: The number of students in higher education, per 1,000 of population, is at least twice that in every other major industrial country except Canada, where it's about the same.

The OECD's review shows how silly the moaning about American "de-industrialization" has been. Over the latter half of the 1980s, total manufacturing output here increased by 20 percent - as much as in Japan, more than in Germany. During the 1980s, civilian employment jumped 18 percent in the US, compared to 11 percent in Japan, 6 percent in Britain, 3 percent in Italy and Germany, and less than 1 percent in France.

The most striking figures in the OECD's review are those on the respective sizes of the 24 national economies. OECD statisticians compute per capita GNP in dollars of "purchasing power parity" for each member country. At the beginning of the 1980s, the per capita GNP of the combined OECD economies was 75 percent that of per capita GNP in the US. And at the end of the decade, it was the same 75 percent. The US has been growing at the same rate as the rest of the industrial world, and thus has maintained a

large lead. Japan's per capita national product at the end of the 1980s was only 75 percent as large as the US and, according to OECD tabulations, the same as West Germany. Both were slightly larger in terms of per person output than France (71 percent of the US) and Britain (70 percent). Only Canada approached that of the US - 94 percent as large at the end of the decade.

Many Americans may be conditioned to regard this as too much good news. But the OECD is not Pollyanna, or a US boosters club. Its comparisons of industrial economies are easily the best available. That the conclusions of economic performance which OECD data sustain unambiguously are so poorly understood is an indictment of economic reporting.

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