America the Dominant
Merrill Lynch economists had a little fun the other day. They gave the United States economy a report card. As one might expect, it got an overall grade of A plus.
Well it should.
In January, the US economic expansion will match the previous longest upturn - that of the 1960s during the Vietnam War. In February, the expansion will be 107 months old - the longest ever in the US.
Commenting on specific economic "subjects," the brokerage house analysts noted that inflation is "absent." The Federal Reserve is "still ahead of the curve." The stock market "up, up and away, at least for tech stocks. The rest of the market, however, is down for the year."
As for the consumer, Merrill Lynch gives that topic a smiley face. Employment gets a "help wanted" sign. And fiscal policy? Federal budget surpluses "as far as the eye can see, or at least until the next recession."
The dollar is shown lifting a heavy barbell - strong versus the euro, weak against the Japanese yen, basically "holding its own."
Nor do most economists see an end soon to the expansion. Merrill Lynch, for instance, expects 3.8 percent growth in gross domestic output in 2000, barely lower than the approximately 4 percent increase in the output of goods and services in 1999.
Behind this happy economic picture is a mix of good fortune and good management.
The Fed and its wily chairman, Alan Greenspan, are getting much credit. The central bank allowed the expansion to continue uninterrupted as the unemployment rate slid toward 4 percent - a far lower rate than most economists, three years or so ago, thought possible without kicking off more inflation.
A Republican-led Congress and the Clinton administration should share in the praise. Despite their clashes, they did restrain federal spending. That, plus surging revenues from healthy growth in incomes and enormous capital gains in the stock market, turned huge deficits into budget surpluses. This has left more money in the economy for business to invest.
Foreigners also helped propel the investment boom. Between 1994 and mid-1999, they sank $1.4 trillion into US credit markets. That helped keep capital relatively cheap. The financial crisis in Asia and sleepy economies in Japan and Europe made the US attractive to that money.
In addition, the US has benefited from what is being dubbed the "New Economy." It leads the way in computers, software, and the Internet.
This technological revolution may be the latest manifestation of what famed economist Joseph Schumpeter termed a process of "Creative Destruction" in the capitalist system. New industries and firms rise, old industries fall, and in the process the system is made more productive.
It could also be that the wave of deregulation started under President Carter and the cut in extremely high marginal tax rates on the well-to-do under President Reagan have stimulated this economy.
Whatever the cause, prosperity has strengthened the American dominance in the world as the new millennium approaches. Economic power is combined with military superiority. No other nation spends nearly the amount that America does on defense. Nor does any other power have the technological edge of the US military. Capitalism is also ascendant globally.
But it will take wisdom - and a greater humility - for America to retain its influence for good in the world.
The need to work closely with other nations - and thus temper the nationalist expression of famed American individualism - will only grow. It should be a beneficial challenge.
(c) Copyright 1999. The Christian Science Publishing Society