Re "Some Depressions Aren't So Bad" (Op-Ed, Nov. 24):
Niall Ferguson's article is yet another example in a long line that presume that the late 19th century and the past quarter-century are similar to a high degree.
In fact, they could not be more different in the one area that matters most.
In the late 19th century the production of goods and services rose much more rapidly in the United States, even as prices fell, than it has in the past 25 years.
Gross domestic product, after discounting for changes in prices, grew by 4 percent a year on average between 1870 and 1910. Since 1973 it has grown by only 2.5 percent a year.
This is an enormous difference. We would be producing about 45 percent more goods and services in 1998 (more than $3 trillion) if we had grown at a rate of 4 percent a year since 1973. The reason we didn't is the slow growth of productivity, or output per hour of work.
Between 1870 and 1910, productivity grew by about 2 percent a year. Since 1973 it has grown by 1 percent a year, much more slowly than it has over any other sustained period since before the Civil War.
Today, there are some admirable productivity gains in some industries.
In the late 19th century there were enormous productivity gains in a much wider range of goods and services. These gains are what drove prices down then.
Today, prices are going down primarily because of global over-investment and, secondarily, because of Government policies that are designed to constrain demand.
Simple historical comparisons to the 19th century are highly misleading.
Any optimisim about the possibility of deflation in the United States is unwarranted.
Jeffrey Madrick New York, Nov. 24 1998 _______________________
With the Dow reaching new record levels, what do you all think Greenspan is thinking? Raise rates? Watching the American holiday shopper? It's been said as EU growth slows, there's now room for them to lower rates.
Peter -------------------------------------------- "Don't call us when the New Age is old enough to drink" -Beck -------------- next part -------------- An HTML attachment was scrubbed... URL: <../attachments/19981127/3badfdd1/attachment.htm>