Liberal Democracy (was Robert Mundell: Genius unbound)

Dennis R Redmond dredmond at oregon.uoregon.edu
Fri Feb 25 13:13:17 PST 2000


On Fri, 25 Feb 2000, Dace wrote:


> It's hard to compare one country to another. Much better is to compare one
> country to itself in the past. Twenty years ago, we were stagnant. Now
> we're booming.

Comparisons between countries are an essential part of the global economy; that's what currency markets are all about. Twenty years ago we were in a Volcker-induced mini-depression, caused by hideously high interest rates. If you average growth out by decade, per capita growth in the Nineties was not overly impressive compared to the Eighties; the EU grew about as fast as we did, despite their crushingly high interest rates during 1993-96 and our relatively lenient credit policies.

Much more worrisome are things like total investment in the economy, where the US average has dropped from 21% of GDP in the Seventies to 19% in the Eighties, down to 17% in the Nineties. The EU invested around 21% and Japan around 29% during the same period. Also, the benefits of growth are much more widely distributed in the EU/Japan; polarization in the US has reached legendary proportions.

Finally, the US boom has been fuelled by a gargantuan influx of Japanese/EU capital, around 300 billion euros a year or so, according to the Federal Reserve.

-- Dennis



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