Transcript United States: class 1

THE UNITED STATES: 1
Phases of economic
development
Revolution--1890: catch up to core
European economies technologically
 1890--1940:industrial concentration
& modern corporation
 1945--1970:rapid ec. growth &
hegemony over world economy
 1970--1990: deteriorating
performance
 1990’s: mixed performance

WWII --late 1960s
(HEGEMONY)

WWII consequences
–
GNP trends
 1929
 1939
 1944
–
$100B
$91B
$210B
role of government--public spending
 1940
$9B
 1945
$98B
 >1/3 of all mfg. structures and equipment
existing in 1945 was constructed by
government
1. Economic Growth put at
head of U.S. political agenda
gov’t involvement in economy did not
decline/govt expenditure as % of GNP
rose ---12% (1940)--- 25% (1950)--35%(1965)
 gov’t agrees to give private sector
public money to produce growth (tax
shift)
 economic consequences

–
–
mixed performance in 1950s
productive capacity nearly triples in 1960s
Bases of economic growth
consumer durables
 residential construction
 role of suburbanization backed by
government policy

–
–
–
FHA mortage guarantees
IRS deducts mortgage interest
interstate highway system
2. Business/labor relationships
period of so-called SOCIAL
CONTRACT between big business
and big unions
 business concedes higher wages
and control over working
conditions
 labor agrees not to strike (to keep
producing)

3. Dominating role of U.S.
in World Economy
1950--just under 50% of world
industrial production. Still over 40% in
1963
 1971 U.S. share of all FDI is 50%
 FDI by U.S. corporations was
encouraged by U.S. tax policy
 U.S. firms (and workers) earn
SUPERPROFITS thanks to technology
and worker productivity edge

Pillars of the Post-war
American Economic Advantage
(Dertouzos, 1989. Made in America)
Sheer size of the American market
 technological superiority
 skill level of American workers
 U.S. affluence
 American managers

U.S. and the World Economy:
early 1970s to early 1990s
THESIS: U.S. displayed relatively
poor performance
 primary indicators

–
–
temporal comparisons: 50s and 60s
vs. 70s and 80s
cross-national comparisons: U.S. vs.
other industrialized countries
Temporal--real wage trends
Growth in Median Family
Income
3.00%
2.50%
2.00%
1.50%
Annual
grow th
1.00%
0.50%
0.00%
1947- 1967- 1973- 197967
73
79
89
Comparative--- Growth in real
compensation
Annual growth in per
capita GNP, 1980-92
4.00%
3.50%
3.00%
2.50%
2.00%
1.50%
United States
Japan
Germ any
U.K.
1.00%
Italy
0.50%
France
0.00%
Alternative Perspectives
on relatively weak
economic performance
1. A catch up and
convergence phenomenon

attributable to:
–
–
–
technological borrowing from the
leader
transfers of labor from agriculture to
industry
greater willingness of less well-off to
work harder and divert resources
from consumption to investment
2. evidence of relative
economic failure and decline in
economic competitiveness

Example
–
John Agnew, 1987. The United States
in the World Economy. Chapter 4.
Level 1
Increased foreign investment by
U.S. TNCs
 increased competition by foreignbased TNCs
 increased dependence on foreign
sources of raw materials
 drain on U.S. economy of defense
spending
 priorities of domestic Keynesian
policy

Level 2
Decline of U.S. relative labor
productivity
 loss of technological leadership
 increased openness to foreign
competition
