THE UNITED STATES: 1

Phases of economic development n Revolution--1890: catch up to core European economies technologically n :industrial concentration & modern corporation n :rapid ec. growth & hegemony over world economy n : deteriorating performance n 1990’s: mixed performance

WWII --late 1960s (HEGEMONY) n WWII consequences – GNP trends n 1929$100B n 1939 $91B n 1944 $210B – role of government--public spending n 1940 $9B n 1945 $98B n >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 n gov’t involvement in economy did not decline/govt expenditure as % of GNP rose ---12% (1940)--- 25% (1950)--- 35%(1965) n gov’t agrees to give private sector public money to produce growth (tax shift) n economic consequences – mixed performance in 1950s – productive capacity nearly triples in 1960s

Bases of economic growth n consumer durables n residential construction n role of suburbanization backed by government policy – FHA mortage guarantees – IRS deducts mortgage interest – interstate highway system

2. Business/labor relationships n period of so-called SOCIAL CONTRACT between big business and big unions n business concedes higher wages and control over working conditions n labor agrees not to strike (to keep producing)

3. Dominating role of U.S. in World Economy n just under 50% of world industrial production. Still over 40% in 1963 n 1971 U.S. share of all FDI is 50% n FDI by U.S. corporations was encouraged by U.S. tax policy n U.S. firms (and workers) earn SUPERPROFITS thanks to technology and worker productivity edge

Pillars of the Post-war American Economic Advantage (Dertouzos, Made in America) n Sheer size of the American market n technological superiority n skill level of American workers n U.S. affluence n American managers

U.S. and the World Economy: early 1970s to early 1990s n THESIS: U.S. displayed relatively poor performance n 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

Comparative--- Growth in real compensation

Annual growth in per capita GNP,

Alternative Perspectives on relatively weak economic performance

1. A catch up and convergence phenomenon n 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 n Example – John Agnew, The United States in the World Economy. Chapter 4.

Level 1 n Increased foreign investment by U.S. TNCs n increased competition by foreign- based TNCs n increased dependence on foreign sources of raw materials n drain on U.S. economy of defense spending n priorities of domestic Keynesian policy

Level 2 n Decline of U.S. relative labor productivity n loss of technological leadership n increased openness to foreign competition