U.S. economy IS stronger than stats (used to) say
Jose G. Perez
jgperez at SPAMfreepcmail.com
Fri Oct 29 17:50:31 MDT 1999
A couple of days ago, I wrote a piece here commenting on yet another "the
sky is falling" doom-and-gloom economic outlook for the U.S. based on the
proposition that the current general level of the stock market is due to a
speculative financial bubble which is bound to burst at any moment and sink
the United States into a great depression.
I argued instead that, while the dot-com craze on Wall Street was
undoubtedly a bubble, that was not true for the market as a whole for the
U.S. was in the midst of a period of rapid growth of labor productivity,
profits and the size of the economy based on technological advances (and,
I'll add here, a favorable combination of international circumstances).
It is a position that I've upheld for some time, including in the extended
debate about Peter Camejo's long upturn article on the list last summer.
In the post I wrote two days ago, I said: "If anything, U.S. economic growth
has been stronger, the productivity advances faster, and inflation lower
than is reflected in official statistics. I believe careful study of the
government's macroeconomic data and how it is put together makes the case
for these propositions overwhelming."
There is now "official" confirmation of this statement. The labor department
came out Thursday with the "flash" estimate of 3rd quarter economic growth.
Lost in the headlines about the spectacular rate of real growth in this last
quarter (4.8%) was the announcement that the Commerce Department has carried
out a comprehensive overhaul of the GDP statistical series.
A combination of better data sources and better statistical techniques
reveals that the economy has been growing almost half a percent more per
year than previously estimated in the 1990s. Specifically, the government
* GDP growth since beginning in 1991 has been revised UP from an average of
3.1% to an average of 3.5%.
* GDP growth from 1959-1998 has been revised UP from an average 3.2% to
* Inflation estimates have been revised downward; for GDP prices, the
1959-1998 average goes from 4.2% to 4.0%; the 1992-1998 average has gone
from 2.0% to 1.9%.
Most of the change in GDP growth is concentrated since 1988, as the digital
transformation of the economy began to have wider and wider sweep. Among the
most significant changes are the reclassification of expenditures in
software from an operating expense to a capital investment, the use of the
new less inflation-biased methodology for consumer price indexes going back
many years (the CPI itself was revised a year or two ago, this rolls into
the GDP statistics the effect of the new way of computing the index), and
new ways of measuring output in the "hard to measure" service sectors of the
economy, such as banking and financial services.
In particular, careful thought should be given to what these more precise
numbers imply about labor productivity growth, for, considered from the
angle of the labor input, there are only two places where increases in the
GDP can come from: more labor, and more output per hour of labor. The
actually employed labor force has been growing at somewhere around 1-1/2% a
year. This implies that labor productivity has increased around 2% a year in
the 1990s, a little lower earlier in the decade, a little higher now.
Virtually all the additional wealth being created by this upsurge in the
productivity of labor has gone to the bourgeoisie, in the form of higher
profits, "hidden" investment in expanding their businesses charged off as
current operating expenses, humongous stock option packages for the
corporate brass, skyrocketing salaries for CEO's and other top executives,
multiplication of perks and subsidies to these same folks dressed up as
"necessary business expenses" and so on. Virtually none is trickling down to
the big majority of working people.
This underlines the dichotomy between the economic situation in the United
States, and that in other advanced capitalist countries, including Europe
and especially Japan, where no significant upsurge in the employment,
productivity or growth has been noted, as far as I know (and, indeed, Japan
remains mired to all intents and purposes in a totally stagnant economy).
This suggests that something more than the digital transformation of
economic activity is involved, for surely this advance in technology
couldn't by happenstance have come packaged in such a way that the U.S. gets
the overwhelming benefit, and none of the basically similar economies around
the world seem to profit much by it. The most obvious explanation would be
that the United States capitalists are somehow eating everyone else's lunch,
but how and why that is happening would need to be explained.
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