Broken clocks are right twice a day. Most economists have confidently predicted recessions every year since at least 1984.
As we enter 1990, the long-awaited slowdown may be upon us, although some recent data releases, including durable goods production and revisions in trade and gross national product data, are suspiciously strong.
But the key question is whether the slowdown is just a pause on the way to new economic records or the first stumble over the edge of the abyss--the gasping plunge into “The Great Depression of 1990,” heralded by Ravi Batra and other purveyors of doom.
The industrialized countries, in fact, stand on the threshold of a long-run global boom, stretching through the decade of the 1990s and probably well beyond.
The boom will be driven by the rapid worldwide diffusion of high productivity manufacturing, a steady fall in inflation and interest rates and, in the United States, a prosperity based on the stabilizing influence of a maturing baby-boom generation.
The sustained growth in manufacturing productivity in all industrialized countries since 1982, United States included, has been the fastest in history. The computerized design and manufacturing technologies behind the productivity surge are still in their infancy.
If anything, productivity improvements during the 1990s should be faster than the 1980s.
The rise of the global manufacturing company--the IBMs, Sonys and Philips of the world--is flushing out all the inefficiencies that shelter behind such national barriers as a fossilized distribution system in Japan, entrenched white-collar bureaucracies in America and union featherbedding in Europe.
The relentless global competitive pressures place a rigid ceiling on price increases and are the major factor in the continuing low inflation.
Over time, the inflation hedge built into interest rates will gradually fall. Meanwhile, budget deficits in all the industrialized countries have been roughly halved relative to GNP since 1985, reducing pressures on interest rates that much further. Long-term bonds could be at 5% by 1995.
Finally, two-thirds of America’s baby-boomers are now over 35. Middle-agers in their 40s and 50s will be the fastest-growing segment of the population through the 1990s.
For the first time since the 1950s, the mainstay of the labor force will be experienced, high-saving heads of families.
Should all this good news be cause for rejoicing? One hopes not. Fear is what keeps an economy lean and taut. Let the prophets of doom continue to thunder as the world economy ushers in a new golden age.