A New Time, A New Year : Essay: The triumphs and heartaches of the past year mean 1992 will be a time of great decision.

Americans can look back on 1991 and say, as with a troubled romance, that it hurt sometimes, but it made you grow up.

The highs were incredible: the United States won a war and the Soviet Union disintegrated.

As a consequence, the U.S. military no longer has to be policeman to the world, and the best and brightest of the old Soviet Union can turn from military pursuits to more productive endeavors. That won’t produce overnight miracles, but the trend is clear and will profoundly influence the world economy.

But there was heartache too. It was a year of facing reality. Until 1991, it was still arguable whether the U.S. economy could escape recession following financial excess in the 1980s. Now there is no argument. The recession arrived and lingered; layoffs and job terminations became daily headlines late in the year.

The burden of debt on corporations, consumers and government was blamed, but in fact larger forces were at work. This downturn, with falling prices for real estate and commodities, is a part of a grander process in the world’s economy.

So 1992 will be a year of making decisions--not only about the Presidential election, but about national and personal priorities. Americans are tired of being jerked around; they want to take control of their lives.

That means saving money, demanding new approaches to industry and sensible solutions on health care and insurance.

The Gulf War proclaimed a new reality when military downsizing went on right through it. The war was fought from inventory--the planes, tanks and missiles were all built earlier, with the Soviet foe in mind. Defense firms were laying off even as the fighting raged.

That inventory of weapons won’t be replenished on the same scale. Defense spending has been declining since 1989 and will decline further. Uniformed military forces will be reduced by 50% over the next few years.

So the challenge of 1945 is upon us once again--to create jobs for discharged soldiers, and to channel the skills of the defense industry to other pursuits.

That won’t be easy or simple. But a fortunate note is that there should be ample savings in a non-inflationary economy to finance new ventures.

To understand how that can be true, when government debt is at record levels and economists and politicians keep shouting about the credit crunch, you must look at the numbers. In the private sector, debt was yesterday’s trend.

Bank loans have been declining for years. New debt creation in the U.S. economy peaked in 1986; private borrowing, excluding home mortgages, is lower now than in the early 1950s.

At the government level, the whole of the federal deficit now pays past obligations--$200 billion in interest and another $120 billion on obligations of failed savings and loans and banks. With disposal of saving and loan assets and recovery from recession, that burden can be reduced.

The credit crunch is due not to lack of money, but to uncertain collateral and wisely uneager borrowers. The real story is that prices are falling for industrial commodities--down 13% in the last year--and for office buildings, warehouses and shopping centers.

The price decline is more than a recession phenomenon. It stems from historic technological change that erupted into public view late in 1991 with massive restructurings at IBM, General Motors and scores of other large companies.

Prices are falling because the cost of computing and communications has come down 30% a year for the last decade, thanks to advances in microelectronics and laser technology. One result is the modern computer-terminal cash register that keeps track of inventory, reorders when necessary, and highlights slow-moving items to be discontinued.

That means less merchandise has to sit around in warehouses, using up capital to finance it, which in turn means that less warehouse space is needed, and fewer bank loans and inventory clerks and so forth. Apply that across all industry and the result is spare capital, that can be used for other purposes, and a surplus of practically everything else.

A high official of IBM acknowledged the new reality last year when he said: “We have millions of square feet of floor space for manufacturing and inventory that no longer exists because microchips have become so powerful.” In November, IBM announced a major restructuring, to divide its operations into separate units that ultimately will work with fewer people.

Similarly, General Motors this month announced another massive reduction in its work force--which it has halved in the last decade in an attempt to make production efficient and competitive. The new reality GM faces is a worldwide surplus of cars because microchip-driven machines have made automobile production possible in places that only yesterday were underdeveloped.

And if technology dealt rudely with big American companies in 1991, it brought final separation to the Soviet Union. Because it lacked modern technology, the Soviet economy lags behind those of Japan and Germany and would have fallen behind India and perhaps South Korea before long.

The Soviet superpower couldn’t solve its problems with a punch in the nose, attacking another country simply to grab technology. Its military could only capture microchips, which are constantly changing anyway. It could not capture knowledge.

Thus the new technology favors brains over brawn. So the Soviet Union has disbanded its imperial structure, and will work in 12 separate republics. Perhaps from that new structure, Russians, Ukranians, Kazakhs or Armenians will be able to produce cars and computers efficiently.

But as technology disrupts old patterns, it opens new ones. Reminded by the Soviets of the perils of falling behind, the American people are seeking a new structure of industry and government. The nation that invented the microchip and laser should make its future, not fear for it.

So, if employment is to be changing rather than steady, then a solution on national health insurance will be necessary. If more employees are to work for small companies and make their own decisions about retirement funds, then those funds must be invested to transform our defense technology and to make American business competitive.

The effort won’t fail for lack of money. U.S. pension funds total $3 trillion. U.S. mutual funds, swelled by individual pension investments, have grown to more than $1 trillion in assets. They will grow more as the legions of baby boomers move into their 40s in this decade and boost their savings and investments.

One investment expert, Charles Clough of Merrill Lynch, projects such a surplus of investable capital that stocks and bonds could be bid up in the 1990s as real estate was in the 1980s.

To be sure, such optimism is far from common at the end of 1991. Conventional thinking is gloomy, predicting the decline of America in the further growth of rich nations, or in the rise of poor nations, or even in the changing ethnic background of the American people.

Always with such predictions, world progress is a zero-sum game--a benefit for others takes one from America, something that in fact has never been true.

The correct response to such predictions always has been a sense of humor. The Economist magazine pokes fun at the current gloom about America, comparing it to turn-of-the-century forecasts that horse dung would bury the streets of London and New York. Instead, the car came along.

In the 19th Century, Thomas Malthus argued that population growth would outpace food production and starvation would result. Instead repeated agricultural revolutions have produced a world surplus of food today--although uneven distribution keeps some in hunger.

The real story at the end of 1991 is not that so many of the world’s people live in poverty but that they are leaving it to come into the cash world economy. More than 3 billion people in China, India, Southeast Asia, Latin America, the former Soviet Union and South Africa--with the best industrial work force on the vast African continent--are changing the world economy even as we speak.

A smart nation will find a way to help those developments along and to create jobs and turn a profit for its own people. That’s why, with a healthy push from 1991, America is embarking on a new time as well as a new year.