Productivity Growth
* Your Feb. 9 article, “U.S. Productivity Growth in ’99 Is Best in 7 Years,” asserts that surging productivity growth helps the country avoid inflation. This is only true if wages lag behind productivity growth.
If the wages and benefits costs per hour increase in step with output per hour, that means that the labor cost per unit of output stays constant. This only undermines inflation if businesses take cuts in their profit margins (which they have not been doing). That is, the anti-inflationary effect of falling labor costs per unit doesn’t happen if workers share the benefits of their rising productivity. It does happen if wages fall behind, as indeed they have (as noted only toward the end of the story), so that inequality between owners and workers increases.
JAMES DEVINE
Professor of Economics
Loyola Marymount University
Los Angeles
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* Occasionally, I have heard from one source or another that there is no explanation for the length of this period of unprecedented prosperity we are enjoying.
I think that I reached at least a partial explanation for it. I have been reading the book by Robert Conquest entitled “Reflections on a Ravaged Century” and came to the following theory: We have scaled back our military preparedness activities since 1989. This then allowed us to put our resources to work on more immediately useful projects. This is not to say that our defense expenditures were bad, because they were necessary to defeat the “evil empire”--so called by one of our presidents.
JOHN DUNKELBERGER
Los Angeles
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* A letter writer (Feb. 7) said President Clinton deserves no credit for today’s economy because it takes 10 years to produce results. Really? Does that mean the economic boom of the 1980s had nothing to do with President Reagan and should have been credited to Presidents Ford and Carter? I suppose the Reagan recession of 1982 was the fault of President Nixon and the Bush recession of 1991 was the fault of Reagan. Would this reader have blamed Reagan and Bush if today’s economy was lousy? Or would he have blamed Clinton? I think we all know the answer to that one!
MATT ROBERTS
La Mirada
