Uncertain times may be ahead for U.S. economy


WASHINGTON -- Paul Volcker, former chairman of the Federal Reserve Board, puts the scale and velocity of America's current wealth-creation in this perspective: In just the first half of this year, the increase in the net worth of U.S. households was approximately equal to the total annual income of the 2.5 billion people of China, India, Russia and Brazil.

The political consequences of such an economic fact are difficult to anticipate, but this seems likely: The surge in wealth is a current cause of political tranquillity, and a potential cause of volatility. People, said someone not overly fond of them, have feelings in all their possessions. America, which has more than four times as many stock owners as union members, has a lot of exposed nerve endings in the stock market.

After years of economic growth, many giddy people may assume that the market is governed by an upward-clicking ratchet. A rapidly rising stock market is a pleasure, and in contemporary America pleasures quickly come to be considered entitlements.

The market and the American pain threshold move inversely, so imagine the political furies that will be let loose when a market plunge pulses fear through the ganglions of a society of stockholders.

A successful society needs a Cassandra or two to keep it properly wary, but all America has at the moment are the likes of Ross Perot and Pat Buchanan hearing the "great sucking sound" of U.S. prosperity being swallowed by a Mexican economy that is 10 percent the size of the American economy.

Predicting the future

Imagining the future and its hazards is increasingly difficult. A businessman recently said the future might look like 1950, when milk trucks crept through neighborhoods delivering their products: People may buy groceries the way they increasingly buy books, in e-commerce.

But such a change would be minor and predictable compared with past surprises and those with which the future is surely pregnant. Consider the thoughts of several contributors to the current issue of Forbes ASAP.

Why do we have mass mobility -- and immobility (congestion)? Because, says science writer James Burke, a 19th-century German engineer used a perfume sprayer and gasoline to invent the carburetor.

A 19th-century English chemist, prompted by the empire's problems with malaria, tried to invent artificial quinine from coal tar. He failed, but when he dipped a strand of silk in it, he had the first aniline dye. Fifty years later, a German medical researcher accidentally spilled some of the new color into a sample of bacteria and noticed that the dye preferentially stained and killed certain bacilli: Chemotherapy was born.

Remington firearms company, using machine tools developed for the Civil War and a mechanism developed for pianos, produced the typewriter.

It facilitated an explosion of commerce, and, says Mr. Burke, "freed women from the drudgery of the kitchen to become involved in the drudgery of office work." Social and political emancipation followed.

Fueling the economy

Increasingly, America has an entertainment economy. Michael J. Wolf, a media and entertainment specialist at Booz, Allen & Hamilton, says the entertainment share of Gross Domestic Product is well over $1 trillion if, in addition to traditional entertainment products (movies, TV, music, sports, etc.), you add much of the consumer electronics sector and things like "fun" vehicles, such as sport-utility vehicles and Harley-Davidsons.

Some entertainment products are, Mr. Wolf says, "largely inexhaustible." Disney's movie "Snow White" cost $1.5 million and made $8.5 million in its initial release cycle (1937-43). Re-released and incorporated in games, toys and apparel, it has made $1 billion.

Through various tie-ins and spin-offs, "The Lion King" already has made $9 billion -- less than the $10 billion in commerce Michael Jordan is estimated to have generated, but "The Lion King" can do it over and over with each generation of children.

America's economic performance is generating understandable pride, and we know what pride goeth before.

The editors of Forbes ASAP allow Mark Helprin, the novelist and essayist, an elegant dissent from the triumphalism of those who, intoxicated by modern marvels, abandon themselves to what he calls "faith in emerging perfection, reason, justice, the linear concept of history."

As an antidote to all that, Mr. Helprin offers some lines from Thomas Hardy's poem "The Convergence of the Twain: Lines on the Loss of the Titanic":

And as the smart ship grew

In stature, grace, and hue,

In shadowy silent distance grew the Iceberg too.

Alien they seemed to be:

No mortal eye could see

The intimate welding of their later history

Are there icebergs in America's path? None just now. None, that is, that any mortal eye can see.

George F. Will writes a syndicated column.

Pub Date: 9/26/99

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