pstau001061001.wav
Loading the media player...
Transcript
Transcripts may contain inaccuracies.
- | IT professor Paul Samuelson | 0:02 |
discusses the current economic scene. | 0:03 | |
This bi-weekly series is produced and recorded | 0:06 | |
by Instructional Dynamics Incorporated | 0:08 | |
and was recorded on October 19, 1970. | 0:10 | |
- | I'd like today to return to the problem | 0:14 |
of the long-range economic outlook | 0:17 | |
and the intermediate range economic outlook. | 0:20 | |
You may remember that about four tapes back I started | 0:25 | |
on that subject and I've had a few letters | 0:30 | |
from people saying they're very anxious | 0:33 | |
to have me return to it to complete what I was going to say. | 0:34 | |
So this must necessarily be speculative | 0:41 | |
but let me turn my attention away | 0:45 | |
from what's likely to happen between now | 0:50 | |
and the middle of 1971, | 0:53 | |
to the middle and long-range. | 0:56 | |
I could begin by saying that | 1:01 | |
at the end of 1970 the US Gross National Product | 1:03 | |
will be almost exactly $1 trillion. | 1:08 | |
It'll be running at that rate. | 1:12 | |
But about 10 years from now in 1980, | 1:15 | |
well I would suppose | 1:19 | |
that in that time | 1:21 | |
a good numerical number | 1:25 | |
would be $2 trillion. | 1:30 | |
However we don't expect prices really | 1:33 | |
to be constant over a decade. | 1:36 | |
And so let us say that prices go up | 1:39 | |
by 1/3, 33 1/3% roughly. | 1:42 | |
I dare say we'll do well over this tumultuous decade | 1:49 | |
of the 1970s to average out to a creeping price inflation | 1:55 | |
of about 3% per annum. | 2:01 | |
But you may wish to | 2:04 | |
be more optimistic | 2:08 | |
and to lower that figure somewhat. | 2:09 | |
In any case, the increase in real output | 2:12 | |
certainly will not double. | 2:14 | |
But just roughly if I had to give a round number | 2:15 | |
I would say it's gonna increase by 50%. | 2:19 | |
Now I did this | 2:24 | |
by some very rough calculations. | 2:27 | |
I'm now gonna check those rough calculations | 2:32 | |
by referring to a recent study | 2:35 | |
put out by the OECD. | 2:39 | |
The OECD is the organization, economic organization, | 2:43 | |
of the nations of Western Europe. | 2:49 | |
Really I might say the NATO Nations. | 2:54 | |
It includes other countries than are in the common market, | 2:57 | |
includes Great Britain for example. | 3:01 | |
It includes Denmark, Norway. | 3:02 | |
It also includes Canada, the United States | 3:07 | |
and it includes Japan. | 3:09 | |
You will be surprised to learn that Japan | 3:12 | |
is part of Europe. | 3:14 | |
But in the map that I have in my mind's eye of the world | 3:15 | |
Japan is just off the coast of Europe, | 3:21 | |
set of islands. | 3:25 | |
And actually the U.K. is a set of islands moved over | 3:27 | |
to be just off the coast of Canada | 3:32 | |
and more to be bunched with Canada and the United States | 3:34 | |
than with Europe. | 3:37 | |
Well now this study | 3:39 | |
has made a more carefully calculated computation | 3:41 | |
for the next 10 years. | 3:46 | |
And may interest us to see what the results are. | 3:47 | |
For the seven major industrial countries, | 3:56 | |
calculating in fixed prices. | 4:00 | |
Prices of 1970 or 1968 | 4:04 | |
there will be a 96% increase | 4:09 | |
in real GNP. | 4:13 | |
That is a remarkable figure. | 4:16 | |
I suspect that that number | 4:19 | |
will come close to being realized. | 4:22 | |
But it shows us that the mixed economy, | 4:24 | |
this economy which is neither old-fashioned capitalism | 4:27 | |
nor newfangled socialism, collectivism, or communism | 4:32 | |
that it has a tremendous dynamism in it. | 4:37 | |
Who will be at the top of the totem pole? | 4:44 | |
Who can doubt what the answer must be? | 4:48 | |
It of course will be Japan. | 4:50 | |
Japan has been the country | 4:53 | |
which has been growing the most rapidly | 4:55 | |
for the last 15 and more years. | 4:58 | |
So according to the experts at OECD, | 5:01 | |
extrapolating past trends and allowing | 5:04 | |
for any foreseeable changes, the Japanese economy | 5:07 | |
will grow by 160% | 5:11 | |
in the decade of the 1970s. | 5:16 | |
Who will be at the bottom? | 5:20 | |
I think you can guess which country that would be. | 5:23 | |
It will be of course Britain. | 5:26 | |
Britain is scheduled to grow by only 37% in this decade. | 5:28 | |
So much is easy to guess | 5:36 | |
but you may be as surprised as I was | 5:38 | |
to see who comes second after Japan and third and fourth. | 5:41 | |
Not to keep you in suspense. | 5:47 | |
The experts calculate that it is France which will | 5:51 | |
be second in growth. | 5:54 | |
It will grow by 79%. | 5:56 | |
You see how misleading that 96% average is. | 5:59 | |
The tremendous increase for Japan pulls every country | 6:02 | |
in the group up to have an average for the whole group | 6:07 | |
of 96 but no other country, other than Japan, | 6:11 | |
comes even close to the 96% average. | 6:16 | |
Well France will grow by 79%. | 6:21 | |
Next and I don't think this will surprise you, | 6:26 | |
Italy will grow by 72%. | 6:29 | |
Fourth comes Canada and Canada is expected to grow by 69%. | 6:35 | |
We realize that Canada having more immigration | 6:43 | |
than the United States, having a still more rapid rate | 6:48 | |
of population growth | 6:53 | |
than the United States | 6:55 | |
can be expected to grow in real terms somewhat more rapidly. | 6:56 | |
Now I emphasize once again that these computations are | 6:59 | |
in constant prices as best the experts can deflate | 7:04 | |
to make money or nominal GNP the commensurate with real GNP. | 7:10 | |
Now aren't you surprised as I was, that Western Germany | 7:17 | |
the Federal Republic of Germany was not in the list. | 7:22 | |
I suppose if we go back 15 years it must surely be. | 7:27 | |
Japan and Germany, which are the miracle advanced nations | 7:34 | |
in their rate of growth. | 7:39 | |
But the Federal Republic of Germany is calculated | 7:41 | |
to grow only by only 57%. | 7:45 | |
That is a slightly lower rate of growth | 7:49 | |
than the anticipated growth rate | 7:52 | |
for the United States itself. | 7:55 | |
Which, according to this OECD study, should be 58%. | 7:57 | |
You see the imprecision of my back | 8:03 | |
of the envelope calculations | 8:06 | |
in which I came up with a 50% rate of growth | 8:08 | |
for the decade, where as the experts come up with 58%. | 8:13 | |
I may say that I did not come up with the 50% estimate | 8:17 | |
simply as a repetition | 8:24 | |
of what the rate of growth was in the 1960s. | 8:28 | |
I mentioned in that tape a few back | 8:31 | |
that the experts at the beginning of the decade | 8:35 | |
of the 1960s expected the US economy to grow by 50%. | 8:38 | |
And they hit it right on the nose. | 8:43 | |
We did grow by 50%. | 8:44 | |
I'm not so naive as simply | 8:47 | |
to extrapolate a past decade's rate | 8:49 | |
and use that as my best guess. | 8:52 | |
Although I may say, you could do worse | 8:57 | |
than to use naive models | 9:00 | |
in long-run extrapolation. | 9:03 | |
And some of the fancy methods of forecasting have proved | 9:06 | |
in fact, to be as bad or worse than naive models. | 9:11 | |
But I had in mind, in my mind the fact that | 9:16 | |
in 1970 although we have a gap | 9:20 | |
and we are below our full employment potential, | 9:23 | |
we are not as far below it as United States was | 9:27 | |
in the first years of the 1960s. | 9:32 | |
So in that sense, we can't be expected | 9:35 | |
to grow quite as rapidly. | 9:39 | |
Also I arrived | 9:43 | |
at my rates of real growth | 9:46 | |
by simultaneously estimating the price level increase | 9:48 | |
and the nominal increase | 9:53 | |
which is not I think a method I would recommend to you. | 9:56 | |
But return to substance. | 10:00 | |
Isn't is surprising that a group of experts | 10:03 | |
could believe that the United States will grow faster | 10:07 | |
than the Federal Republic of Germany in the next 10 years? | 10:10 | |
Course there's a reason for it. | 10:15 | |
The experts do expect that German productivity | 10:18 | |
will increase faster than the US productivity. | 10:22 | |
Why shouldn't it? | 10:26 | |
The American economy is at the forefront | 10:28 | |
of science and technology | 10:32 | |
and managerial economics. | 10:35 | |
The other countries of the world, | 10:41 | |
if they can only imitate our technology. | 10:43 | |
If they can only close the gap between their technology | 10:47 | |
and ours can hope to make very considerable progress. | 10:51 | |
Let's make no mistake about it. | 10:57 | |
This is of tremendous advantage to say, the Soviet Union. | 10:59 | |
The Soviet Union as it gets it's head above water, | 11:05 | |
when it no longer must put all it's resources | 11:10 | |
into heavy industry. | 11:13 | |
When no longer it is producing crude products | 11:15 | |
because there's such a scarcity | 11:18 | |
that people will take any kind of utility product. | 11:21 | |
I'm thinking now of ill-fitting, cheap, textiles, suits, | 11:24 | |
and so forth. | 11:30 | |
As soon as the Soviet Union becomes anywhere near | 11:33 | |
to affluence, the problem of consumer's choice, | 11:36 | |
the problem of how to pick from the great variety | 11:41 | |
of non-necessities of life. | 11:44 | |
The comforts and luxuries and conventional necessities | 11:46 | |
of life is a tremendous task. | 11:50 | |
And it's not a task which in the past, | 11:52 | |
totalitarian centralized planned states | 11:55 | |
had been very good at performing. | 11:59 | |
They have of course, a very great advantage. | 12:02 | |
They can just look over their walls | 12:04 | |
at the Western countries. | 12:06 | |
And if an American jackass likes a six-cylinder car | 12:09 | |
of a certain type in 1955, who is to think | 12:13 | |
that a Soviet citizen will not have a hankering | 12:18 | |
for the same kind | 12:23 | |
of consumer's durables in 1975? | 12:26 | |
Many European countries have used the United States | 12:30 | |
as an analog computer. | 12:33 | |
We refer again and again to the Americanization of Europe. | 12:36 | |
Usually we deplore it. | 12:41 | |
The cultured people of Europe deplore it. | 12:42 | |
The tourists from America deplore it. | 12:46 | |
We don't want to leave Minneapolis in order | 12:48 | |
to meet in Milano another Minneapolis. | 12:51 | |
We want to keep the peasantry in Europe picturesque | 12:56 | |
and provincial. | 13:01 | |
Well there's no secret, Americanization. | 13:03 | |
It's not America it has nothing to do with us | 13:07 | |
any more than to speak of the Californiaization | 13:10 | |
of the United States. | 13:14 | |
It is simply that we reached each level | 13:16 | |
of affluence earlier than they did. | 13:19 | |
And when they reach, in 1970, the lever of affluence | 13:22 | |
which we enjoyed in 1929, | 13:26 | |
to take figures at random, | 13:31 | |
you can be sure that they will want | 13:34 | |
to spend their money pretty much the way we did. | 13:36 | |
And so you find all classes in Scandinavia | 13:40 | |
and increasingly in France and in Italy | 13:46 | |
putting away their motorcycles and bicycles | 13:51 | |
in favor of automobiles. | 13:53 | |
The traffic jams on a weekend in the summer | 13:57 | |
between Paris and the Mediterranean | 14:01 | |
really put to shame anything that I have seen | 14:04 | |
in the last 20 or 30 years. | 14:08 | |
I have to go back to my boyhood | 14:10 | |
when we too had inadequate roads | 14:13 | |
and a burgeoning auto population. | 14:16 | |
So that in coming into one | 14:19 | |
of our great metropolitan centers | 14:21 | |
you might spend four or five hours in a traffic jam | 14:23 | |
each Sunday night. | 14:27 | |
Germany then will grow with greater productivity | 14:31 | |
per man-hour than the United States will. | 14:34 | |
But we still have a | 14:37 | |
faster thrust of population growth | 14:42 | |
than the Federal Republic of Germany does. | 14:45 | |
We will live on the baby-boom which accompanied World War II | 14:49 | |
and followed World War II for quite some time. | 14:54 | |
In fact, like an echo, it will come back | 14:57 | |
as my children born | 15:01 | |
in that period have children, have children | 15:04 | |
and with attenuation. | 15:06 | |
And a dwindling echo when their children have children. | 15:09 | |
You will see these bulges in our population. | 15:13 | |
And that counts if we ar talking about the increase | 15:18 | |
in real Gross National Product. | 15:22 | |
Of course if we deflate that by the size of the labor force. | 15:25 | |
If we deflate it by the size of the population | 15:28 | |
including dependents who are young and who are old | 15:32 | |
and were not in the labor force. | 15:35 | |
Then again, we loose our surprise and Germany is expected | 15:37 | |
by the experts to increase faster than the United States. | 15:42 | |
The two countries in the list who will be most held in | 15:45 | |
by slowness of growth of their labor force | 15:50 | |
will be Britain and the Federal Republic of Germany. | 15:54 | |
The actual increase, the number persons employed | 16:00 | |
in Germany and Britain is estimated to be only | 16:03 | |
of the order of magnitude of 2%. | 16:07 | |
Whereas for the country, all the counties as a whole, | 16:11 | |
as an average, 11% is the more reasonable figure. | 16:16 | |
This suggests a number of considerations. | 16:25 | |
First, | 16:30 | |
Germany in the past, has benefited tremendously | 16:33 | |
from in-migration of labor. | 16:37 | |
Before the Berlin Wall of was it 1961 | 16:41 | |
and earlier than that? | 16:49 | |
There was a tremendous influx of workers, | 16:51 | |
of families from Eastern Germany to Western Germany. | 16:56 | |
If you believed in the old-fashioned notion | 17:00 | |
that there's only so much work to be done, | 17:02 | |
that there's a lump of labor. | 17:05 | |
And if a woman comes on the job market or a black comes | 17:07 | |
on the job market. | 17:11 | |
Or to go back to Germany, if an Eastern German comes | 17:12 | |
on the job market | 17:16 | |
that automatically displaces a charter member, | 17:18 | |
a native son from a job. | 17:20 | |
Then you couldn't understand the history | 17:23 | |
of the years since WWII. | 17:27 | |
But | 17:32 | |
that migration from Eastern Germany | 17:33 | |
came pretty much to an end, one supposes primarily | 17:37 | |
for political reasons. | 17:41 | |
It wasn't that people, if given a free choice, | 17:42 | |
would not continue to want to come to the West. | 17:47 | |
On the other hand, the most active sprits leave first | 17:50 | |
and the most dissatisfied leave first. | 17:53 | |
So it would have, in any case, probably slowed down. | 17:56 | |
Then the Germans imported labor | 18:00 | |
from all over Europe. | 18:03 | |
They imported labor from adjacent countries. | 18:06 | |
They imported labor from lower-income countries. | 18:08 | |
There are whole urban areas in the German cities | 18:14 | |
where you will hear Greek and Turkish | 18:17 | |
and Spanish and Italian. | 18:20 | |
Usually these workers come without their families. | 18:24 | |
Certainly the first instance without their families. | 18:27 | |
And they send back a great deal of immigrant's remittances. | 18:29 | |
When in the early 1960s, the first days | 18:36 | |
of the Kennedy administration, there was much talk | 18:41 | |
throughout the land of structural unemployment. | 18:44 | |
People like Professor Charles Killingsworth | 18:48 | |
of Michigan State University. | 18:50 | |
Many others, trade union people, some people | 18:54 | |
in industry began to speak of our 7% unemployment | 18:57 | |
to that date being attributable to structural reasons | 19:03 | |
and not to an inadequacy of overall purchasing power. | 19:08 | |
One could not help but look at Germany. | 19:13 | |
And if the Spaniard and Turk and Greek | 19:18 | |
who doesn't even know the language, | 19:22 | |
who has the disability of looking rather different | 19:25 | |
from the citizenry, | 19:29 | |
could be brought in to useful employment | 19:32 | |
in tremendous numbers | 19:34 | |
by the insatiable German industrial growth. | 19:37 | |
Then who could really believe | 19:44 | |
that the reason why our unemployment was | 19:46 | |
then so high was because | 19:49 | |
of some final and permanent structural disparity | 19:51 | |
between the skills of people | 19:56 | |
and the needs of the modern industrial machine. | 19:57 | |
And so it came to pass, | 20:01 | |
as the 1960s progressed, | 20:04 | |
as we had the Tax Reduction Bill of 1964, | 20:08 | |
as business confidence and the desire | 20:15 | |
to invest became ever-greater. | 20:17 | |
We found that the structurally unemployed | 20:20 | |
did not constitute a hard-core of iron. | 20:25 | |
They constituted a hard-core of ice. | 20:28 | |
A hard-core which would not disappear overnight | 20:33 | |
but which could be melted under the continuous impact | 20:36 | |
of the hot poker of high-effective demand brought about | 20:42 | |
by proper Federal Reserve policy and proper fiscal policy. | 20:46 | |
There's a moral in this. | 20:52 | |
In the decade of the 1970s if I return | 20:54 | |
to the United states, new manpower can be a boom | 20:57 | |
for our economy. | 21:01 | |
We have vast potential resources still untapped, | 21:04 | |
still not properly used. | 21:10 | |
Two of course come to mind. | 21:12 | |
The female population. | 21:15 | |
Any look at the statistics shows that women, on the average, | 21:20 | |
receive incomes vastly less than men. | 21:26 | |
In many industries the ratio | 21:30 | |
of female wage rates | 21:33 | |
to male wage rates is a low as 50%. | 21:35 | |
Some of those differences of course are attributable | 21:39 | |
to differences in industrial effectiveness. | 21:43 | |
Some of them are due to the fact | 21:47 | |
that women are temporary entrance often in labor market. | 21:49 | |
They leave in order to be married and have children. | 21:53 | |
They return only after their youngest child is 10 years old. | 21:56 | |
And there is a disadvantage to any employer | 22:01 | |
in the loss of continuity with respect to women. | 22:05 | |
I don't wish to belittle these temperamental, | 22:09 | |
physiological, physical, psychological, institutional, | 22:13 | |
sociological differences between the sexes. | 22:18 | |
But | 22:21 | |
I believe that as time progress | 22:23 | |
and as artificial impediments | 22:26 | |
to female opportunity | 22:31 | |
to compete, gradually themselves melt. | 22:33 | |
I don't think anything dramatic will happen. | 22:38 | |
I don't think it will disappear overnight. | 22:40 | |
You will find increasingly a larger percentage | 22:42 | |
of female participation in the labor market. | 22:47 | |
This far from undermining the wage of the union man. | 22:50 | |
Far from hurting opportunity | 22:55 | |
for the male wage earner. | 23:00 | |
Far from creating insuperable problems of mass unemployment | 23:03 | |
to the American economy, will in fact enable us | 23:08 | |
to do as well as the 58% that is here predicated, | 23:11 | |
will enable us perhaps if we use this resource wisely, | 23:17 | |
to do better. | 23:21 | |
The same thing can be said, I believe, with respect | 23:23 | |
to black labor. | 23:26 | |
There is of course a great deal of friction | 23:29 | |
in the ghetto, on the edges of the ghetto | 23:33 | |
between, I'm sorry to say, more between poor whites | 23:37 | |
and the black population, than the populous at large. | 23:42 | |
This poor, white problem was long observed by historians | 23:49 | |
in the American south. | 23:56 | |
The modern sociologist of the city, who studies | 23:58 | |
so-called ethnic groups realizes that part | 24:01 | |
of the hard hat backlash | 24:05 | |
is not simply a backlash | 24:10 | |
against intellectual, pampered, spoiled youth | 24:11 | |
in the universities, but is a concern for status. | 24:16 | |
Now all that is understandable. | 24:22 | |
The question I'm addressing myself to is, | 24:25 | |
in the years ahead, is there a genuine economic threat | 24:27 | |
to the pocketbook well-being | 24:31 | |
of the white worker | 24:34 | |
if because impediments of opportunity | 24:37 | |
to the black person are lowered? | 24:42 | |
Now if there were, | 24:47 | |
let's make no mistake about it, | 24:49 | |
the pocketbook is a powerful influence upon life. | 24:50 | |
One doesn't have to be an economic determinist | 24:55 | |
to realize | 24:57 | |
that when a man's income is at stake, | 24:59 | |
his standard of living, his wife's comfort, | 25:04 | |
his children's education and progress is concerned. | 25:09 | |
If there were a genuine grievance | 25:13 | |
against the black population, | 25:14 | |
it would be very hard for moralist to get around that. | 25:16 | |
I don't have the time today because my time is almost up | 25:19 | |
to go into the analyses that have been made | 25:25 | |
of what would happen to real wages in the United States | 25:29 | |
if our population were to increase over the next decade? | 25:33 | |
Instead of at | 25:38 | |
let's say, | 25:40 | |
I don't know what a reasonable figure is, | 25:44 | |
but let's day our labor force man-hour population | 25:46 | |
at 5% or 7%. | 25:50 | |
What if that were to step up to 10 or 11%? | 25:54 | |
Would that result in by the law of diminishing returns | 25:57 | |
in a considerably lower wage? | 25:59 | |
Something that should be greeted with happiness | 26:02 | |
by the employer who gets more ready women, | 26:04 | |
more ready blacks, more ready workers of all kinds | 26:07 | |
for himself to hire. | 26:10 | |
But would this be at the expense of wage standards | 26:11 | |
which the unions have painfully built up over many years? | 26:15 | |
The bulk of the evidence is, no. | 26:20 | |
Just as the increase | 26:23 | |
in labor force of Germany | 26:26 | |
of Western Europe of Japan of the United States | 26:29 | |
in past decades | 26:35 | |
has been at a tremendous rate and no man can trace the, | 26:36 | |
an increase in long-term unemployment to that. | 26:42 | |
So with respect to the United States. | 26:47 | |
In fact, we all know that there are many heavy burdens | 26:50 | |
upon the American taxpayer in the years to come. | 26:53 | |
Upon the American income earner of all kinds. | 26:56 | |
We shall have to clean up our cities. | 27:00 | |
We shall have to clean up polluted waters. | 27:01 | |
All this is going to mean higher taxes. | 27:05 | |
If we can tap new resources of manpower | 27:09 | |
and upgrade manpower, then the weight of that burden | 27:14 | |
upon each person's shoulders, will be that much the less. | 27:18 | |
And so, looking ahead over the 10 years, | 27:23 | |
we can say today. | 27:28 | |
Precisely because we have learned the post-cainjun lessons | 27:30 | |
of how to convert new resources into a blessing | 27:34 | |
and not into a creator of mass-unemployment | 27:38 | |
of poverty in the midst of plenty. | 27:43 | |
Because we know how to tame fiscal policy | 27:45 | |
and monetary policy, we can look forward | 27:50 | |
to the next decade | 27:52 | |
as a year | 27:55 | |
of tremendous economic prosperity. | 27:56 | |
- | You've been listening to Professor Paul Samuelson | 27:59 |
of MIT discussing the current economic scene. | 28:02 | |
If you have any questions or comments | 28:04 | |
for Professor Samuelson address them to | 28:06 | |
Instructional Dynamics Incorporated, | 28:08 | |
166 East Superior Street, Chicago, Illinois, 60611. | 28:11 |
File Info
The preservation of the Duke University Libraries Digital Collections and the Duke Digital Repository programs are supported in part by the Lowell and Eileen Aptman Digital Preservation Fund