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-	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

Item Info

Title:

Tape 61 - untitled

Date:

circa 1970 to circa 1971

Contributor:

Samuelson, Paul A. (Paul Anthony), 1915-2009

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English

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Paul A. Samuelson papers, 1933-2010 and undated

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Paul A. Samuelson papers, 1933-2010

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Economics Cassette Series: Paul Samuelson

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Tape 61 - untitled

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