NCPA - National Center for Policy Analysis

Robust U.S. Economy Props Up Others

May 5, 1999

With the U.S. economy growing so rapidly and the economies of other industrialized nations more or less stuck in the doldrums, some analysts are beginning to worry that the rest of the world is depending too much on growth here.

DRI/McGraw-Hill economist Francisco Larios sees the world's dependence on the U.S. as "very dangerous," and predicts that if the U.S. stumbles "it will be felt around the world."

Wells Fargo economist Sung Won Sohn worries that if global demand picks up and U.S. demand stays strong, "that could kick off a global bout of inflation.

Most economists, however, say such worries are premature and American strength is benefiting -- not harming -- the laggards.

  • While there are few signs of recovery in Japan, the situation in the rest of Asia shows modest improvement.
  • Europe's Economic and Monetary Union predicts Euroland's gross domestic product will grow 2.2 percent this year, compared to the 4.5 percent annual rate registered in the U.S. during the first quarter -- but at least Europe's figures are in the positive column.
  • Chris Swan, an economist at the consulting firm Wefa Group, points out that the rest of the world "isn't having such difficulty because the U.S. economy is growing so rapidly."
  • Sohn observes that strong U.S. demand for Asian goods has been "one of the few bright spots for Asian economies."

Economists say the U.S. need not apologize for attracting world capital. Swan says the U.S. "isn't robbing other economies of anything." He makes the point that money "is fleeing bad policies and bad economies" and that investors wouldn't put their money into troubled economies even if investing in the U.S. wasn't an option.

What's important is that other regions adopt U.S.-style policies and get back on their feet as soon as possible.

Source: Charles Oliver, "Running on Just a Single Engine, Will the Global Economy Crash?" Investor's Business Daily, May 5, 1999.


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