What's Behind All This Prosperity?
November 11, 1997
Aside from a shallow downturn in 1990 and 1991, the U.S. is in its 15th year of economic expansion. Economists and social observers are trying to identify the factors responsible for this unprecedented run of good times following the disastrous decade of the 1970s.
Martin Anderson, a senior fellow at the Hoover Institution, has compiled a list of 10 items that he sees as responsible for the national prosperity of recent years.
- The first three are the vanished threat of nuclear war, the spread of capitalism and easy taxes -- or easing of the tax burden -- echoing Adam Smith's 1755 observation that prosperity rests on peace, justice and easy taxes.
- Then come the computer revolution, control of government spending and deregulation.
- These are followed by a stable monetary policy, steady economic policy and a massive U.S. capital base.
- Finally, there is the overall superiority of the U.S. economy.
Anderson cites studies by the University of Michigan's Joel Slemrod and Bruce Russett of Yale University that found that individuals think and plan farther ahead when the threat of war is lessened. Greater security alters their economic behavior.
"Simply put, they found that a decreased fear of nuclear war is likely to increase personal savings... which is likely to decrease long-term interest rates," Anderson notes. "And low long-term interest rates are good for economic prosperity."
He credits the policies of Ronald Reagan for helping turn the tide away from socialism toward capitalism -- not only in the U.S., but throughout the world.
Anderson notes that the U.S. economy is now twice the size of its competitors. He acknowledges that it "may not be perfect," but "it is simply the best."
Source: Perspective, "The Big Boom," Investor's Business Daily, November 11, 1997.
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