About American economy by Dr. Fuess

　

Now, it is good time to talk about American economy. The present American economy is the best in the 20th century. Economic growth rate will be ５% in 1998, jobs are growing, income is rising, and the unemployment rate is the lowest in American history. It is also good time for university students. Most of them get 2 or 3 job offers. In fact, there is shortage of skilled workers in America. Despite the good economic circumstances, people worry about the future. There are two worries. One is about inflation. There are no inflation signｓ in America yet. But people are nervous about it. The other is about Asian economy. Economical difficulties in Korea, Malaysia, Indonesia worry, but many people worry about what is wrong with Japan. If there is difficulty in the Japanese economy, it may cause a big problem to US. Especially, the weak Japanese banking sector is dangerous.

In the long run, education is problem. The present strong economy is based on information technology. People work with computers, so they have to be able to work with them. To do so, people need education. The gap between educated people and uneducated becomes so wide that it puts pressure on society. Moreover, improvement of technology could be too fast for people to get used to it in the future.

It is interesting that the American economy is strong now although it was not strong when I was a university student. European economies are not strong. Europe is the capital of unemployment. Although the European

Union may be important for Europe, most Americans think it does not affect the American economy too much. Most people think Asian economies will be stronger than Europe, and will link to a strong American economy. America is a big and powerful country, getting a lot of attention from the world, so other countries often criticize America. Nowadays, many countries are criticizing Japan, because it is rich and strong like America.

Question 1 what is the reason that American economy is so strong now?

It is because of the dramatic increase in productivity. Now, increasing productivity is faster than during the 1940ｓ, 1950ｓ. The economy has grown because of productivity, innovation, and re-engineering. Before, GM, IBM, US Steel were the most important companies in America. Now, they are information companies, which are Intel Microsoft, Netscape, which rely on advanced information technology. 　

Question 2 how did the US government set financial deficits in order?

There are two types of government in the US, the US government and the50 state governments. Every state government has its own tax, laws, customs, holidays and so on. Also they have power to spend money. Each state must balance its budget. On the other hand, it is not balanced in the federal government. It spends more than taxes, so they have to sell bonds. Since 1993, it has been able to shrink its budget. This year, it is balanced and for several years into the future. In the 1980s, Japan's aid to the US "shrink your budget deficit". It was helpful for America because it forced the government to reduce debt. Moreover, Bill Clinton decided to rise tax in 1993. Of course it was unpopular, but finances were balanced. One more important thing is the end of the cold war. America thought it was no longer threaten and was able to reduce one-fourth military budget. Now, the economy is growing, companies are paying more taxes, so the deficit disappeared. America has good experience, so America can lecture to other country.　

Questions 3 How long will American bubble last?

America does not have a bubble at all. A bubble occurs if stock prices are rising too quickly. Real estate prices are fairly stable in America. The Stock market is growing because companies are just more profitable. The US economy could slow down if two things that I mentioned before happen.

Question 4 what is the reason for Japanese bad economy?

The biggest problem is the banking system. A few days ago, the Japanese and US governments cooperated in the foreign exchange market. The yen has been coming back down again because people worry about banks. They think the Japanese government is too slow to fix them. Weak banks make the economy weaker. It is like a cancer. It is impossible for Japan to recover without fixing them. If Japan solves the problem, consumers will

get confidence and fiscal stimulation will be effective. Americans often say "good news and bad news". In Japan, the bad news is the banking system. On the other hand, the good news is that Japan is rich and strong enough to fix the banking system by itself.

Why does not Japanese government move quickly to fix banking system?

The banking system requires confidence and a good reputation. To fix the banking system, we have to accept that banks are weak. That may cause panic, so the government worries about it. If the government says some banks are dangerous, consumers lose confidence, and it is embarrassing for the government. America is amore risk taking culture, and people are

suspicious about their government. In the 1980s, banking was a problem in the US too. Many banks collapsed like the present Japan. Then, American government founded the Resolution Trust Corp RTC, which checks weak banks and is able to kill them. What it did was to eliminate 200weak banks and recovered consumer confidence. It did not require much tax, but a certain attitude. Americans say Japan should have done it earlier, because it is easier than later, and they have got experience.

Question 5 It is said that principle of equality is Japanese system. On the other hand, American is Competitive？

American is different from Japan. Most of Americans came from other countries to start a new life. This created the culture of chance and individualism. People are free to succeed, but also free to fail. In Japan, I was surprised that every single stop is announced on trains. Not in America. You are supposed to know where you are going. One reason

why Japanese like equality is that Japan is a homogeneous society. America has to take account of other cultures.

　Question 6 Is it true that American students tend to work in a small company?

Big companies are not as attractive to them. People work in a big company to save money to start their own business. It is the most common in the information industry. People say Japan is group-oriented society and America is individualistic. However, America is also group-oriented society. People belong to a university or a church. It is common that people do business with someone who went to the same university. University is the center of business. Universities expect people to run their business and donate money to them.

　Question 7 How do you think about the relation between Japan and America in the future?

I think it will be same. America says to Japan what to do and Japan does not care. Japan says to America what to do and America does not care either. Although governments continue to disagree, business relations are good. One potential change will be China. China is becoming strong. Japan will be between China and America and have to balance their power.

Question 8 Bill Gates is the richest man in the world. How do you think about it?

Good for him. He quit his university and founded his own company. Americans do not like rich people whose parents were rich. America has an opportunity way of thinking. For every company that succeeds, there are thousands of failures. It is worth being respected. Furthermore, rich people donate their money for good will to be seen using good money.

　

Question 9 Why is the cost of university so expensive?

It is really expensive, about $50000 - $100000, because there are no subsidies for universities. However, the payoff of university education is so great, and universities keep good standard of education. University graduates earn 80% more than high school graduates do, so it is personal investment. Most American universities are in small towns and have to provide places for students to live.