 |
|
|
Issues In Perspective - December 30 & 31
December 30 & 31
|
|
Perspective One
|
THE AMERICAN ECONOMY IN 2001
The evidence of economic slowdown in the American economy is unmistakable. In the third quarter America's GDP growth fell to an annual rate of 2.4%, its lowest in four years. Unemployment-insurance claims often the first harbingers of economic slowdown have risen sharply. Durable goods fell by 5.6% in October. Company inventories have risen strongly in the past two quarters, which may force firms to reduce excess stocks (and therefore production) next year. Corporate profits are being squeezed by a combination of higher oil prices and slowing sales: for non-financial firms, profits fell sharply in the third quarter, after a 13% rise over the previous four quarters.
In short, America's nine-and-a-half-year expansion, the longest in history, is clearly slowing down. So, the question is - will America experience a soft or a hard landing? How should we think about this?
America's credit binge, which fueled this expansion, is also coming to an end. The ultimate was achieved in the third quarter, when, for the first such period in 30 years, Americans spent more than they earned. Households and firms have been borrowing hand over fist, lifting the total private-sector debt to a record 150% of GDP. But remember that debt is fixed in value, whereas the value of assets can fall witness the stock market. Debt also has to be serviced out of income, so that if profits fall and everybody tries to sell their shares at the same time, stock prices will fall again. This could be the makings of a recession. Furthermore, America will need to borrow for the rest of the world this year some 4.5% of its GDP, up from 1.7% in 1997. This deficit has been easy to finance while growth and investment returns have been higher in America than elsewhere, but as growth and profits slow, dollar assets will look less attractive to international investors. In addition, the strong dollar has played a big role in America's low inflation and low interest rates. If the American economy goes south, so will its dollar and with it low inflation.
If America experiences a downturn, will it affect the rest of the world? As its economy slows, America might harm other economies in terms of its trade, the exchange rates and in capital flows. For example, Canada and Mexico depend heavily on America purchasing their exports, as do many East Asian economies like Malaysia, the Philippines and Thailand. A declining American economy will surely hurt these countries. In addition, if the American economy slows, and a sharp decline in the dollar follows against the euro and the yen, then exports will be further harmed. Finally, economic decline in America will surely drag down the stock markets of other economies as well. Therefore, an American decline will harm the emerging economies the most because they depend so heavily on America buying their exports. The fate of the world economy thus depends on what occurs in America. This is what President-elect Bush faces as he takes office in January 2001.
The above is why America is looking to Allan Greenspan of the Federal Reserve to cut interest rates in early 2001. This, many argue, would spark the stock markets' rise and increase American wealth once again. But any economy that depends for its growth on consumers spending more that they earn is not on a very sound footing. Further, Greenspan cannot be expected to restore equilibrium to an economy so heavily biased toward the use of credit. That is why many are now arguing that President-elect Bush must promote a significant tax cut that would restore both market stability and consumer confidence. The liquidity problems that are building up in the economy could be thus relieved. Perhaps the old adage, "letting the taxpayer keep a fair share of what they earn," is not so wrong after all. In short, the United States needs strong economic policy leadership immediately from the Federal Reserve and from the President.
See The Economist (9 December 2000), pp. 77-79 and George Melloan, Wall Street Journal (5 December 2000), p. A27.
Back to top
|
|
Perspective Two
|
|
"THE IMPORTANCE OF CHARACTER IN 2001"
In October 2000, the Josephson Institute for Ethics released the preliminary finding of its survey entitled "Report Card on the Ethics of American Youth." The results point to what the institute calls "shocking levels of moral illiteracy" among American youth. Here is a summary of the findings:
92% of the kids surveyed admitted to lying to their parents and 78% admitted lying to a teacher.
70% said that they had cheated on a test, and half of them said they had done so more than once. One quarter of those surveyed said they would lie to get a job.
One in six said they had gone to school while drunk at least once in the previous year.
This is true despite the fact that 3/4s of the states now mandate that students be taught values like honesty, trustworthiness, respect for others, etc. What are we to do? Allow me to suggest a powerful new book that presents an argument for us to consider. The book is by James Davison Hunter entitled The Death of Character.
Hunter identifies three phases of moral development in American history: From Puritan times until early 19th century, moral education was inspired by God and Scripture. A child was taught to be virtuous in hope of living up to a Christian code of conduct. Through the middle of the 19th century, reform-minded educators such as Horace Mann sought to accommodate a population that increasingly included more Catholics and Jews. The shift was to now to a more "nonsectarian Protestant piety" that blended the moral lessons of republicanism, the ideology of the day. In short, children learned to be good in order to become good citizens. The final phase, the one we are in now, is governed by a new set of assumptions, derived from the teachings of psychology, that dominates the culture. This new phase is commanded, according to Hunter, by "a moral framework whose center point is the autonomous self." Today, a student, therefore, is taught to look inward to discover his/her own personal morality to learn what makes him/her feel good about himself/herself.!!!
America has, according to Hunter, bought the lie of a therapeutic ethos for our children and for our culture. Character building in this ethos considers strict moral judgments harmful to psychological health. But this ethos has produced its own new moral paradigm, Hunter shows. We now live in "a moral culture with its own distinctive set of prejudices and its own distinctive method of indoctrination. It only feels inclusive to those who share its assumptions." The plight of the Boy Scouts, whose refusal to include homosexuals as scoutmasters threatens their existence in our "inclusive" society, is a powerful case in point. Therefore, enforcing commonality in the name of therapeutic inclusiveness has created a moral culture that is hardly moral and certainly not inclusive.
Finally, consider the case of the Girl Scouts. Earlier in the 20th century, the Girl Scouts Handbook proclaimed that a scout must be "loyal" to country, family, friends, church and school, as well as "to the highest ideals which she knows." It also directed her to be "clean in thought, word and deed" and to be "cheerful." But in 1972 the loyalty law was scrapped because "many younger girls did not understand the word." That same year the idea of cleanliness of mind became "grounds for humorous or even contemptuous dismissal" and was abandoned. Cheerfulness was rescinded in 1996 "as outdated and unrealistic in the face of adversity." What then is left? Personal gratification and fulfillment are the only justification for moral action. There is no tradition, which established the reasons for moral behavior, and there are no more meaningful communities, which reinforce the moral tradition. (Witness the Girl Scouts and what the culture would like to do to the Boy Scouts). Year 2001 must be a year in which we reacquaint our children with moral absolutes rooted in our religious traditions and reinforced in our religious communities. If not, the next generation of leaders will have no moral compass or anchor!!
See James Davison Hunter. The Death of Character: Moral Education in an Age Without Good or Evil and Chuck Colson, "Breakpoint" (25 October 2000).
Back to top
|
|
|
