Balancing Acts

Balancing Acts

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Galbraith, James K. Basic Books, 1990
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IN THIS SUMMARY

Today, a competitive challenge defines our economy and the at-tendant difficulties we are now experiencing have to do with failures of policy and not faults of national character. In the 1970s and 1980s, the inward orientation of macroeconomics led to inward-oriented explanations (e.g., the productivity slowdown) or explanations that incorporated externals (e.g., oil price shocks). Both obscured, however, critical elements introduced by international competition.Macroeconomic models overlook the fact that the structure of a nation's industrial base is the key to its standard of living, and that economic rent-the search for the marketable products that yield large surpluses over the cost of production-is a prime source of sustained prosperity. Thus, policies affecting demand can influence, over the long term, the patterns of activities, occupations, social structure, and distribution of income in the U.S. America's standard of living and position in the global economy have depended on its ability to continually and substantially dominate world production of capital goods (capital goods embody design, and unique design is the essence of scarcity value). Since superiority in this area cannot be copied by developing nations or second-rate industrial powers, nor be undercut by low wages, it is the one thing that guarantees a high standard of living.