79-04-B7
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Higher Standard of Living[edit]
Transcript[edit]Here I go again on inflation. But I think you might be interested in a new study that has only recently been released by the New York Stock Exchange. The study was prepared by its Office of Economic Research, and is called "Reaching a Higher Standard of Living". Quite a team worked on the report headed by William Freund. It included Professor John Kendrick of George Washington University (who was for a long time keeper of the national income statistics in the U.S. Department of Commerce); Edward Denison, Brookings Institute; Lawrence Klein, University of Pennsylvania; Albert Rees, National Bureau of Economic Research; and Professor Richard Quandt of Princeton. Maybe the report should have been called, "Why We Can't Reach a Higher Standard of Living". The researchers found that in the 10 years between 1967 and 1977 real earnings of non-agricultural workers in the private enterprise only increased $2.50 a week. And that's before taxes. Why and how did all those big wage settlements amount to so little? Well, in real terms our economy just couldn't deliver the products available for purchase to meet the increases in paychecks. We know that inflation is a case of too much money chasing too few goods. We also know the government is running the printing press full time, turning out greenbacks. But the report reveals also that in this 1967-to-77 decade, the rate of productivity increases declined 45 percent. No other industrial economy has known such a drop. In West Germany, Japan and France, the increase in per-man hour productivity is twice as great as it is in our own country. It is almost twice as great in Italy. There are three reasons for this: we are reinvesting as a percentage of our Gross National Product less than half of what those other countries are investing in research and development. The figures are the same for investment to replace or upgrade aging plants and equipment. And what we are investing is in unproductive environmental and safety features mandated by government regulations. The high-salaried American worker who once made us the world's leading provider because of his high productivity--(what we chose to call "American know how") is now being outproduced because he is not being provided with the tools he needs to be competitive in the world market. In a way we're all to blame. We have stood by while particular interest groups lobbied government for regulations and requirements without regard to cost effectiveness. We have let political demagoguery influence tax policies. Our capital gains tax is the highest in the industrial world. So is the percentage of our industrial plants that are outmoded and approaching obsolescence. Inflation plus tax policy has given us the lowest savings rate in our history. If we don't save (thus providing capital for investment) we don't grow. Right now it doesn't pay to save. We are the only ones who can do something about this--we the people. This is Ronald Reagan. Thanks for listening. |
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