Economic Growth

When most people think about campaigns for social causes they think of organizations like Greenpeace and Amnesty International. But in the post-Enron, post-Tyco world, the most effective campaigners may well prove to be big institutional investors -- mutual funds and pension funds.

Recession. Terrorism. Layoffs. What wage earner or job seeker in this economy wouldn't want a return to "Morning in America"? Remember that? The year was 1984, and Ronald Reagan was running for reelection under that slogan, declaring that the long night of Carter-era economic stagnation had ended. Americans agreed so overwhelmingly that Reagan won majorities in 49 states. Yet the very month of Reagan's landslide, the unemployment rate stood at a painful 7.2 percent.

The fundamental challenge for human institutions in the 21st century is to create and maintain a sustainable combination of economic, social, and natural environmental conditions in an increasingly global and commercial civilization.

President Bush's proposed budget blurs the important distinctions between stimulus and growth. Given the differing objectives of the two -- on the one hand increasing spending to stimulate the economy in the short term and on the other increasing saving to boost longer-term growth -- it is nearly impossible to accomplish both.

With the stimulus and growth components of the president's economic proposals canceling each other out, the budget plan is likely to accomplish neither.

This special issue was a collaboration between The Atlantic Monthly and the New America Foundation, and featured 14 different articles by New America fellows and staff. Each of those pieces is available online via the links below.

The Forgotten Home Front
James Fallows, Chairman, Board of Directors, New America Foundation

Nothing illustrates America's profound contradictions more starkly than a comparison with other advanced democracies: among these the United States is either the very best or the very worst performer on a wide range of social and economic criteria. We are simultaneously the leader and the laggard among our peers -- almost always exceptional, almost never in the middle.

The U.S. economy is afloat today thanks only to the undaunted American consumer. Breaking the pattern seen in other downturns of the past half century, consumption grew at a brisk pace through the three quarters of recession in 2001. Despite plunging stock prices, the spending binge continued last year, financed by record borrowing, a huge wave of mortgage refinancing and home-equity loans, a large federal tax cut, and anemic household saving. Were it not for the persistence of American shoppers, the economy would surely have headed into a tailspin.

This autumn events in Tokyo led many observers to believe that Japan was ready to restructure its profoundly dysfunctional banking system. These hopes were soon dashed, however, as the "forces of resistance" to economic reform marshaled their resources and persuaded Prime Minister Koizumi to eviscerate the banking program. A mood approaching dejection has subsequently fallen over Japan specialists in that country and around the world.

Few Californians seem aware of the state's disturbing economic circumstances. The economy is losing well-paying blue-collar and middle-class jobs at an astounding rate, especially in the Bay Area. Meanwhile, growth is increasingly concentrated in a handful of outlying counties. As a result, California's economy is fragmenting as never before between slow-growth, politically powerful population centers and pro-growth, politically marginal counties that surround urban cores. And California's leaders seem indifferent.