Domestic Economic Policy

Abstract

Gloomy assessments of its condition, prospects, and relative decline notwithstanding, the American economy remains the largest in the world. Since the oil price shocks of 1973 and 1979, the United States has achieved higher rates of output growth than many other industrial countries, but much poorer improvements in productivity. There has been scarcely any increase in output per head since the late 1960s, and output per hour has grown only modestly; output per head has increased more rapidly in manufacturing than in services, but the performance in both cases has been poorer than in most of America’s major competitors. The apparent contradiction between high GNP growth and trivial productivity improvement is explained by the workforce having expanded rapidly, as women and new waves of immigrants have entered labour markets: during the 1980s, the United States created more jobs than any of its major competitors.