Balancing Acts: Technology, Finance, and the American Future

Balancing Acts: Technology, Finance, and the American Future

Balancing Acts: Technology, Finance, and the American Future

Balancing Acts: Technology, Finance, and the American Future

Excerpt

There is a legend that on one occasion, perhaps in 1859, the aerialist Blondin, crossing on his tightrope in front of Niagara Falls, met with the supreme crisis of his career. A guy rope behind him, essential for stability, frayed and gave way. This sent a visible, deadly shock wave down the main line. Blondin's reaction was instant and effective: he ran, gripping his balance pole, ahead of the tremor, until he had reached safety on the far shore.

The legend is improbable and may well be false. But it illustrates two true propositions. The first is that good policy sometimes requires quick action. The second, closely related, is that equilibrium is more easily maintained at high speed.

Since 1982, the steady growth and price stability enjoyed by the U.S. economy have been purchased, as all know, by federal budget deficits approaching $200 billion per year and by corresponding deficits on trade and the current account. These have transformed the financial position of the country. They are undoubtedly unsustainable for that reason. The question is what to do about them, and when.

I will argue that the answer must turn on two choices. The first is a choice of industrial direction for the United States. The second is a choice of institutions to replace tight money and periodic recession as the guaran-

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