Magazine article The Futurist

A Gloomy Future for U.S. Capitalism? Declining Growth, Weakening Competitiveness, and Other Dark Clouds Loom. (Economics)

Magazine article The Futurist

A Gloomy Future for U.S. Capitalism? Declining Growth, Weakening Competitiveness, and Other Dark Clouds Loom. (Economics)

Article excerpt

"The U.S. economic system faces some very serious problems in the coming decade," declares economist Frederic L. Pryor, an authority on the comparative study of economic systems. In his latest book, The Future of U.S. Capitalism, Pryor analyzes the impacts that changes in technology, demographics, public policy, and other areas will most likely have and what, if anything, can be done to avert the problems he foresees.

The storms will rise on four key fronts: declining economic growth, an increasingly volatile business cycle, widening income disparities, and rising globalization shaken by public backlashes.

* Declining economic growth will result principally from demographic changes in the United States, says Pryor. As the population ages, more people will be spending down than adding to their savings, leading to a lower saving rate for the country as a whole, he points out. Other adverse forces could include food or resource shortages that cause people or businesses to invest less.

* Increasing volatility could result from the U.S. economy's growing vulnerability to external shocks. "Deepening globalization will gradually enfeeble national monetary and fiscal policies to stabilize the economy," says Pryor. Decreased savings and increased debt could also lead to higher interest rates and possibly to a serious downturn.

* Widening income differentials are likely in the long run, says Pryor. The poverty-trap effect caused by inferior schools in low-income areas (and lack of access to computers and the Internet) will become stronger, and wealth will become even more concentrated at the upper end of income distribution.

* Unsteadily rising globalization results from the myriad political factors that limit the pace of international integration. Globalization itself limits a nation's ability to regulate its own businesses and protect particular sectors of the economy, and it reduces the power of voters, which in turn could lead to backlashes.

These trends lead Pryor to forecast slowing growth in the first half of the twenty-first century, but not the sharp discontinuities that others have predicted, since institutional forces are often hard to move. …

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