Edited by Alan M. Rugman and Gavin Boyd
Chapter 2: Problems of governance in the USA
John J. Kirton As the twenty-first century opened, it appeared that the American economy was afflicted by a comprehensive case of macroeconomic mismanagement. Its overall GNP growth had plunged from over 5 per cent in 2000 to virtually zero by mid-2001, a uniquely large and rapid postwar deceleration that showed every sign of getting worse. Behind the plunge lay falling productivity growth, as earlier estimates of above average performance were revised downwards, new much lower figures recorded, and hopes that the information technology revolution would bring a permanent increase were set aside. By autumn 2001 unemployment had jumped to 4.9 per cent. Energy price increases and springtime brownouts in California brought the long-forgotten phrase of ‘energy crisis’ back into the American public lexicon. American stock markets continued to plummet through an ever broadening range of sectors, driven by declining corporate earnings, an evaporation of business investment, and eroding consumer confidence. And the federal government’s hard won fiscal surplus vanished, to be replaced by the ever mounting deficits of old. Externally the plummeting performance was equally evident. Over the summer of 2001 the once unassailable US dollar lost 10 per cent of its value against the euro. America’s current account deficit ballooned to ever larger levels. Slower growth and a lower dollar signalled that the longstanding large inflows of foreign direct investment (FDI) into the United States were slackening. And the outbreak of new financial crises in the major emerging markets of Turkey and Argentina suggested that a new round of...
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