OECD Economic Surveys : United States 1962.

47 Pages·2.509 MB·English

by  OECD

UNITED STATES
BASIC STATISTICS
THE LAND
Area-ContinentalUnitedStates, plut Hawaii Populationofmajorcities,includingIheir
and Alaska (thousand sq.km.) (cid:9) metropolitanareas(I960):
New York(cid:9) 10,695.000
Chicago (cid:9) 6,221.000
Loi Angeles-Long Beach (cid:9) 6,743,000
THE PEOPLE
Population (July 1961) (cid:9) 183,7-42,000 Labour force, including armed forces,
Numberofinhabitants persq. km. . . 20 1961 (cid:9) 74,175.000
Population,annualnetnatural increase Ofwhich: employed in agriculture . 5.463,000
(average 1956-1960) (cid:9) 2,943.000 Netcivilianimmigration(annualaverage
Net rate of annual increase per 1.000 1956-1960) (cid:9) 314,000
inhabitants(average 1956-1960) . . 17
PRODUCTION
Gross national product in 1961 (billions of Origin of national income in 1961:
U.S. dollars) (cid:9) 518.7 Agriculture,forestryandfishing(cid:9) 4",',
G.N.P. perhead (U.S. dollars) ...... 2.823 Manufacturing (cid:9) . 28%
Gross fixed capital formation: Construction ............. 5 %
percentofG.N.P. (average 1957-1961). 14 Other (cid:9) (cid:9) 63%
per head (U.S. dollars, average 1957-
1961) (cid:9) 365
THE GOVERNMENT
Public consumption, 1961 (per cent ofG.N.P.). Composition ofthe 88th Congress, 1963:
Public construction activity, 1961 (per cent of House of
G.N.P.). (cid:9) Representatives Senate
Current revenue of Federal, state and local Democrats ....... 259 68
governments, 1961 (percentofG.N.P.). . . 29 Republicans (cid:9) 176 32
Federal Government debt to Federal
Total (cid:9) 435
Government revenue, 1961 (per cent) . . . 301
LIVING STANDARDS
Food consumption, calories per head per Average hourly gross earnings in manufac¬
day, 1961 (cid:9) 3,190 turing, 1961 (U.S. dollars) (cid:9) 2.32
Consumption of energy per head I960 Number of passenger cars in use per
(O.E.E.C. average - 100)(cid:9) 307 1.000 inhabitants. I960 (cid:9) 312
Steel consumption, apparent, I960 (kgs per Number of telephones in use per 1,000
head) (cid:9) 501 inhabitants, 1961 (cid:9) 418
FOREIGN TRADE
Exports: Imports:
Exportsofgoodsandservicesas percentof Imports of goods and services as per cent
G.N.P. (average 1957-1961) (cid:9) 5.2 ofG.N.P.(average1957-1961)(cid:9) . 4.7
Mainexports 1961 (percentoftotal merchan¬ Main imnorts 1961 (percentoftotal merchan¬
dise exports): dise imports):
Cotton (cid:9) 4 Coffee (cid:9) 7
Grains (cid:9) 9 Non-ferrous ores, metals and manufac¬
Automobiles and parts (cid:9) 6 tures (cid:9) 7
Chemicals (cid:9) 8 Newsprint(cid:9) 5
Machinery(cid:9) 23 Petroleumandproducts (cid:9) II
ECONOMIC SURVEYS BY THE OECD
U MIXED
STATES
1962
ORGANISATION FOR ECONOMIC
CO-OPERATION AND DEVELOPMENT
The Organisationfor Economic Co-operation and Development was set up under
a Convention signed in Paris on 14th December 1960 by the Member countries of the
Organisation for European Economic Co-operation and by Canada and the United
States. This Convention provides that the O.E.C.D. shallpromote policies designed:
to achieve the highest sustainable economic growth and employment and a
rising standardofliving in Membercountries, while maintainingfinancialstab¬
ility, and thus to contribute to the development of the world economy;
to contribute to sound economic expansion in Member as well as non-member
countries in the process of economic development;
to contribute to the expansion of world trade on a multilateral, non¬
discriminatory basis in accordance with international obligations.
The legal personality possessed by the Organisation for European Economic Co¬
operation continues in the O.E.C.D., which came into being on 30th September 1961.
The Members of O.E.C.D. are: Austria, Belgium, Canada, Denmark, France,
the Federal Republic of Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United
Kingdom and the United Slates.
This document was approved
by the Economic and Development Review Committee
in November 1962
CONTENTS
I. THE PROBLEM TO BE SOLVED (cid:9) 5
Prices and wages (cid:9) 11
Balance of payments (cid:9) 13
II. THE POLICIES REQUIRED (cid:9) 18
Fiscal policy (cid:9) 19
Constraints on fiscal policy (cid:9) 23
Monetary and debt management policies (cid:9) 27
III. CONCLUSIONS (cid:9) 33
STATISTICAL ANNEX (cid:9) 36
LU
CD
<
O.
<
0Û
UNITED STATES
1. In contrast to the earlier post-war period, the United States
economy in the last few years has been marked by a slow rate of growth
and an uncomfortably large external deficit. The balance of payments
has improved in the last eighteen months'; but the recent course of
domestic activity has remained disappointing, with the recovery slowing
down at an early stage, well short of full employment conditions. These
circumstances have naturally led to intensive discussion of the combi¬
nation of policies appropriate, particularly in the fiscal and monetary
fields, to achieve faster growth and external equilibrium, and this is the
main topic of the present report. Part I, which reviews the major trends
indomestic activity andforeignpayments, seeks to highlight the problems
which policy needs to solve. Part II discusses the role that fiscal and
monetary policies should play to this end.
I. THE PROBLEMS TO BE SOLVED
2. The dissatisfaction with the record of the last few years which is
so often expressed should not be allowed to hide the fact that, in the
post-war period as a whole, the United States has enjoyed a growth
rate which compares favourably with the longer-term trend. Since the
beginning of the century the real gross national product has risen at an
average annual rate of about 3 per cent a year. Between 1947 and 1961,
the average rate of increase was about 3.5 per cent. But the expansion
slowed down considerably in the latter part of this period, and the latest
cyclical upturn has done little to change the weak trend of recent years.
a) The 1953-1961 Period
3. Since 1953, the expansion of output has been modest compared
both with previous years and with the experience of other industrialised
countries'. The United States' real gross national product has been rising
by 2.5 per cent a year only, compared with a rate of more than 4.5 per
cent in the 1947-1953 period. Between 1953 and 1961 the real gross
national product of Western Europe rose by 4.5 per cent a year; the
output of the Common Market countries has been rising at an annual
rate of about 5.5 per cent.
4. There is ofcourse little reason why all countries should neces¬
sarily achieve the same rate of growth. The record may be influenced
by differences in resources, preferences, stages of development, and
starting positions, particularly over shorter periods. But the expansion
in the United States has been modest in relation to the potential of the
U.S. economy itself.
5. The extent to which the growth rate has fallen short of whatmight
be considered both possible and reasonable, can be measured variously.
Unemployment, comparing the rates prevailing at earlier cyclical peaks,
rose from a seasonally adjusted rate of 2.6 per cent of the labour force
in July 1953 to 4.2 per cent in July 1957 and to 5.1 per cent in May
1960. A less traditional indicator, which relates time lost through un¬
employment and involuntary part-time work to the total man-hours po¬
tentially available, suggests that unused labour has been even higher
than the unemployment ratio reveals. Capacity utilisation in manufactur¬
ing industry declined from about 92 per cent in late 1955 to 86 per cent
in early 1960, compared with a preferred rate of about 90 per cent.
6. While actual output rose by only 2.5 per cent a year from 1953
to 1961, the economy's productive capacity is estimated to have been
growing at an annual rate of about 3.5 per cent.* This, however, is a
minimum estimate of the extent to which the actual performance of the
economy has fallen short of its potential. The 3.5 per cent rate of
capacity expansion has been achieved in conditions of considerable
slack; productive capacity would surely'have risen faster if the economy
had been operating steadily at full employment, with demand pressing
more strongly on capacity; this would have represented an important
new force in the economy, raising the rate of growth and stimulating a
more rapid modernisation of the capital stock.
7. Throughout the past decade the ratio of business fixed investment
to gross national product has been lower than in most other industrialised
countries. The physical volume of U.S. business fixed investment in the
first half of 1962 (annual rate) was 3 per cent lower than in 1956 or
1957, the post-war peak.
8. The expansion of activity has been particularly disappointing
since 1957. The 1958-1960 recovery was shorter and weaker than the
two preceding upturns. And the latest recovery has slowed down con¬
siderably at a rather early stage,well short offull employment conditions.
Estimated by the Council of Economic Advisers.
Diagram 1
G.N.P.volumeindices ECONOMIC GROWTH FROM 1950 TO 1961
1950=100
225 225
I ,
200 -- 200
U.S.A.
Germany(F.R.)
Italy
175 175
France
O.E.C.D.
++ UnitedKingdom
150 ;_- 150
125 125
I
L
100 100
1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962
Source: GeneralStatistics (O.F..C.!).).
Table 1. Fixed Investment Rates in the United States
and Europe, 1951-1960 n
Per cent ofgross national product
1951-55 1956-60 1960
Total fixed investment, excluding residential
construction :
United States (cid:9) 12.0 11.6 11.2
E.E.C(cid:9) 14.1 15.8 16.6
United Kingdom (cid:9) 10.5 12.8 13.6
Machinery and Equipment :
United States (cid:9) 6.0 5.4 5.1
E.E.C(cid:9) 8.9 10.2 10.8
United Kingdom (cid:9) 6.9 8.2 8.7
1. Constant (1954) prices and exchange rates ;excluding government investment
in machineryand equipment.
Source : O.E.C.D. General Statistics.
b) Current Trends
9. The recovery which began early in 1961 was, for some months,
a rapid one. Between the first and last quarters of the year, the real
gross national product rose at an annual rate of 9 per cent. But the rate
of expansion slowed down to only about 3 per cent in the first half of
1962, despite the fact that physical scope for further advance was still
substantial; at mid-year manufacturing output was only 87 per cent of
capacity and unemployment was above 5 per cent. The Council of Eco¬
nomic Advisers had estimated that the gap between potential and actual
output might be narrowed from 10 per cent in the first quarter of 1961 to
some 3 per cent in the second quarter of 1962. But the disappointing
rate of advance in the first half of 1962 left the gap at mid-year still
close to 6 per cent.
10. Expectations at the beginning of the year were that business
fixed capital formation would rise much faster than in 1961 and, in the
second half of the year, become the main dynamic element behind the
expansion ; the assumptions on which this view was based included an
improving rate of capacity utilisation, a strong increase in profits and
depreciation allowances, an early enactment of the tax credit for invest¬
ment, and relatively stable interest rates and adequate liquidities. Other
types of investment expenditure residential construction and inventory
accumulation were expected to rise less fast in 1962 than in 1961,-
and to remain relatively stable in the second half of the year. It was
thought that government expenditure on goods and services would con¬
tinue to rise steadily, and that personal consumption would increase in
line with total non-consumption expenditure, with little change in the
savings ratio.