Tape 198 - International economic picture-Britain, Switzerland, Italy, Japan; U.S. and expenditures for poor nations
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- | Hello. | 0:01 |
This is David Francis, | 0:02 | |
Financial Editor of the Christian Science Monitor. | 0:04 | |
I'd like you to welcome you once more | 0:06 | |
on behalf of Instructional Dynamics Incorporated | 0:08 | |
to a visit with MIT's Nobel Prize-winning economist, | 0:10 | |
Paul Samuelson. | 0:14 | |
We are recording this chat in mid-May. | 0:16 | |
During our last visit, Dr. Samuelson, | 0:19 | |
we examined the domestic economy. | 0:22 | |
I thought today we might look at the international scene | 0:24 | |
where there's been considerable excitement lately. | 0:27 | |
Has the world entered another | 0:31 | |
international financial crisis? | 0:33 | |
- | No, I don't think so. | 0:36 |
It is reassuring for an American | 0:37 | |
who sometimes is troubled about | 0:39 | |
what's going on around him in his own country | 0:42 | |
to look abroad and to realize that | 0:44 | |
it's the human condition to have trouble, | 0:47 | |
but I don't think that we're now | 0:50 | |
in the midst of a new crisis, | 0:54 | |
a Great Depression. | 0:57 | |
We have instability, but it's the kind of instability | 0:58 | |
that we've become accustomed to. | 1:01 | |
What you do see when you look abroad | 1:05 | |
is a tremendous variety of different degrees of inflation. | 1:07 | |
It makes you thankful that we now live in | 1:13 | |
a regime of voting and flexible exchange rates. | 1:17 | |
If you just look at the list put out by the OECD | 1:21 | |
for the 12-month period ending this spring, | 1:25 | |
you find that a country like Iceland, | 1:30 | |
perhaps because of her fish and other problems, | 1:34 | |
has had a 36% annual rate of inflation. | 1:37 | |
I guess Iceland wins the booby prize in this competition. | 1:41 | |
On the other hand, if you look at Germany, | 1:47 | |
that's Western Germany, they've had only 5.5%, | 1:50 | |
and we're very nearly as good as Western Germany | 1:54 | |
with our 6%. | 1:57 | |
But of course, it's the countries with | 2:00 | |
larger than average world inflation. | 2:02 | |
Well, by the way, Switzerland, I guess, | 2:05 | |
I'd like to make some comments | 2:07 | |
on the Swiss situation in a moment. | 2:09 | |
Switzerland actually wins the absolute prize, | 2:11 | |
2.5% price inflation. | 2:15 | |
But, let's do think that all this happiness | 2:17 | |
in the land of yodeling actually, | 2:20 | |
Switzerland was one of the hardest hit by the recession. | 2:24 | |
- | Oh. | 2:28 |
- | She had a 7.5% drop | |
in her GNP. | 2:31 | |
The trouble with Switzerland is, of course, her glory. | 2:33 | |
She's a haven for hot money, for cool money, | 2:36 | |
for scared money, | 2:40 | |
and her banks have been doubling their deposits, | 2:43 | |
where it's used to continue to double their deposits, | 2:47 | |
they've been doubling them in three years recently. | 2:50 | |
It shows that there still is a lot of money, | 2:54 | |
which is frightened, and it's coming in to Switzerland. | 2:56 | |
Well now, why wouldn't it be a blessing to a country | 3:00 | |
to have all that cash flowing in? | 3:03 | |
We always feel so sorry for countries | 3:06 | |
that are having a run of the currency against them. | 3:07 | |
Well, the trouble is, if it tends chronically to appreciate, | 3:10 | |
the Swiss franc. | 3:16 | |
And so, whereas, you used to get four and a half, | 3:18 | |
four and a third Swiss francs to a dollar, | 3:25 | |
it's now, or more like, two and a half. | 3:27 | |
That makes it very tough for the Swiss watch industry, | 3:30 | |
which is already in trouble with the crystal quartz | 3:33 | |
and the various electronic competition | 3:40 | |
from Japan and elsewhere to compete. | 3:43 | |
So, except for the fact that Switzerland | 3:45 | |
has a safety valve in the form of guest workers | 3:49 | |
who can stop coming in, Italians and others, | 3:55 | |
it is really | 4:00 | |
for a Swiss suffering, we often think, | 4:04 | |
I often think of Switzerland and Sweden as really, | 4:07 | |
knocking on the door with respect to | 4:10 | |
the American standard of living. | 4:12 | |
But I've just seen some interesting figures | 4:13 | |
that a typical American worker | 4:16 | |
has to work three or four years to buy a house, | 4:18 | |
house that he could live in. | 4:21 | |
Well, a Swiss worker has to work 10 or a dozen years | 4:23 | |
to buy a house that he can live in. | 4:27 | |
It's all those foreigners who are bidding up the prices | 4:30 | |
of property. | 4:32 | |
So, it's no, | 4:35 | |
it's no bed of roses. | 4:37 | |
- | I understand that the Swiss | 4:39 |
have seen a lot of their foreign workers depart, | 4:41 | |
which has appeased a severe political problem | 4:44 | |
in Switzerland. | 4:46 | |
- | Yes, because as one perhaps could have expected | 4:47 |
in a country that is so self-contained, | 4:51 | |
they did grow up kind of a George Wallace, xenophobic, | 4:55 | |
again, the foreigner, movement, political movement | 5:00 | |
in Switzerland. | 5:03 | |
It was voted down but the fact that there was a serious vote | 5:04 | |
shows that it's very nice | 5:08 | |
to have the foreign workers to do the dirty work. | 5:12 | |
It's been said that a Swiss citizen | 5:15 | |
is like a citizen of Athens. | 5:18 | |
It's great for those who are on top of the heap in Athens. | 5:20 | |
You just discuss literature, write it, | 5:24 | |
look at statues and make them, | 5:25 | |
but all this is the visible peak of an iceberg | 5:29 | |
built on slavery. | 5:31 | |
Well, the Swiss don't have slaves, | 5:33 | |
but they do have relatively unskilled, inexpensive workers. | 5:34 | |
So no Swiss does dirty work. | 5:40 | |
If you look at the stock market, | 5:42 | |
the quotations of all the different countries, | 5:47 | |
and if you look at it as I will do, | 5:49 | |
from the standpoint of an American, | 5:53 | |
you want to convert the gains | 5:54 | |
since the beginning of the year into dollars. | 5:58 | |
That is, you wanna correct for | 6:01 | |
any depreciation or appreciation of the exchange rate. | 6:03 | |
And there, it's Hong Kong, the Hong Kong stock market, | 6:06 | |
which leads the list. | 6:09 | |
That's gone up through early May by 36%. | 6:12 | |
Still, it's interesting to see that the Dow Jones averages | 6:17 | |
come second in the list. | 6:20 | |
And Canada, our neighbor in North America, | 6:22 | |
the Dow Jones was 17% up at that time, | 6:24 | |
perhaps a little more right now, | 6:29 | |
and Canada's had a 15% increase. | 6:31 | |
Interesting that Japan has had a 9.5% increase, | 6:35 | |
and then you come to Switzerland, with its 8 2/3% increase. | 6:40 | |
Now, it doesn't mean that | 6:47 | |
Swiss stocks have risen 8 2/3%, | 6:49 | |
but they've got a little lift from the exchange rate. | 6:51 | |
- | Oh, yes. | 6:55 |
- | An appreciation | |
of the Swiss, | 6:57 | |
that same appreciation which is such a load on their, | 6:58 | |
on the competitiveness of their industries. | 7:02 | |
The bottom of the list, of course, perhaps no surprise, | 7:06 | |
is the Italian stock market, which has dropped 30%. | 7:10 | |
But the UK has shown a 5% increase, | 7:16 | |
and we have to remind ourselves that last year, | 7:21 | |
which was a year of trouble and turmoil for the UK, | 7:23 | |
it was the UK and Hong Kong | 7:26 | |
which had the largest percentage increase in stocks | 7:29 | |
even when you convert it back into dollars. | 7:33 | |
- | Now that, that must be-- | 7:35 |
- | It was almost 100%, | |
if I remember it. | 7:37 | |
- | That must be remarkable, | |
because the pound has slipped so dramatically | 7:38 | |
in the last month or two. | 7:40 | |
- | Well, well I said last year. | 7:42 |
- | Oh, oh. | 7:44 |
- | I'm talking-- | |
- | I'm sorry. | 7:46 |
- | Before the plug was, | |
(David laughs) | 7:47 | |
the plug was pulled. | ||
But also, the fact that the averages in London | 7:49 | |
could rise so much in a miserable year like 1975 | 7:54 | |
tells you how far those averages have fallen | 7:58 | |
prior to that term. | 8:02 | |
- | Could we turn to the British situation? | 8:05 |
- | Yes. | 8:06 |
- | Do you think Great Britain has a good chance now | 8:07 |
of lifting itself out of its economic backslide? | 8:11 | |
- | Well, first, they have a new prime minister. | 8:14 |
That gives the government a little bit of | 8:17 | |
bidding space time. | 8:21 | |
He has succeeded in, | 8:23 | |
in getting an agreement, | 8:28 | |
and I must say that I thought that the 4.5% agreement | 8:29 | |
he got-- | 8:34 | |
- | You're talking about | |
the wage agreement. | 8:35 | |
- | The wage agreement | |
was a pretty good one, and really, way better | 8:36 | |
than the 3% agreement which was sought | 8:39 | |
because you have to use a rule of reason here. | 8:41 | |
And to get a agreement that's so low | 8:45 | |
that you can't believe in it, and it can't be maintained, | 8:48 | |
would that not be a good thing? | 8:53 | |
4.5% wage increase is just barely believable | 8:54 | |
that it might work. | 9:00 | |
And of course, that already involves a drop in real income | 9:03 | |
because let's see what's been happening to British prices. | 9:08 | |
Well, they've been growing at 20% a year. | 9:13 | |
- | Yeah, I think more recently, | 9:16 |
they've been growing between 8% and 9%, | 9:17 | |
but still, that's only half. | 9:19 | |
- | Yeah. | |
So, we're talking then about a cut. | 9:19 | |
I spoke to a journalist, | 9:22 | |
financial journalist | 9:27 | |
from one of the large London newspapers, | 9:28 | |
and he predicted that the agreement would come through, | 9:32 | |
about the way it seems to have come through, | 9:35 | |
and he says it's 4.5%, but of course, it will be six. | 9:36 | |
I mean, in other words-- | 9:40 | |
- | Okay. | |
- | They're, after the fact, you will find some slippage, | 9:41 |
and no doubt, as in the case of the US, | 9:45 | |
we find, for example, even for example, New York, | 9:51 | |
that a promised productivity increase | 9:54 | |
is used as an excuse to break the formula | 9:58 | |
for the transport workers to avoid a strike | 10:01 | |
or something like that. | 10:03 | |
Well, the formula's broken, | 10:04 | |
but when you get that promised productivity increased, | 10:05 | |
that's, of course, in the lapse of providence. | 10:08 | |
So, that the, | 10:13 | |
the pound is certainly fallen. | 10:15 | |
It went through $2 without looking back, | 10:19 | |
which, we have to remind ourselves | 10:25 | |
that it was not very long ago | 10:26 | |
that the pound was $2.40. | 10:28 | |
- | Yeah. | |
- | And held between $2.30 and $2.40 for a long, long time. | 10:30 |
Well, from $2.20 to $2.05, it seemed to hold there, | 10:34 | |
and then suddenly, at $2.05, | 10:40 | |
it's almost as if on a certain day, | 10:41 | |
the Bank of England just gave up defending the indefensible. | 10:44 | |
Having, I believe, spent the equivalent of | 10:50 | |
several billions of pounds, that would be, say, | 10:54 | |
5 billions of dollars of international reserves | 10:59 | |
in keeping the pound up just for another fortnight. | 11:02 | |
That's what governments tend, it seems, so often to do. | 11:05 | |
Well, now, the pound is down around $1.85. | 11:10 | |
The forward pound, December, you might get for a $1.76 | 11:15 | |
or something like that. | 11:20 | |
- | Yeah. | |
- | I find myself reading over British books again, | 11:22 |
and this will certainly tend, | 11:26 | |
unless it's frittered away with new wage increases, | 11:31 | |
and mark-up of prices, | 11:36 | |
it will tend to make the British exports more competitive. | 11:39 | |
But, of course, by the same token that | 11:43 | |
it is reducing their export price, | 11:47 | |
it robs their import prices. | 11:50 | |
It makes it very uncomfortable for people in Britain. | 11:51 | |
No depreciation helps if every time you depreciate | 11:54 | |
and start to get the medicine of, in collaboration going, | 11:57 | |
you frustrate that medicine by having domestic prices rise | 12:03 | |
by exactly the amount of the depreciation. | 12:08 | |
In that case, you're at a one-way street, | 12:10 | |
sort of one-way street that we've become so familiar with, | 12:12 | |
in the case of many of the Latin American countries | 12:15 | |
with their chronic inflation rates, 20, 30, | 12:18 | |
even more percent per year. | 12:21 | |
But now, why do I say that we're not in a national crisis? | 12:23 | |
Well, the volume of the international trade | 12:27 | |
seems to be holding up. | 12:32 | |
It's true, if you see American stock market reports, | 12:33 | |
company earnings, that there beginning to be a number of | 12:39 | |
alibis about exchange depreciation losses. | 12:43 | |
These were uncovered positions, | 12:46 | |
but we have, for the banks, | 12:50 | |
I would say more through the large banks | 12:53 | |
than through the mercantile market in Chicago. | 12:55 | |
The possibilities of hedging at a price, | 13:01 | |
there is always some friendly speculator | 13:04 | |
who is ready to share the risk with you. | 13:06 | |
And so, I noticed as I look at these price figures, | 13:09 | |
bad as they are, they are showing an improvement. | 13:13 | |
Let's take Iceland for example. | 13:18 | |
36%, isn't that awful? | 13:19 | |
But it was 49% in 1975. | 13:22 | |
And if you take the United Kingdom, | 13:27 | |
it, as you just mentioned, has come down. | 13:30 | |
Now, another thing, you've probably noticed, | 13:35 | |
I guess that you've reported about it yourself, | 13:39 | |
that the Wall Street Journal, and the Journal of Commerce, | 13:42 | |
had the pieces showing that | 13:44 | |
the business expansions abroad which came after us, | 13:46 | |
and which seemed to be just a bit on the anemic side | 13:51 | |
in comparison with our own and with their hopes, | 13:53 | |
that's now being quickened. | 13:57 | |
They're beginning to get the stock building, | 13:59 | |
inventory accumulation, | 14:01 | |
and I think we can give ourselves a small pat on the back. | 14:02 | |
Our expansion early, which has provided a good market. | 14:09 | |
Perhaps you've noticed how the Japanese exports this year | 14:13 | |
to the United States have leaped upward | 14:15 | |
in comparison with a year ago. | 14:18 | |
We have been a good neighbor. | 14:19 | |
We have done our international duty. | 14:22 | |
We've done perhaps even more, | 14:24 | |
a bit more than our international duty, | 14:25 | |
by virtue of doing our domestic duty, | 14:28 | |
which is to end the recession. | 14:31 | |
And so, our moral by recession | 14:33 | |
of the last 13 months or so has meant good markets abroad. | 14:36 | |
It's also meant, | 14:41 | |
what most of the international trade experts had predicted | 14:42 | |
at meetings I've attended in Washington, | 14:46 | |
that our extremely favorable balance of trade, | 14:48 | |
our excess of merchandise exports over imports, | 14:52 | |
was not gonna last, | 14:56 | |
and we've now begun to move into negative figures. | 14:58 | |
We still have a comfortable, positive, current surplus | 15:00 | |
counting in invisibles, | 15:05 | |
counting in our earnings from abroad. | 15:07 | |
But the trade balance has gone negative, | 15:10 | |
and how much further negative it will go, | 15:13 | |
I think will depend, on among other things, | 15:18 | |
on how good the planting season is. | 15:20 | |
It looks good at the moment. | 15:25 | |
How good our crops are. | 15:26 | |
And also, perhaps, how bad some of the crops may be abroad. | 15:28 | |
What's the use of having a surplus | 15:36 | |
if it isn't there to be used? | 15:37 | |
And so it's been nice to have a little buffer, | 15:40 | |
which has permitted us to go ahead on our expansion | 15:43 | |
without a great preoccupation with, | 15:47 | |
what did we do to our international position? | 15:51 | |
This too is attributed to the fact that | 15:54 | |
unlike the pre-1971 period, | 15:57 | |
when we were always looking over our shoulder | 16:01 | |
and beyond our shores | 16:03 | |
because we were defending an over-valued dollar. | 16:04 | |
We now know that even if our balance of payments | 16:07 | |
turned rather bad because our recovery | 16:10 | |
was going so much better than the rest. | 16:15 | |
And then, what's a dollar, a floating dollar for | 16:17 | |
if it isn't there for the purpose of | 16:20 | |
being capable of being floating downward, | 16:23 | |
just as it has been floating upward vis a vis, | 16:25 | |
the, particularly, the British, | 16:29 | |
but also the Italians? | 16:33 | |
- | Yeah. | 16:36 |
Let's turn to that problem child, Italy. | 16:37 | |
What do you see is the main difficulty there? | 16:40 | |
- | Well, Italy has the second potential, | 16:44 |
third potential, | 16:52 | |
of all the OECD countries for growth. | 16:53 | |
She's at that stage of development | 16:56 | |
where growth ought to be easy. | 17:00 | |
Northern Italy is extremely industrialized. | 17:03 | |
It's shown tremendous progress. | 17:07 | |
Southern Italy is still very poor, | 17:11 | |
but at the level of real per capita income | 17:13 | |
where Italy now finds herself, | 17:17 | |
she should be with France | 17:19 | |
or perhaps, just a bit behind France, | 17:22 | |
and both of them not with as good prospects as Japan. | 17:24 | |
They should, according to the experts, over the next decade, | 17:29 | |
have the greatest capacity for growth. | 17:32 | |
As I remember, at the beginning of this decade of the 1970s, | 17:34 | |
the OECD in Paris made the estimate | 17:38 | |
that the Italian real GNP would grow by no less than 72% | 17:42 | |
in the decade of the 1970s. | 17:51 | |
That's real terms. | 17:53 | |
- | Oh, yes. | |
- | That's not per capita. | 17:54 |
But that's better than the US | 17:56 | |
and better than the estimate for Germany. | 17:58 | |
But, what's happened is the political instability | 18:01 | |
within the system. | 18:06 | |
I think a lot of that money | 18:07 | |
that's going into those Swiss banks | 18:08 | |
has been frightened Italian money. | 18:10 | |
And of course, that's shown itself | 18:13 | |
in the drop in the stock market. | 18:14 | |
It's shown itself also in the depreciation of the lira. | 18:17 | |
Undoubtedly, although I don't hang out my shingle | 18:24 | |
as an expert in politics, | 18:27 | |
I can't really talk about political economy | 18:29 | |
without bringing in politics. | 18:32 | |
The fact that the Italian Communist Party | 18:34 | |
is knocking at the door | 18:38 | |
for at least coalition | 18:40 | |
entrance into a new government, | 18:44 | |
that has frightened lots of people. | 18:48 | |
I dare say it's frightened a lot of people, | 18:50 | |
lots of people in Washington, who think of our NATO alliance | 18:51 | |
and don't especially like the files | 18:55 | |
which we share with our NATO allies becoming open | 19:00 | |
to the eyes of members of the Italian cabinet | 19:07 | |
who are members of the Communist Party. | 19:12 | |
Our secretary of state, who pronounces, | 19:17 | |
if not the American position on every subject, | 19:21 | |
his own position on most subjects | 19:23 | |
has revived the domino theory. | 19:26 | |
And it has more or less warned the Italians | 19:32 | |
against playing footy footy with the Communists. | 19:38 | |
I noticed that the Pope, much in sorrow, | 19:42 | |
had chastised and reproached | 19:47 | |
certain Catholics | 19:51 | |
formerly connected with the Vatican | 19:56 | |
who have been siding with the position that | 19:58 | |
the Communists could be become a part of the government. | 20:02 | |
Well now, the Italian Party, it has to be said, | 20:05 | |
the Italian Communist Party, | 20:10 | |
is an extremely independent communist party | 20:12 | |
as communist parties go, | 20:15 | |
unlike the Portuguese Communist Party, | 20:17 | |
which has been a very faithful follower of the Moscow line. | 20:20 | |
The Italian party has not hesitated to criticize Moscow, | 20:28 | |
somewhat to the displeasure, no doubt, of the Soviet Union. | 20:32 | |
But still, there's always the nagging doubt | 20:39 | |
while a communist party is not in power, | 20:42 | |
it is willing to behave not like a totalitarian party, | 20:47 | |
but just like a party of protest, a party of the left. | 20:54 | |
I recall that at the last international gathering | 21:00 | |
of the Poles in this party conference in the Soviet Union, | 21:06 | |
the third member of the French Communist Party | 21:11 | |
said that the French Communist Party takes very seriously | 21:15 | |
the respecting of the rights of other parties | 21:20 | |
up to the moment we take over. | 21:25 | |
- | Yes. | 21:26 |
- | That was a frank statement. | 21:27 |
Well, many people are saying you can't, | 21:31 | |
you can't have stability and peace economically in Italy | 21:35 | |
without the Communists getting in, | 21:40 | |
so you'd better let them in. | 21:43 | |
Besides, they're not all that bad | 21:46 | |
because they're not Stalinists kinds of Communist. | 21:47 | |
Well, I've talked to | 21:53 | |
Italian intellectuals who are not themselves communist, | 21:59 | |
and their opinions often are | 22:01 | |
that this is an unusual communist party | 22:06 | |
and that's it been rather reliable in its, | 22:10 | |
in its deeds and in its statements, | 22:17 | |
at least in the recent past. | 22:19 | |
But I don't profess to having informed opinion | 22:23 | |
whether a coalition government | 22:26 | |
is a necessary, strategic price, | 22:30 | |
or industrial recovery in Italy. | 22:33 | |
And in any case, whatever what might be | 22:38 | |
my recognition of the legitimacy of that situation, | 22:42 | |
certainly, an awful lot of frightened capitalists | 22:48 | |
have been trying to evade exchange controls. | 22:51 | |
- | I see where the Swiss were forced to put exchange controls | 22:56 |
on their side of the border to prevent Italian. | 23:00 | |
- | Well, what is the rule? | 23:02 |
You can't bring in more than $8,000 | 23:03 | |
in cash in any one period? | 23:05 | |
- | Yeah, yeah. | |
- | That's in dirty currency. | 23:09 |
Why do I say dirty currency? | 23:10 | |
But, since the news item points out that you can buy check. | 23:13 | |
But I'll, tell you a story. | 23:18 | |
This is a story which happens to be as a true as | 23:20 | |
a story told at a second and not third-hand can be, | 23:24 | |
and it's not a story about Italy. | 23:28 | |
It's a story about England. | 23:30 | |
It's a story about a South African | 23:32 | |
who's been living in England for many years, | 23:36 | |
and who has a good deal of wealth, | 23:38 | |
which he would like to get out of England. | 23:41 | |
And he learned somehow that the manager of his branch | 23:44 | |
of one of the large banks in England, | 23:52 | |
one of the large big four, could help him in his regard. | 23:56 | |
And he approached the manager and asked whether he could | 24:00 | |
actually transfer to a Swiss bank account 35,000 pounds. | 24:05 | |
That's at the time we're talking about, | 24:12 | |
$80,000 to $90,000, perhaps. | 24:15 | |
And the bank manager said, | 24:19 | |
"Yes, if you bring it to me ten days from now, | 24:21 | |
"then I will arrange to have it | 24:26 | |
"transferred to your account." | 24:29 | |
He brought the money. | 24:33 | |
- | In cash? | 24:34 |
- | In cash. | 24:35 |
And his nerve failed him at the last moment. | 24:37 | |
And he said to the bank manager, | 24:40 | |
"Can you give me some kind of receipt?" | 24:45 | |
And the man said, "Of course not." | 24:48 | |
So then, it was up to him what to do, | 24:51 | |
and he decided to go through with it. | 24:54 | |
And he said he spent a most uncomfortable week, | 24:59 | |
but a week later, | 25:04 | |
he received a notice that it had duly arrived. | 25:05 | |
Now, the point of my story is that | 25:08 | |
it is now said that in England, | 25:11 | |
gentlemen are beginning to cheat. | 25:14 | |
- | Oh yeah. | 25:16 |
- | And that there always | |
have been spivs and people outside the pale. | 25:18 | |
You know, a gentleman in England is quite a different thing. | 25:23 | |
He can overdraw his bank account, | 25:27 | |
pay a very small rate of interest, | 25:30 | |
whereas the rest of the people pay a high rate of interest. | 25:31 | |
He has a voluntary declaration of what his tax obligation is | 25:33 | |
as against spivs who are checked up on. | 25:37 | |
Oh well, we come a long way. | 25:39 | |
A lot of things are floating these days. | 25:42 | |
(David chuckles) | 25:44 | |
And it looks like | ||
codes of honor are also | 25:45 | |
somewhat being vamped or are flexible. | 25:46 | |
- | Yeah. | 25:49 |
- | Oh well. | |
Yeah. | 25:51 | |
- | What's the | |
situation in Japan? | 25:52 | |
- | Japan is keen to have a recovery. | 25:54 |
I mentioned their exports have gone up. | 26:00 | |
An American professor, professor Rudolph Dornbusch, | 26:01 | |
gave a talk in Tokyo which was listened to | 26:09 | |
with great interest | 26:13 | |
'cause he said they should stop insisting upon | 26:14 | |
an export-led boom. | 26:16 | |
But they have the same philosophy that you so often find | 26:18 | |
in people like Dr. Arthur Burns. | 26:21 | |
If an actual recovery is very strong, | 26:24 | |
even though it puts pressure on resources, | 26:28 | |
somehow, it's not inflationary. | 26:29 | |
It's not anything to worry about. | 26:31 | |
But, if a recovery is strong | 26:33 | |
because the government does something about it, | 26:35 | |
that's a no good kind of strong recovery. | 26:37 | |
So, what Japan has been doing as it's been, | 26:40 | |
of course, large corporations running losses because | 26:44 | |
you have to keep on the help | 26:46 | |
all their lives. | 26:48 | |
- | Yeah. | |
- | They've been waiting for this export-led recovery | 26:49 |
instead of doing what of course the Japanese government | 26:53 | |
has a lot of power to do, to expand internally. | 26:56 | |
But they have had a very good luck | 26:59 | |
on the wage drive in the spring, | 27:02 | |
instead of it going out of control, | 27:05 | |
it's been really measured, | 27:07 | |
and their rate of price inflation has improved tremendously. | 27:10 | |
In fact, they're right down there near | 27:14 | |
where those numbers I gave you | 27:15 | |
for Canada and the United States. | 27:17 | |
So I think that although Japan's days of | 27:18 | |
10% per year real recovery | 27:24 | |
may be somewhat a thing of the historical past, | 27:28 | |
I would expect that six months from now, | 27:35 | |
we'll be talking about the very healthy, | 27:38 | |
the bottom recovery of the Japanese. | 27:41 | |
- | Well, we have time for one quick look at another topic. | 27:44 |
- | Okay. | 27:48 |
- | Earlier this month, | |
United States Secretary of State Henry A. Kissinger | 27:49 | |
made a major address to the United Nations Conference | 27:52 | |
on Trade and Development, taking place in Nairobi, Africa. | 27:55 | |
What do you think of his proposals, his speech? | 27:59 | |
- | Well, I think that there's a lot of smoke | 28:03 |
and very little fire | 28:06 | |
because we talk about spending billions | 28:08 | |
to reclaim the Sahara. | 28:12 | |
This reminds me of our last president, | 28:14 | |
who always spoke of generations of peace. | 28:17 | |
Each little triumph, and the meeting was called | 28:19 | |
the greatest thing since French fried potatoes were invented | 28:22 | |
and-- | 28:25 | |
(David chuckles) | ||
but I don't really know whether this kind of smoke | 28:26 | |
really fills the eyes of the developing countries | 28:29 | |
and fools them at all. | 28:32 | |
What you have is a demand on their part | 28:35 | |
because they're the ones who still have not balanced | 28:38 | |
their accounts with the OPEC oil industries, | 28:42 | |
and they've been getting accommodation. | 28:47 | |
They rang tremendous depths, which cannot last. | 28:49 | |
So, I think that there's a long story there | 28:51 | |
that would need to be told at length, | 28:54 | |
and it's not as if the US is ready to pony up | 28:57 | |
any sizable fraction, like 1% even, or 2% of our GNP | 29:01 | |
in the form of unrequited aid | 29:06 | |
as part of our contribution to the great dialogue | 29:08 | |
between the north and the south. | 29:11 | |
So, mostly, what we're contributing, I'm sorry to say, | 29:13 | |
is rhetoric, and whether that's a good export or not, | 29:16 | |
I don't know. | 29:18 | |
- | Does that mean trouble? | 29:19 |
- | No, because I don't think that those developing countries, | 29:20 |
which have the need, really have the power, | 29:25 | |
even to blackmail or to punish the rich man up north | 29:27 | |
for not responding to the need. | 29:34 | |
It's only when poor people are poor and rich people are rich | 29:38 | |
and the poor have the power to do something about that, | 29:41 | |
that that becomes trouble, I think, | 29:44 | |
in the sense which you asked it, | 29:46 | |
but I think for a person of humane feelings, there is a, | 29:47 | |
we should feel troubled. | 29:53 | |
- | Thank you very much. | 29:54 |
If you subscribers would like to ask questions | 29:56 | |
of Professor Paul Samuelson | 29:59 | |
or suggest subjects for him to discuss, | 30:00 | |
please write to Instructional Dynamics Incorporated, | 30:03 | |
450 East Ohio Street, Chicago, Illinois 60611. | 30:07 |
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