Economics [antikvár]

Preface Economic analysis has continued to progress since the writing of the previous edition; but it has produced no revolutionary upheavals requiring major changes in this book. However, the worid about us has changed in ways that were beyond belief just three years ago. Who would have dreamed in 1987 that in 1990 the Berlin wall would be chopped up and sold as souvenirs in shops throughout the world, or that the formerly socialist economies of Eastern Europe—perhaps even the USSR itself—would be headed by leaders eager to declare their commitment to the market mechanism. For us, the fundamental importance of these events stems not only from their negative verdict on the workability of central planning, nor from the fact that the free market has won the competitive struggle with "Marxism," sensational though that victory clearly is. Perhaps equally important for the long run is the fact that the United States cannot just stand by as a passive observer of these cataclysmic developments. They affect our economy inescapably, and in a large variety of ways. U.S. military spending will probably be cut substantially, under powerful public pressure. The reunification of Germany has implications for the U.S. balance of payments and for American competitiveness in world markets that constitute a major and persistent source of concern. U.S. business is now offered substantial marketing and investment opportunities in the newly opened economies of Eastern Europe that competition does not permit it to ignore. These and other related developments hammer home the fact that American workers and American firms carry out their economic activities in a market that is fundamentally international. Half a century ago, the rest of the world mattered far less to the U.S. economy than it does today. Back then, General Motors was primarily concerned with competition from Ford and Chrysler; foreign cars were hardly worth worrying about. In almost all industries, the bulk of U.S. production was sold to other Americans. Imports and exports constituted a far smaller share of GNP than they do today. But all this has changed. American producers of computers, airplanes, and TV programs make a large proportion of their sales and profits outside our borders. Television sets in U.S. homes come almost entirely from abroad, and Japanese cars are the primary competitive threat to our automobile industry. For these reasons, it made sense in the past for most of the pages of an American textbook to treat the U.S. economy as an isolated world complete in itself. And, for the sake of expository simplicity, that is how most books were written. Only in later chapters were international economic linkages introduced as a necessary but troublesome complication, modifying somewhat the isolated-country analysis of the remainder of the volume. Whether such an approach was defensible in the past is perhaps debatable. But it clearly no longer makes sense. The isolated-country economy is so gross a distortion of reality that its use for expository simplicity can no longer be justified even as a starting point.