Who's Afraid Of Economic Growth?

My compliments on the excellent article "Why are we so afraid of growth?" (Cover Story, May 16). Americans, as a nation, have stopped believing that good things can happen to us. We have entered the most transformative era in our recorded history, and the opportunities are dazzling. But only if we look with new unconventional eyes, divorced of the fear to which we seem to gravitate.

C. Sherman Severin

Graduate Director

Business & Management Dept.

Marylhurst College

Marylhurst, Ore.

Your story is the best treatment I have seen yet of this important topic. I was especially pleased to see the references to [Joseph A.] Schumpeter. I have tried to bring more attention to his thinking in some of my speeches.

One of the unfortunate legacies of post-World War II macroeconomics is that somehow "more people, working smarter, producing more" is assumed to reduce the purchasing power of money. Not everyone on the [Federal Reserve's Open Market Committee] believes that growth causes inflation.

Jerry L. Jordan

President and CEO

Federal Reserve Bank of Cleveland

Editor's note: The writer is a voting member of the Open Market Committee.

The notion of innovation, new technology, and intense global competition spawning a surge in productivity is intuitively appealing and seems consistent with recent data. Nevertheless, your article seems too optimistic in suggesting that the long-term potential growth rate of the U.S. economy may have risen as much as a full percentage point, to 31/2% per year.

First, the recent acceleration in productivity growth owes in part to a normal, cyclical rebound from recession-depressed levels. As the economic expansion matures, productivity growth will likely slow from its recent torrid pace.

Second, whatever increase in trend productivity we are enjoying is likely being offset to some degree by a slowdown in the growth of the labor force from the 1980s.

Joshua Feinman, Vice-President

Bankers Trust Co.

New York

Before it's here, it's on the Bloomberg Terminal.